Employers and individuals frequently use employment contracts as an effective way to confirm the terms of employment and prevent the use of confidential information. Severance agreements are used to specify any compensation and benefits to be provided following termination of employment, typically in exchange for a release of claims. The advantages of employment contracts include defining expectations as to compensation, benefits, responsibilities, and other terms of employment, and can provide enhanced protection of confidential information, prohibit unfair competition and protect against the misappropriation of trade secrets.
When an employee leaves a company, whether voluntarily or otherwise, matters can get messy if there is a dispute as to the proper interpretation of the employment contract or disagreement as to the terms of a proposed severance agreement. An employment contract or severance agreement that is not properly drafted may be ambiguous, overbroad, and raise issues as to the parties’ obligations and expectations. Excessive contractual restrictions on future employment (non-compete limitations) are not enforceable, and are subject to judicial construction and limitation.
Many businesses recognize the importance of using employment contracts to protect trade secrets and confidential information, including customer and vendor lists, pricing, marketing plans, manufacturing processes, know-how and other proprietary information. Confidentiality and non-compete agreements are enforceable if the terms are reasonable. Factors as to the reasonableness of the terms include whether the restrictions on competition are necessary to protect the employer’s legitimate business interests, impose an undue hardship on the employee, or would be injurious to the public.
Employment contracts must be carefully drafted to accomplish the intent of the parties and to minimize the potential for future disputes. When the terms of employment contracts are unclear, the scope of judicial inquiry and interpretation tends to be fact specific and unique to each case. There are many advantages to using legal counsel to draft and review employment contracts, so as to reduce the risk of disputed terms, unenforceable obligations, and unintended consequences.
If you have questions about an employment contract, non-compete/non-disclosure agreement, or a severance agreement, please contact us
. We have extensive experience drafting and negotiating all types of employment contracts, explaining the terms and proposing revisions acceptable and beneficial to all the parties. We are here to provide practical, cost effective legal advice and guidance.
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