Employment Contracts: Everyone needs promise protection

Employment Contracts: Everyone needs promise protection

By Bernard C. Dietz, Esq.

You would never think of buying a home without a written contract setting out all of the details of the sale. It would be impossible to buy a new car without signing a contract that sets out the price to be paid and the terms of the deal. And you can’t get a credit card without signing a formal application contract.

So why do people routinely accept job offers without written employment contracts?

employment contractsEmployment contracts aren’t just for CEOs

Your job is the source of the income used to pay for your house, your new car and your credit cards, yet very few people have written contacts with the companies that hire them detailing the terms of their employment. Sure, CEOs and other senior executives have written contracts covering their jobs, but why don’t the rest of us?

The vast majority of the workforce would benefit from a written contract that covers how we’ll be treated, how we’ll be compensated, what we’ll be doing, and more. Otherwise, what governs all of the time we spend away from our families five or more days a week? It is important and prudent to ensure that promises made at hiring time will be respected during the course of employment.

The problems with verbal job offers

In general, at the time of an offer and acceptance of a new job, most new employees are verbally told the details of their new employment, including the rate at which they’ll be paid. But verbal offers are not good for employees for a few reasons:

  1. If the information is not written down and there is a dispute or misunderstanding as to what was said in the past, you will find it very difficult to prove your version of the original agreement.
  2. The manager that made all of the verbal promises may move to another part of the company, or quit, or be fired, leaving no confirmation of your agreement. (See: Gotcha! Get job offer concessions in writing!)
  3. The manager may not have been authorized by the company to make certain promises to you, and the company may refuse to stand behind the manager. The consequences can be profound if you have already resigned your old job and uprooted your family for the new one.

Unless the promises made at hiring time are somehow secured, it can be difficult or impossible — and costly — to enforce them.

An offer letter is not enough

Sometimes, employers provide new hires with an offer letter. This is a good start — a written document that could function as a contract, except that these letters often include statements that negate their contract value.

Problematic statements include:

  • “the terms of the offer letter are subject to change in the future,” and
  • “new employees agree to and are bound by the terms of our employee handbook”.

Too often, the new employee doesn’t get to see the handbook until after the hire is made, and the handbook almost always states that it is subject to change at any time by the company. (See Employers shouldn’t keep secrets from job applicants.)

When the terms of a job offer are subject to change, it isn’t good for the new employee. There are no concrete promises to ensure that the employee is getting (and giving) what was agreed to at the time the job offer was accepted.

At will: The mistake companies make

The number one reason employers are reluctant — or refuse — to provide employment contracts to the vast majority of employees is because:

“We want to be able to fire the employee if we feel they’re not working out, and we don’t want a contract to limit our ability to do this.”

This concern arises from the concept of “at-will employment.”

Simply stated, when a company hires someone at will, it can fire the employee for any or no reason at any time. (Likewise, the employee is free to quit the job.) Most states in the U.S. are considered at-will states, where the legal presumption is that, absent a contract stating otherwise, all employees are at-will employees and employers can fire them for any or no reason at all (other than for reasons of discrimination, of course).

But companies confuse at-will employment with employment contracts. Employers often believe that having a contract with an employee automatically eliminates the freedom of at-will status. This is simply incorrect.

More about employment contracts: Employment At-Will vs. The LeBron James Rule.
A true contract defines a term of time for the employment period, making the arrangement predictable for both parties. It can include an at-will clause. An essential part of the employment contract should be the term, or length of time, of the agreement, which may be six months, a year, or at will, which means “for as long as we both agree to keep it going but either party can end it at any time.” Thus, other important terms can be enforced without limiting the freedom to part company at any time.

The benefits of good employment contracts

When a company misunderstands at-will employment, it misses the clarity and benefits offered by employment contracts. With a well-written employment contract, settling disputes regarding an employment becomes a much simpler and less expensive proposition for both sides.

As with any contract, at the first sign of a dispute the contract can simply be reviewed to confirm the rights and responsibilities of each side. If the contract is not being upheld by the employer or employee and it can’t be resolved by discussion or negotiation, then a lawsuit may be filed. But of course, a central reason for a good contract is to avoid litigation.

When there is a written agreement to refer to, the decision of who is right or who is wrong may be decided quickly as a matter of contract law, rather than as a protracted matter of “he said-she said.”

