Businesses protect themselves from the risks inherent in hiring workers with contracts. Employment contracts also help clarify what benefits and income employees can expect to receive in return for their work at a company.
It is quite common for successful businesses operating locally or regionally to continue using the same employment contracts for years, even decades. Business owners and executives might not realize how their outdated contracts may put their organization at risk. These are some of the reasons that a company may need to alter its existing employment contracts.
Changing employment laws
California employers have not been able to include non-compete agreements in their contracts for some time, but employers across the country continue to do so. Now that there has been discussion at the federal level of banning non-compete agreements, quite a few organizations may eventually need to completely rework their contracts to comply with those new rules. Anytime significant employment laws change, companies may need to review their contracts and consider whether updates or addendums are necessary.
Changing employment arrangements
Has the company just offered a significant promotion to someone who has done exceptionally well in middle management? Will someone who’s previously worked in production end up moving to product development where they will have access to trade secrets and other valuable intellectual property? A boilerplate agreement may not be sufficiently protective. Businesses may need to fine-tune their employment contracts to specifically address the unique risks and challenges inherent in different roles, including engineering, sales and executive positions.
Claims brought by employees
Sometimes, companies only realize that they do not have adequate contractual protection from worker misconduct after an employee brings a lawsuit or initiates an internal claim about some kind of dispute. Realizing that the company’s policy on sexual harassment or bonuses has become outdated may force revisions or addendums to the contract. Typically, employers will need to negotiate each contract change or addendum with their existing workforce, which may lead to some hiccups during the process and could potentially lead to the loss of some talent as well if people oppose the proposed changes that the business deems necessary.
Periodically reviewing and occasionally updating employment contracts with legal guidance can prove to be crucial for a company that is hoping to avoid liability and other complications related to its staff.