An employee agreement is the traditional document used in relationships between employees and employers for the purpose of laying out the rights, responsibilities, and obligations of both parties during the employment period. Given its purpose, an employee agreement can be one of those vital documents utilized by an employer. Also referred to as employment contracts, they are often executed for a specified period of time.

An employment contract sets the terms of the relationship between the employee and the employer. If an employer decides to have an employee sign a contract, it should include the job description, the duration of the job, benefits, grounds for termination, protection against company secrets, ownership to an employee’s work products, and limitations for the employee to compete with the company once he or she leaves.

• Control the employee’s ability to leave the business
• Prevents the employee from competing against the company
• Prevents the employee from revealing company secrets
• Gives the employer more control over the employee

In addition to employees, your business may engage independent contractors to handle certain tasks. Determining who is an employee and who is an independent contractor is not always as easy as it sounds. Moreover, misclassifying an independent contractor as an employee can have grave repercussions for your business. You may need to pay taxes, interest, and penalties to Government even if the misclassification was inadvertent. Independent contractors retain control over how their work is done and usually run their own separate business. They might include painters, lawyers, IT consultants, and other people in specialized fields whom you might not need to keep permanently on your staff but only retain from time to time. The main test for determining whether an individual is an independent contractor or an employee is the amount of control that the employer has over the individual. If the employer can only control the result of the work, such as the ultimate article that is created, the individual is probably an independent contractor. Conversely, employers are more likely to have behavioral control and financial control over individuals who are employees. This means that they can control the method by which the employee works, such as setting office hours or requiring a worker to use certain equipment. They also control the financial nature of the work, such as how a worker is reimbursed or whether they are allowed to seek outside competing business opportunities.

No matter how small your business, it can be a good idea to have an employee handbook. A document of this nature can clearly establish rules, rights, and expectations for employees. Having these policies memorialized can increase efficiency, and also serve to protect you from litigation. Keep in mind that employee handbooks should be worded carefully, as a badly drafted policy can expose you to legal liability. For example, employee handbooks can be construed as employment contracts in some states (even if you don't intend to establish an employment or contractual relationship), and this can provide the basis for a number of legal claims against you. It is a good idea to regularly review and update your employee handbook to ensure compliance with current employment laws.