When do I need written agreements, procedures or written policies with employees, contractors and service providers?
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With general employees, while it is a good idea to express written employment policies, employment agreements, sometimes called employment contracts, are not generally necessary or desirable. Typically, you should only have employment agreements with employees who are very important to the company or who have unusual benefits.
The purpose of maintaining a written record of company policies is to give notice and to set uniform treatment and instruction for employees on expectations for performance and behavior at the workplace. Employee manuals have always been helpful roadmaps of a company's procedures and policies. A well-crafted manual spells out the employment relationship, employee rights, complaint procedures, discplinary procedures, standards of conduct, and resignation and termination policies. Click for an article that explains what a manual should include to maximize its value for both employers and employees.
On the other hand, the purpose of employment agreements is to ensure that both parties are legally bound to the employer-employee relationship, which is contrary to the default legal scenario of employment being "at will" where either party may terminate the relationship at any time. For that reason, these agreements are not to be taken lightly. They often mean the employer can be liable for paying the employee the remaining salary of the term if the employer breaches the agreement in firing the employee. At the same time, if the employee wants to quit, she may not be able to without being sued for breach of the contract. These agreements usually include clauses on title, salary, bonus, vacation, options, and lengthy termination of the employee. These sections can be detailed and are restrictive to both parties in ways that either may find problematic later.
With a contractor or service provider company, you should always have a written agreement. Without one, properly drafted under copyright law, you will not own the work product of the persons you hire. Additionally, you want to be sure that the services being provided are clearly agreed upon, that the work product is warranted and that the contractor or service provider guarantees that the work is original and will not infringe the rights of another party. A service level agreement ("SLA") is an agreement for services, which sets forth specific levels of performance which must be reached.
Employment laws differ from state to state, so be sure to consult an attorney in your state about your particular situation.
Click for an informative article on these clauses and contracts in detail as well as forms.