10 Things Every Business Person Should Know About Contracts
1. EMPLOYEE HANDBOOKS ARE NOT WHAT THEY SEEM.
An Employee Handbook sets out the employer’s general rules regarding employment, including benefits, disciplinary and termination issues. Employers are not required to put their employment rules in writing. While an Employee Handbook sets out the policies or practices of an employer, it generally does not constitute a contract with the employee. What this means to you is that you should not assume that company policies will not be changed at some time during your employment. An attorney can advise you whether an Employee Handbook has created contractual rights which an employee can enforce during or after the termination of employment.
2. OFFER LETTERS, WHAT DO THEY MEAN?
An Offer Letter is the letter sent to an employee advising them that a job, with certain defined duties and compensation, is being offered to them. The Offer Letter must be carefully reviewed. The terms should include salary, sick and vacation time, pension and other employee benefits and any other term which you negotiated. Generally, an Offer Letter does not offer a job for life nor for a set term. Rather, it merely states the terms which will exist while you are employed.
3. AT WILL VERSUS A TERM EMPLOYMENT.
An “At Will” employee is one that can be terminated at any time by an employer or employee without any reason. Most people in the United States are At Will employees.
4. MAKE SURE THAT THE OFFER LETTER OR CONTRACT STATES THE TERMS OF YOUR EMPLOYMENT.
It is your job to understand the terms of any contract in which you enter. This can not be said strongly enough. This means that acronyms, industry terminology and accounting terms must be used consistently and must be defined. In particular make sure that any commission or bonus formula can be calculated based on information which the employer has at hand.
5. SIGN ON THE BOTTOM LINE.
You must end up with a signed copy of any Offer Letter, Contract or Confidentiality or Non-Competition Agreement which you enter into. If your employer does not sign an agreement then it is not bound to the written terms. You may argue that an oral agreement exists but this is harder to prove.
6. PERSONNEL RECORDS.
You should keep a copy of your company Employee Handbook, Offer Letter and other Company memos and important papers related to your employment. These are best kept at home. If you have not kept a document and need to provide it to an attorney to review your rights you can seek a copy of your records. Under law in Illinois you can access a copy of your personnel records by requesting a copy.
7. WHAT TO DO IF YOU ARE NOT PAID.
If your employer does not pay you salary, commission, bonus or any other sum when it is due you should remind your supervisor verbally and then in writing that the payment is past due. Do not wait until more money is due you. By law, an employer must pay wages by the next regularly scheduled pay day. Wages include salary, sick pay, vacation pay, bonus and commission monies which have accrued. If your employer does not pay you, the Department of Labor has authority to investigate claims of violations by employers. Alternatively, a lawsuit may be filed.
8. WHAT DOES AN EMPLOYER HAVE TO PAY YOU UPON TERMINATION?
Under Illinois law an employer has to pay you all of your wages which have accrued prior to termination. Payment must be made by the next regularly scheduled pay day. In addition, if a written or oral contract exists rights under the contract may also be sought.
9. CONFIDENTIALITY, NON-COMPETE AND NON-SOLICITATION AGREEMENTS, WHAT YOU SHOULD KNOW.
Confidentiality, Non-Compete and Non-Solicitation Agreements each restrict an employee from taking certain action which is competitive with the employer’s business. Generally, a Confidentiality Agreement restricts an employee from using the confidential or trade secret information of the employer, a Non-Competition Agreement restricts an employee from working in any business which is competitive with the employer’s business and a
Non-Solicitation Agreement restricts the employee from soliciting or doing business with the customers of his employer. Not all agreements are enforceable even if you signed them. This means that you should always seek legal assistance in understanding your rights and obligations under any agreement which you have signed.
10. SEVERANCE AGREEMENTS.
An employee may be eligible for severance payments if the employer had a company policy which granted severance or a written employment contract exists which provides for severance payments. Employers will also often give severance benefits where they want to bind an employee to an obligation not originally restricted. For instance, an employer may want protection against the prospective competitive activities of an employee who knows confidential information or could take away a substantial amount of business and may offer a flat sum in one or more installments to insure its business is protected. A Severance Agreement must be carefully reviewed to make sure that salary, bonus or other payments due to the employee are not being waived and that the employee’s restrictions are no broader than necessary.