As an HR professional, it often feels like you’re a jack of all trades. Some days you’re a mediator, others you’re an employee engagement specialist, and some days you’re an HR law wiz. When it comes to drafting legal documents, it may feel like you should enroll in night law school or watch some Law & Order SVU to successfully handle the ever-changing tasks assigned to you.
While both your company and its employees may take these documents for granted, you know there’s a lot of strategic thinking and work that goes into drafting them. HR legal documents are not one-size-fits-all, especially when you take your local and state regulations into account—a key reason we recommend consulting a legal professional to review them before you roll them out.
But to help you draft your next HR legal documents, here are some pointers and considerations that should be top of mind:
The offer letter may be the most important legal document between a company and its employees. It sets up the expectations for how both parties will work together.
The cornerstone of the offer letter is to explain the scope of employment. In other words, what are the employee’s responsibilities? Is the employment at-will—meaning they can quit or be terminated for any legal reason, at any time—or is the employee being hired for a specific time period?
(As a side note, you may be interested to learn that the United States is one of the few countries where the employment relationships are predominately at-will. In most other countries, employees can only be terminated for cause.)
Another important piece of an offer letter is compensation, which goes beyond putting the employee’s salary in writing. In today's world, you need to think in terms of “total compensation.”
For starters, think about how the compensation will increase. Is the employee eligible for annual raises? What about bonuses, commissions, stock options, or other common forms of incentive compensation?
Next, outline the benefits which the employee will be entitled to. What benefits are offered, and which will they participate in? How much vacation time and paid time off is the employee eligible for? Can vacation time roll over to the next year? Be sure to check your state and local laws as their regulations may vary on these subjects.
These are just the core parts you should include for every employee, regardless of your industry or the role. But for certain employees, you may also want to add sections that go over things like confidentiality or reimbursement of expenses.
These are agreements with employees that prevent them from working with a competitor during a specific period of time and in a specific geographical region (i.e. non-competes) or prevent them from soliciting your customers or employees (i.e. non-solicitation).
When used appropriately, restrictive covenants can help protect trade secrets and sensitive information and prevent employees from taking clients or employees away from the organization. However, as these agreements become more popular (30 million American workers are currently covered by a non-compete), they’ve also become broader—restricting some employees from finding work in their field for years after leaving a job. This has made courts wary of their use, and in some instances, they have been ruled as unenforceable.
The key when drafting these agreements is to be as fair and precise as possible.
First, consider which employees should have some type of restrictive covenant. Does the employee have access to sensitive information that may help a competitor (non-compete)? Does he or she have direct contact with clients (non-solicitation)? Is it a senior employee (both)?
Second, think hard about what you are trying to protect and who your direct competitors are. For example, if your direct competitors are all in the East Coast, you many not need a nationwide restriction.
And always take into account the state in which the employee is based, as states can vary on regulation of these agreements. California, for instance, tends to not like restrictive covenants.
Non-Disclosure Agreements and Invention Agreements
While non-disclosure agreements (NDAs) are also meant to protect important information, they are different from non-competes. These agreements specify who owns intellectual property and typically claim that anything developed, written, produced, or invented during employment is owned by the company.
These agreements can also prevent employees from discussing certain projects or information for a specified period of time. For example, if the company is ramping up for a super secret new product release, employees working on the project may be required to sign a confidentiality agreement.
Retention Bonus Agreements
As companies evolve, it’s only natural that some may get acquired or go through another significant “life” event (e.g., going public, being spun off, etc.). Whatever the reason, there may be occasions in which you need to ensure that certain key employees stay with the company to help the company navigate the circumstances.
If that’s the case, a retention bonus agreement may be your best friend. These are agreements that promise the employee a certain amount of money if he or she stays with the company for a certain period of time.
With these you need to be very careful in clearly drafting the conditions under which the bonus will kick in (i.e. Is it just the passing of time? Is it the accomplishment of certain milestones, like the closing of an M&A deal?). It is also smart to divide the payment into installments to incentivize the employee to stay longer.
An employee handbook isn’t the same thing as an offer letter, but it’s equally important. The U.S. Small Business Administration defines employee handbooks as “an important communication tool between you and your employees. A well-written handbook sets forth your expectations for your employees, and describes what they can expect from your company. It also should describe your legal obligations as an employer, and your employees' rights.”
A well-written employee handbook will save you from many HR headaches. Employee handbooks usually deal with topics like: company values, non-discrimination and anti-harassment policies, how to report workplace incidents, safety and security, use of company technology, protecting company property, overtime policies, leaves of absence, and standards of conduct.
The next time you need to draft any of the above HR legal documents, you may want to use this guide to help you think through the process and to remember the most important considerations. Happy drafting!
The content of this publication is provided for informational purposes only and does not contain or constitute legal advice. You should not act on this information without seeking legal professional counsel.
Manuel Martinez-Herrera is VP of Legal and Compliance at Namely, the all-in-one HR, payroll, and benefits platform built for today’s employees. Connect with Manuel and the Namely team on Twitter, Facebook, and LinkedIn.
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