Consult with Siegel & Dolan today! Call (312) 878-3210

Do I Need an Employment Agreement?

Yes! Everyone should have an employment agreement.

An entire industry supports job-seekers in landing a new job. Recruiters, resume writers, and job boards are just among the few. However, once you land your new position, after searching and interviewing, how do you know:

  • Your employment is secure?
  • What your rights and obligations are during your employment?
  • What to expect from your new employer?
  • Your salary, bonus, commissions, benefits, and vacation pay
  • Your stock options or other equity interest

In this article on employment agreements, we will discuss these and many other issues. In short, we strongly encourage all employees who are able to negotiate an employment contract.

An employment agreement is critical to securing the terms of your employment, including your compensation, job duties, and benefits.  However, employment agreements need to go far beyond just the basics of your new position. They can — and should —  clearly address what happens when your employment ends and/or whether you are restricted from working for a competitor after you leave your job.

Understanding employment agreements will help you negotiate better compensation and benefits, and secure your new position while protecting your future relationship with your employer.

What employment terms should be included in your agreement?

There are many essential items that should be included in your employment contract. These might include:

Additionally, depending upon your position and the job, you may also include additional perks, such as:

  • Travel expenses
  • Membership fees in industry organizations
  • Auto allowances
  • Relocation expenses
  • Reimbursement for professional insurance
  • Payment for attending conferences/seminars
  • Means of resolving disputes: mediation or arbitration and choice of law

For more information on negotiating employment agreements, sign up for our download on our home page called a “Comprehensive Guide for Negotiating Employment Agreements.”

What types of compensation should be included?

Compensation is one of the most significant considerations when deciding whether to accept a new position. When negotiating your employment contract, you need to confirm that you address your entire compensation package, not just your salary, since non-salary compensation can be the largest part of your compensation.

When documenting compensation in your employment agreement, you should include, among other things as applicable:

  • Base pay/salary with periodic adjustments
  • Bonuses
  • Equity compensation
  • Stock and Restrictive Share Units
  • Dates of bonuses: monthly, quarterly or annually
  • Requirements for obtaining bonuses/other compensation

Finally, make sure you address the specifics about your employee benefits. Although these benefits don’t typically come to you in the form of cash, they are part of your compensation. For example, document your health benefits, your family’s health benefits, your retirement benefits, your disability or life insurance benefits, holidays and vacation. When addressing your benefits, make sure you document the cost of the employee benefits, noting which portion is paid by your employer and which is paid by you. Also, confirm what happens to your benefits when your employment ends.

Are restrictive covenants going to keep me from working after I leave?

Some employment agreements include non-competition and/or non-solicitation provisions, otherwise known as restrictive covenants. These clauses benefit the employer, not the employee.

Restrictive covenants seek to prohibit employees from working for a new company it deems a competitor, disallow an employee from pursuing business with certain clients,  and prevent an employee from soliciting former colleagues.  For example, a non-compete clause may prevent you from working for a competitor within a particular geographic location, such as the county of your former employer, and for a specific period, such as two years.  Where a non-solicitation clause prevents you from encouraging your former employer’s current employees or customers from going with you to your new employer.

To be enforceable, both restrictive covenants must be reasonable in scope, time, and nature. If reasonable, then you’ll be restricted from certain work activities for a specific time period. However, if these covenants seem unreasonable, such as preventing you from working for a competitor outside your employer’s geographic region, then you should negotiate this provision or have an experienced employment attorney help you do so.

If you sign an employment agreement, even if it has unreasonable provisions, you should be prepared to live with the terms of the agreement. However, we have had great success overcoming the terms of an unfair agreement.

Should I demand severance pay?

Invariably, jobs end for one reason or another.  Being prepared for the eventuality is crucial and should be addressed in your employment agreement.  Whether you leave your job voluntarily, terminated for poor performance, suffered the results of job elimination, lost your job due to an acquisition of your employer, or have been terminated for cause, negotiating a severance package at the beginning of your employee-employer relationship is imperative.  Almost all states, Illinois included, do not have laws requiring the payment of severance.  If you want to ensure that you will receive severance pay, you’ll need to negotiate it in your employment contract.

When negotiating an employment agreement, we recommend having an experienced employment law attorney like Marc Siegel  or Patrick Dolan on your team.

Your future employer’s proposed employment agreement will undoubtedly enure to the company’s benefit, not yours. Take steps to ensure your job security, maximize your compensation and prepare you for employment after your agreement expires by working with Siegel & Dolan today.

To consult with an employment attorney about your proposed employment agreement, please contact Siegel & Dolan Ltd. at (312) 878-3210.