How can employment contracts protect your small business?

by | Dec 15, 2022 | Business Law

A lot of small business owners like to keep things informal. Instead of wearing a business suit to work, they might be more likely to show up in jeans. They likely spend a lot of time working alongside their employees rather than staying inside their private office all day.

If this is your style and it works for you, that’s great. But there are some things you should consider doing more formally, such as hiring employees. Specifically, having new hires sign employment contracts to help protect your small business. Some advantages include:

  • A contract can make it clear to your new hire and yourself exactly what their duties, compensation and severance package will be.
  • It can be used to protect trade secrets, such as confidential client information and intellectual property.
  • You can include clauses that require the employee to provide reasonable notice before quitting and a noncompete clause to keep them from jumping immediately to a competitor.
  • If you ever sell the company, employment contracts can help you retain key people, making the business more valuable.

Employment contracts are not a good fit for every business. Typically, having a contract in place means the employee is not “at-will,” which means you cannot fire them for virtually any reason you want. And it might limit your potential hiring pool if some applicants are reluctant to commit to a contract. But if you are considering using employee contracts for some or all of your hires, a consultation with an attorney can help you decide how to proceed. Your lawyer can also draft the contracts for you so that they are accurate and reflect your goals.


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