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Prepared By: Melissa C. Marsh, Los Angeles Employment Attorney
Written: March 2009

I assist clients not only with the preparation of their employment contracts for key employees in high paying positions, but also with the preparation of relatively simple employee offer letters that can significantly reduce the possibility of a lawsuit if prepared properly.

Every Employee Should Have Either An Employment Contract or Employee Offer Letter.

When hiring a new employee, an employer should always present the job offer in writing, either in the form of an employment contract, or an offer of employment letter. The purpose is to clearly set forth the terms of the employment relationship, so the employee cannot later say the employer promised something other than what was placed in the offer of employment. In addition, depending on the nature of the company, or the business, additional contracts or agreements may be necessary to address a specific aspect of the employment relationship (e.g., confidentiality agreement, proprietary rights agreement, termination letter, or severance agreement) and certain employee policies, or an employee manual may need to be acknowledged (read and signed) such as: the company's sexual harassment policy, computer, internet and email use policy. Etc...

A California employer should always require all employment contracts, including an employee letter offer of employment, and company policies to be signed BEFORE the new hire starts the first day of work. Although employment contracts can be instituted for existing employees under certain circumstances, for the contract to be valid some form of "consideration" must accompany the signing of the agreement, such as a pay raise, promotion, bonus, or additional benefit such as health insurance, etc.

It's important to put your employment agreements and employee policies in writing because business contracts, whether written or oral, are legally binding. When a contract for employment is oral, or performed on a handshake, it is much easier for the employee to make false allegations and much harder for the employer to disprove them. In addition, if a policy is oral it is very hard to prove the policy existed and its requirements.

Basic Terms For Every Employment Contract, or Employee Offer Letter

In general, the basic employment agreement, or employee offer of employment letter, should set forth the following:

1. the job title and job description;
   
   
2. The at-will nature of the employment (preferred unless circumstances require otherwise), or term of the employment;
   
   
3. Work week and/or hours;
   
   
4. Wages (hourly rate or salary) and list of benefits (if any);
   
   
5. Singing Bonus or Relocation Expenses, if any (amount, how paid, and how forfeited);
   
   
6. Stock Options or Ownership Interest (purchase price, vesting period, and opportunities for additional grants);
   
   
7. Expense reimbursement, and allowance (if any);
   
   
8. Any special requirements, or conditions (e.g. confidentiality, invention assignment, etc..);
   
   
9. Any employee policies, or an employee manual, that the employee will be required to read and sign;
   
   
10. Termination Clause addressing issues of severance pay and stock options (if applicable); and
    
    
11. Entire Agreement Clause (should be included, but if included then all other employee agreements and policies must be noted in the agreement.

A properly drafted clear and concise employment contract will benefit both the employer and the employee and can limit the risk of, and costs associated with, litigation resulting from oral promises.

Employment Contract Clauses That Can Get Sticky.

Noncompete Clause, or Noncompetition Agreement. Employment contracts often include a clause that prohibits the employee from engaging in any business that is identical or similar to the employer's business while employed, and sometimes for a a period after employment. Although California at one time permitted narrowly drafted non-compete clauses in the employment setting, today they are illegal unless: (1) absolutely necessary to protect an employer's "real" trade secrets; and (2) specifically limited to the disclosure of the employer's "real" trade secrets.

Arbitration Clause. Employers sometimes propose arbitration because it allows for a dispute to be decided by a neutral third party rather than by a jury. Arbitration also tends to be a quicker way to resolve disputes. Unfortunately, California has strict requirements for an arbitration clause in an employee contract to be enforceable.

Attorney's Fees. An "attorney's fees" clause can be inserted, but typically is not. Employers tend to shy away from them because if an employee sues and wins, the employer will not only have to pay his own attorney, but also the fees incurred by the employee. By the same token, an employee could also end up on the hook for the employer’s attorneys' fees if he or she loses.

Employment Contracts Cannot Waive Certain Employee Rights.

California employers should note that California law prohibits an employee from waiving certain rights granted under California's Labor Code and federal law such as: minimum wage, overtime pay, how and when wages must be paid, allowable deductions from an employee's paycheck, accommodation for a disability or pregnancy, workplace safety standards, and certain employee benefits such as workers compensation and unemployment insurance. For example, California law requires the payment of overtime pay if the employee (regardless of title) is not exempt. An employee cannot waive his or her rights to overtime pay. If an employer asks the employee to waive any of the rights, the employer will likely be required not only to pay the benefit, but also severe penalties.

Do I Need A Lawyer?

The terms and conditions of an employer-employee relationship, or contract, are not required to be set forth in writing. Many small businesses, in fact, still hire employees on a handshake. These same small businesses also typically find themselves on the receiving end of an employee lawsuit. In some cases the small business survives, and in others they don't. Unfortunately, in today's society oral employment agreements often turn into a very expensive nightmares because the employer has little to defend his or her position. Since the employer is deemed to be the person it power, it is the employer's responsibility to put the terms of the employment relationship in writing or risk bearing the burden of oftentimes proving a negative. Another reason to use employment contracts and employee offer letters, and to have them prepared or reviewed by attorney, is California's frequently changing employment laws. By having a California employment law attorney prepare and/or review your employment contracts, employee letter offer of employment, and employee policies you can at least be apprised on changes in the law that may affect your contracts and policies. In economic downturns employee lawsuits exponentially increase.

For example, if your employment contracts contain a non-compete or noncompetition clause (which was permissible a few years back), you may learn that the clause is illegal and if relied upon by the employee can subject the employer to a tremendous amount of liability. Again, California laws change rapidly and the forms found on the internet, or at an office supply store, often contain illegal clauses that should not be used. If you can't afford an employment lawyer to prepare your employment agreements, then at the very least consider hiring an employment attorney to review your existing employment contracts and policies. Typically such a review with minor changes will only cost about $300 to $500 and an ounce of prevention can be worth a pound of cure. When the economy turns south lawsuits drastically increase, and a single employee lawsuit can result in high damage awards.

For California Employees.

For California employees, who are presented with an oral job offer we often recommend that the employee send their acceptance in writing. By sending a simple email, or fax, that confirms the terms presented, he employee can be assured that the benefits and pay promised are actually remitted. If the employee is presented with a written employment contract, or offer letter, we suggest the employee review it carefully before accepting. If there is any term the employee is unsure about, or feels uncomfortable with, we suggest the employee not approach the employer and risk losing the job. Instead contact an employment law attorney and have him or her explain the ramifications of the provision causing concern. Sometime the clause may be enforceable and a deal breaker, but in other cases the clause causing concern may in fact be illegal.

Our employment law practice consists of both assisting employees and counseling employers who seek to comply with new state and federal employment laws, providing human resource training, and providing essential contracts and employee policies to prevent employee lawsuits. To schedule a consultation with Los Angeles employment lawyer, Melissa C. Marsh, Call 818-849-5206 or Send Us An Email. California Employment Attorney Melissa C. Marsh will respond promptly to your email.

Based in Sherman Oaks and West Hollywood, Los Angeles, California employment lawyer Melissa Marsh is available to serve small to midsize businesses throughout Los Angeles County, including: West Hollywood, Beverly Hills, Miracle Mile, Burbank, North Hollywood, Valley Village, Toluca Lake, Studio City, Sherman Oaks, Van Nuys, Encino, and Woodland Hills.

© 2009 Melissa C. Marsh. All Rights Reserved.

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