A good contract protects promises

An employment contract doesn’t have to be a long, difficult document, and it can be tailored for any employee. First and foremost, the contract should protect promises made by both parties at the time of hiring. Both an employee and an employer should look for these simple but very important terms in a contract:

  • The position being offered and accepted
  • The compensation that will be paid
  • Whether the employment is for a set length of time or at will
  • Specifics regarding vacation time and sick leave and whether such time accrues from year to year
  • The responsibilities of both parties with regards to the work to be done and the work environment
  • Terms of separation in the event the employee is terminated or resigns, including guaranteed severance terms and pay, depending on whether separation is “for cause.”

The last item is especially important if there is any post-employment non-compete agreement (NCA) or restrictive covenants. It’s fine to agree to stay out of your employer’s game, as long as you’re being paid to sit on the sidelines.

The contract should be signed by the company and the employee. If you’re the employee, you should store a copy in a safe place, like the safe deposit box where you keep the deed for your house and the title for your car. The contract for your job is at least as important as those documents.

Employment contracts are good for everyone

Having a written contract benefits both the employee and the employer because it makes a clear, definitive record of what everyone is agreeing to at the time of the agreement. These contracts are not just for executives, though an employment contract for an executive will be more complex and detailed than for a staff employee or a middle manager.

Anyone would rest more easy knowing that the details of employment are set down in writing, both to promote success of the working relationship and to avoid controversies. (See: Job offer rescinded after I quit my old job.)

Employment contracts are good for everyone. The main benefit for employers is that they don’t have to worry about potential verbal promises made by a rogue manager that could come back to haunt them. A company can, if it chooses, make it clear that the employment is not promised for any set length of time. The main benefit for employees is that they are protected if their management changes and if memories fade about promises that were made. The contract ensures promises will be kept.

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Bernard C. Dietz runs a private legal practice in Richmond, VA representing entrepreneurs and businesses of all sizes in a wide variety of legal matters.

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Job Search During The Pandemic

Job Search During The Pandemic

By Jason Alba

job searchBefore you think I’m an expert in the history of pandemics (check out this great infographic for a visual of pandemic history), I’ll admit that I’ve never experienced anything like what we are going through today. The world seems to be at a standstill with no more eating inside restaurants, all conferences postponed… even the Olympics have been moved.

Job panic in the pandemic

At first it seemed the biggest problem we’d face was getting toilet paper. Don’t get me wrong, not having ready access to toilet paper could be catastrophic. As time passes it seems that, without discounting the tragedy of illness and death, we are looking at economic crises that no one living has experienced. I’m seeing a lot of fear, panic and a lack of focus.

The first week people started working from home en masse, the comments I saw and heard were that people just didn’t know what to do. Routines were rattled and people wondered what this would mean for their jobs. Recruiters have been talking about hiring freezes. Recruiters, by the way, are like a canary in the proverbial coal mine when it comes to the economy.

Opportunities in the pandemic

Even then, with the confusion and major changes to life and work, some businesses are continuing with as much force as they had B.C. (Before Coronavirus). Some companies, such as delivery, shipping, and manufacturing, have announced massive hiring needs. Of course, these aren’t all executive jobs, or senior management jobs, but if a company is about to bring on thousands of new employees, they’ll have management and leadership needs they might not have had before.

I work with a Saas (Software as a service) company that is continuing to grow, close deals, and see expansion with current customers. The business success they are seeing isn’t related to current events. Rather, business must continue, and businesses continue to invest in growth and other initiatives. Businesses are even investing in employees. While you probably see hiring freezes in some companies, surely there are other companies that have their normal needs, or will have new needs. This becomes your opportunity.

Job search in the pandemic

Here’s what I know about the job search during this time: While some things will be different, other things will very much remain the same — especially what works. The pandemic makes it necessary to do more of what we know works best.

Jason Alba is creator of the 6-week Job Search Program, a daily web-based audio tutorial designed to help you get your next job. He’s also CEO of JibberJobber, the acclaimed contact-management system for job seekers.

Lets be honest: Much of the pain of a job search is in actually doing what it takes every day to achieve your goal. Job hunting is an iterative process. You must do many of the same tasks every day. The repetition can get tiring and lonely. It’s hard to keep up the necessary pace. It’s hard to stay motivated. Every day of the Job Search Program, Jason talks and guides you through your job search.

Frankly, one of the important things Jason delivers is the daily “kick in the pants” even the most astute job seekers need to keep them on track. Every day, Jason walks you through a series of High Value Tasks designed to help achieve your goal. Then you confirm your progress on his clever logging system.

I’ve known Jason for 15 years. He’s one of the few people in the job-search world I respect and admire. His program isn’t for everyone — but it’s the closest thing you’ll find to a daily session with a savvy job-search coach. (You’ll recognize lots that you’ve learned on Ask The Headhunter!)

