The Need to Review your Contract
Most people don’t think of employment agreements as either elaborate or difficult to understand. And yet, I run into them all the time. You might have one now. If you’re a lawyer, you’re probably chuckling now. But I digress. The tendency when presented with an employment agreement is to quickly skim through the document, or even skip it entirely. It’s just not important, right? Wrong. I cannot tell you how many times I have had to go to battle for one of my clients who skipped the review step and didn’t catch some critical legal principle early on. I am always fighting against the "we were all good friends here" defense, when we’re actually fighting over the contract you should have read, understood, and discussed with an attorney before you took that great new position. The legal principles at play in more complicated agreements are not always self-evident. An example of this is a non-compete, which most people believe has a narrow enforcement history. However, in the last several decades, the known universe of non-compete clauses with significant enforcement history has broadened. As with any legal principle , the best practice is to discuss the clause with an attorney who understands several different areas of law. Witness the example of the insurance agent who was required to arbitrate all disputes that came out of a policy he sold. An issue came up regarding the commission that was due to him under the terms of the policy. He went to arbitration over this contractual obligation (which had been included in the policy without his consent, incidentally). When the agent lost at the arbitration, he discovered that he could not appeal from that decision to a court, because the arbitration clause throughout his contract prohibited court action. Lesson learned, but all too late. Don’t get burned like he did. Bring your employment contract into an attorney office and review all of the particulars. Expect that an attorney who is experienced in contract review will recommend a collaborative review process so that you can smooth over any real or imagined rough spots quickly and easily. In the end, you’ll be making an informed decision about whether to sign the deal laid in front of you. Isn’t that what we all want, anyway?
The Aspects a Lawyer Analyzes
A lawyer can determine whether the salary being offered is competitive for your particular industry and the position you have accepted. There are some variations between salary offered by employers in the public sector or Niagara regional web-based employers (who seem to be offering higher-than-average salaries), versus national or international companies. The lawyer also can determine other factors that should be considered, such as bonuses and additional free compensation aside from salary, and how those bonuses are calculated. Additionally, the lawyer will ensure that your benefits package is adequate, will offer appropriate amounts of vacation time, holidays, personal days, and so on. Further, the lawyer will consider the circumstances under which your benefits will be terminated. Are sick days compensated in the future? How many do you get? Is there a salary continuation plan? Is there any short term or long term disability plan offered by the employer?
The lawyer will look at whether there is a non-compete clause, which is very tricky, and can be a significant impediment on your ability to seek alternate employment if the non-compete provision is written too broadly. The lawyer also will need you to disclose any previous employment contracts you may have had, and will ensure that they are not a "competing" contract, which could trigger the non-compete clause. The lawyer will also look at the scope of the company that the non-compete clause applies to.
The lawyer also will look at the termination provisions set out in your employment contract, to ensure that they comply with the Employment Standards Act ("ESA"). The major consideration is whether you will be paid the requisite notice period applicable in the circumstances, based on your age at the time of termination, your length of service, and your position. The ESA offers minimum amounts of notice, but the common law generally offers greater amounts of notice than would be required by the ESA. In the past year, there has been a push by the courts to have employees compensated an average of 30 day (or more) per year worked, whereas the ESA only requires the following amounts of notice: 1 week per year worked, up to 8 weeks’ notice after 8 years of employment. The lawyer can determine whether you will be fairly compensated in the event of a termination.
The Dangers Present in Many Work Agreements
In most cases, attorneys will review and explain the following types of errors which are common in the employment contracts:
- (1) Confidentiality. This is likely a requirement or desire of the employer (akin to a trade secret, by there are some nuances like time duration, scope and reasonableness);
- (2) Non-Competition Agreements (also known as Covenants Not To Compete). More common in certain industries than others, again – this is likely a requirement or desire of the employer (and may not apply to you or be unenforceable under the law if it is too overreaching);
- (3) Non-Solicitation. In some ways resembles the non-compete agreement above, again – this is likely a requirement or desire of the employer;
- (4) Vacation and PTO. Many employers have adopted these kinds of policies, however – not all. If you are going to be entitled to benefits in the future (after less than one year of service for example), you should find out your rights in that regard and get it in writing, including the rate or amount at which they accrue;
- (5) Expenses. This is generally a fireside concern for many employees, this is clearly a concern of the employer who often will require some form of pre-approval of expenses. Some employees will find the definition of "expenses" to be quite limiting, this may or may not work to their advantage and should be clarified with an attorney;
- (6) Commission and Bonuses. Many individuals often fail to adequately read employment agreements before signing them. Many companies structure commission and bonus programs in certain ways that may not rewarding to all employees; and
- (7) Buy/Sell Agreement. This is not followed by all businesses, but it could make a dramatic difference in the event of a business dissolution and could be arguably responsible for several hundred thousand dollars.
Advantages of Engaging an Attorney
For most people, this is the most important step in the process: consulting with an experienced employment attorney because a lawyer with a solid understanding of contemporary employment law can foresee potential issues that the employee may not even be aware of. A skilled employment attorney can provide peace of mind that the contract meets your needs and the legal requirements, give you a better understanding of your rights, and provide reassurance that the contract contains agreements to protect you .
Your lawyer will be able to review the contract carefully and tell you if anything is missing, and give you detailed explanations of all the rights and duties contained in the agreement, as well as rights you may be giving up (such as non-compete and anti-raiding restrictions that may limit future job opportunities). If the contract is unsatisfactory, an attorney can help you negotiate a better deal. An attorney can also help decide whether it may be worthwhile to leave the position and move on to a better offer elsewhere.
Determining the Proper Lawyer
To be safe, you want a lawyer who knows employment law inside and out to review your contract. While any lawyer can pick up the Legalese of an employment contract, an employment lawyer will be able to identify issues that may give you problems down the road. Employment law is constantly changing. New laws or regulations can impact the legal effect of particular language in your contract or offer you new rights. An employment lawyer can let you know if you need to replace a generic phrase with one that has a precise meaning.
When selecting an employment lawyer to review your contract, look for criteria that convince you the lawyer knows employment law. You should always check the State Bar website. Select the state where you will be working if your work is remote. Some states have online databases enabling you to search for a lawyer by area of practice. The database will list lawyers who have self-identified as specializing in employment law. It will also show you the number of clients each lawyer claims to represent in employment matters of the issues they handle. In addition to these records, you should check the lawyer’s website. Look for client testimonials, reviews from third-party review ratings services and representative transactions. How long the lawyer has handled employment law matters is also relevant.
The Cost of Legal Scrutiny and How it is Worth It
An employment contract legal review generally costs between $300-750 depending on the complexity of the document, amount of benefits involved and experience of the reviewing lawyer. This is a small fraction of the overall value of what you are giving up by signing a poorly written or one-sided contract, or one that you do not fully understand. In short, the cost is also a fraction of the risk you take by signing without knowing. No matter how many agreements you sign with your employer , you should absolutely be hiring a lawyer to review at least one of your contracts during your career, particularly your first. Even if you get a good offer package you remain at significant risk by signing because so much in your future is riding on that agreement and you may well decide in 5-10 years that you hate your employer and want to leave, only to learn for the first time that you can’t work in the same industry or earn anywhere near what you might with another employer.