Jason invites you to try the first 3 days of the 6-week-long Job Search Program for free, so you can decide whether it’s right for you. I’ve tried it, and I like it, or I wouldn’t be telling you about it. Judge for yourself. Try it out for free.

[Disclosure: This website earns a referral fee if you make a purchase.]

Networking will be more important. Jobs have always been filled based on trust and relationships. People hire who they know, or who is referred to them, or who somehow ends up on the radar. Networking doesn’t have to happen in person, though. When you think about networking as relationship building more than as a superficial exercise, you’ll find your networking efforts are more focused and effective.

Talking to the right person will be more important. I was talking to a colleague during a sales conversation and he stressed that we were not pitching to the right person. Our conversation was not even with a gatekeeper. While the other person was eager to hear what we had to say, they were neither an influencer nor a decision-maker. It was then I realized that talking to people was great, but talking to the right people was more important. This is as true in sales as it is in the job search.

Having the right conversations is even more critical. When you talk to the right people, make sure you have the right conversation. The conversation with a gatekeeper is different than the conversation with a decision-maker. In the job search you will talk to plenty of people who are not hiring managers, but they might help you network with hiring managers. Make sure you know which conversations to have with which contacts.

Follow-up is more essential. Unfortunately, networking in the job search means meeting a lot of new people, online, at networking events, or in outdoor venues when society opens back up. Meeting new people is important but it’s not enough. You must follow up. Not having a follow-up strategy is an indication you really don’t understand networking. As I mentioned, networking is about relationships, and you don’t form professional relationships with just one conversation. We need to have multiple conversations, and follow-up is a big part of that.

These have been the basics of job search for decades. Unfortunately, for many years job seekers have relied on job boards to do most of their work. Why network when you can almost anonymously upload a resume, without talking to humans? For introverts, this was like a dream come true. For everyone else, we felt forced to do job search that way, lest all the good jobs were posted and filled with job-board applicants.

The truth is, plenty of jobs were found by the principles above. This was true during great economies and horrible economies. Even while everyone seems to be working from home, who you know and who knows you is as important today as it has ever been. In fact, today it’s more important.

Jason Alba is the CEO and creator of JibberJobber.com, a web-based CRM-like system that organizes and manages a job search and networking. He recently created The Job Search Program, a six-week tutorial framework in which Alba guides a job seeker through planned, daily tasks necessary to land a job.

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Employment At-Will vs. The LeBron James Rule

Employment At-Will vs. The LeBron James Rule

By Mark Carey, Esq.

What do you mean I can be fired for any reason or no reason at all? Who made up this rule? Why do I have to follow the employment at-will doctrine? Well, you don’t, and there are several reasons companies and employees should shift to a modified approach that satisfies the expectations of both the employer and the employee.

Confusion about employment at-will

at will employmentOver the past 23 years I have handled employment law cases for both executives and employees. My clients are really confused and bewildered by the employment at-will rule, and about the significant financial impact it creates when employers decide to let them go.

Many clients say they understand the basic rule that they can be fired at any time (“at will”), and that they can leave a job at any time. But beyond that, they know absolutely nothing about why the rule came into being or, more importantly, how they can negotiate around it. When a termination occurs, the adverse impact of the rule becomes clear. They suffer from the break in their career trajectory and from the resulting financial uncertainty.

At the executive level, I routinely negotiate employment contracts that provide for termination “for cause” and “termination for good reason.” This is standard in the industry at the executive level. However, I also confront cases where the employer “shoves in” a provision identified as “termination for any reason.” If that sounds like the employment at-will rule, it is.

LeBron James has leverage

Enter the LeBron James Rule. (I made up this rule). Basketball superstar LeBron James can write his own ticket to work wherever he finds the highest bidder. He can demand that the “termination for cause” in his contract be accompanied by the “good reason provision” — and the latter must be accompanied by a severance payout. This makes the employer think twice about terminating an employee.

“Termination for cause” means you violated the law and company policies, so your employer can fire you without any severance. “Termination for good reason” means you can quit because the employer materially changed your title, for example, or your salary, reporting structure, or the location of your office —  and the employer must pay you a guaranteed severance.

You might say not everyone is as fortunate as LeBron. I disagree, and this is what has bugged me for many years. Too often, our knee-jerk reaction is to accept this stupid and ill-conceived at-will rule. Some say, just be grateful you have your job. Give me a break! There is a new way to handle this.

The new LeBron James rule

I propose getting rid of the employment at-will rule and replacing it with the modified LeBron James form we see in executive employment contracts.

When negotiating a job offer, employees (not just executives and LeBron James) need to negotiate employment contracts into the deal. Employees need to identify their leverage factor and use it. That is, what makes you the most desirable hire for the job? This is what makes the employer throw higher pay, equity, or severance at the job candidate in order to induce you to accept a job offer. (See the Comments section in How to Say It: How ’bout some severance pay?)

Under the LeBron James rule, employees could be fired only for “cause,” and the employee could terminate employment for “good reason.” Further, if the good reason event occurs, then the employer must pay a severance amount to take care of some of the financial issues related to your transition to new employment. If you land a new job, your severance stops, as this is fair.

Find your leverage and do not be shy about asserting it.

Everybody wins

Here are several positive effects of eliminating the employment at-will rule based on my research into this issue.

  1. End the divide between Management vs. Everybody: Eliminating the employment at-will rule will get rid of the great divide between management and employees. Literally, this is the trust divide. If management scares employees into believing they can be fired any time, management is not creating a loyal and trusting environment. Trust spurs the kind of innovation and creativity that will push the company forward in profound economic ways. Employers want employees to be focused on their work, but the at-will rule distracts them and kills their motivation. The rule erodes any semblance of entrepreneurial creativity among the team. Employers need to seriously rethink this one.
  2. End the divide between HR vs. Everybody: Honestly, did you really believe the Human Resources (HR) department was there to help you? I make it my mission to point this out to every client I have. HR has a duty of loyalty to the employer. It has absolutely no interest in doing what’s right for you. By eliminating the employment at-will rule, HR will be aligned closer with employees and HR will do a better job of “caring” for the very employees that make up the company. Without employees, you have no company. Where did all those employers go astray?
  3. Eliminate the politics of fiefdoms: Does your boss play favorites? Do they hire from their own last place of employment? Are there any “brown-nosers” on the team who believe the only way to the top is to “work it” — what ever that means? Such are the politics of building fiefdoms. This behavior is childish and it’s irritating to say the least. You know what I am referring to. Why do some employees play along, and why do supervisors encourage it? Eliminating the employment at-will rule will breed meritocracy. Employees will begin to feel compassion for their co-workers and work more closely as a team or family, instead of putting a knife in one another’s back at work. All employees will work with management for the good of the company, and all will prosper together — not just executives with good contracts.
  4. Reduce Discrimination: If you create trust, honesty, transparency and vulnerability, then you create lasting relationships where employees want to stay and work. Employment discrimination bias arises from many reasons. My theory is that if you get rid of the employment at-will rule, you will gut the walls that employees build in their work environments with the sole goal of getting ahead. Think about it. When you direct negative words or behavior against another employee to make yourself look better in the eyes of your employer, you will do it to get ahead. That negative comment or behavior could be motivated by differences in gender, age, race, or religion, or it might involve manipulation like seeking sexual favors in exchange for career advancement. We need a sea change to correct our current direction. The status quo just doesn’t work anymore, except perhaps for employment attorneys like myself as we are very busy policing this garbage. If we eliminate the employment at-will rule and we give you employment protections, when you see something, you will feel empowered to say something. You will be protected if you have the courage to speak out.

A Special Case: Older workers

Finally, here is my shout-out to older employees. Employers like to say, “We honor your wisdom and experience, you are worth every penny we pay you.” Many employees who are in their fifties and even sixties are well paid because they have many years of experience to offer, more than someone twenty years their junior. Some get fired (or not hired) simply because of their age.

I say we should apply our new rule to keep older employees on board. (See Age 70, working and job hunting again.)

We should focus on the positive economic impact these older, wiser employees can create for the company. Management must stop using the at-will employment excuse to terminate baby boomers because this abhorrent practice is not financially sound and never was to begin with. It’s like a bad drug addiction. Remember, wisdom still is a virtue for a reason.

Job security pays

When will we see elimination of the employment at-will rule? When management realizes they can make greater revenue multiples by providing better job security. They will have to stop listening to management-side defense lawyers  who lobby incessantly to maintain the employment at-will rule for every client. The world isn’t flat, but we believed it was until someone showed us it wasn’t. The same goes here.

Management should adopt this new LeBron James rule and maybe — just maybe — they will finally see that #employees_matter.

Mark Carey is an employment attorney at Carey & Associates, P.C. in Connecticut. He can be reached at mcarey@capclaw.com and at (203) 984-5536.

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