Employee Agreements
The written materials between an employer and employee (offer letters, contracts, handbooks, etc.) define the expectations of the employment relationship. When well-written, they can provide some liability protection for employers and be used as a tool for giving employees any legally required information. Unfortunately, we have seen many bad ones. Badly written or inappropriate documents cause more trouble than not having them in place at all. This section discusses:
- When you should have employment documents and
- What to include (and more importantly, what not to include) in them.
Concrete Action Steps
1) Specify “At-Will” Employment
In EACH AND EVERY written document explaining an employee’s duties or benefits – including offer letters, employment contracts, and employee handbooks – state that the employment is “at-will,” unless you’re certain you want to make guarantees about the employment. Also avoid using language implying you will keep the employee on for a certain length of time (e.g. “We expect to have you working here for at least a year”) or hinting at the existence of a pre-termination procedure (e.g. “the first infraction will lead to a verbal warning”). See our article on At-Will Employment for more information.
“At-Will” Language for Offer Letters and Employee Contracts
“Your employment is ‘at-will,’ meaning either party can terminate the employment relationship at any time without cause and without notice.”
2) Decide which written documents are necessary; Write them carefully
Possible written documents include:
- Offer Letter (covered in this article)
- Employee Agreement/Contracts (covered in this article)
- Employee Handbook (covered here)
Offer letters are probably logistically necessary. For employee contracts and handbooks, it is often worse to have a bad or inapplicable written document in place than to not have one at all. We recommend writing employment documents carefully, ensuring they are applicable to your business, and implementing them exactly as written. We highly recommend retaining a lawyer to draft your employment documents specifically for your business.
A note for employers of Chicago domestic workers: Chicago employers of nannies, care workers, and home cleaners (i.e., professions that include domestic workers) must provide their employee with a written contract in their preferred language (see Ordinance 6-100-040) that includes their wage and the work schedule agreed upon by the employer and domestic worker.
Offer Letters
An offer letter is a formal letter sent from a prospective employer to a prospective employee as an offer of employment. The most important legal reason to send an offer letter is to establish at-will employment (for more information, see our full section on “At-Will” Employment). Of course, there may be other business reasons to send an offer letter not addressed here, such as setting the tone of your business and the employment relationship. There is often a tension between business advice and legal advice to avoid making too many promises. Every employer needs to resolve this tension for themselves based on the needs of their business.
Offer letters have no required form and can contain as much or as little detail as the employer prefers. We suggest:
- Keep the information contained to a minimum and
- Avoid making promises or guarantees.
Stick with the essentials – position, duties, compensation, at-will employment, general expectations, and benefits – and make clear that those are all subject to change at the employer’s discretion.
Employee Agreements
Depending on how many employees your business hires and your type of business, you may want your employees to sign a contract or agreement.
Common employee agreements contain confidentiality, work-for-hire, and/or non-solicitation provisions. All employers have unique needs, and employee agreements should be tailored to each business’s specific situation. For example, employers in the healthcare field may need to include a HIPAA provision in their employee contracts. Businesses that work with children may need to include specific provisions for safety reasons. There are many possible provisions to include. We discuss a few of the more common terms below.
At-Will Language
You’re probably getting tired of us bringing up at-will employment, but it’s just so important! You need to include an at-will employment provision in any agreement your employees sign.
Confidentiality
Confidentiality provisions define what information is considered confidential and limit who the employees can share it with and how they can use it.
Whatever your business is, it almost always makes sense to have your employees sign a confidentiality agreement. The terms of this agreement can be as broad or narrow as you want, but in general it should:
- Define what information the employee will have access to that is considered confidential (usually client information, marketing strategies, general business strategies, intellectual property, etc.). The more specific your definition, the easier it will be to enforce.
- Indicate that all confidential information will be kept confidential by the employee during AND AFTER their employment.
- Limit what confidential information can be used for. This may provide some protection if an employee works for or starts their own competing business down the line.
*Be careful* Do not prohibit discussing salaries or conditions of employment. Under the National Labor Relations Act (NLRA), employees must be allowed to congregate and discuss their working conditions for mutual aid. They are given legal protection from employer retaliation.
Work-For-Hire
Under copyright law, a work made for hire (also colloquially known as “work for hire”) is a work created by an employee as part of their job. The product is owned by the employer, not the employee.
If your business produces any kind of original work (including technology, written materials, marketing strategies, processes and procedures, etc.), you will likely want a work-for-hire provision in your employee agreements. By signing a work-for-hire agreement, the employees acknowledge that they will be developing work product (i.e. intellectual property) for the company, and that they will do so in the context of their employment. Thus, the result is the property of the employer, not the employee.
Patent Exceptions (Employee Patent Act): Provisions that assign an employee’s rights to an invention to their employer do not apply when:
- No equipment, facilities, trade secret information, etc., of the employer were used, and
- It was developed entirely on the employee’s own time (unless the invention relates to the employer’s business or research and development of the invention results from any work performed by the employee for the employer).
Non-Solicitation
A non-solicitation provision states that an employee cannot bring or attempt to bring any of the business’s clients (and/or employees or contractors) with them to a new venture. A non-solicit can protect a business from losing clients, employees, or contractors to a departing employee, but courts are reluctant to enforce them, especially if not properly drafted.
This is a tricky area of the law, and it is continuously evolving. Because of this, we strongly recommend you speak with an attorney before having your employees sign a non-solicit agreement. It is very tricky to make these provisions enforceable. In general, employers need to do the following with non-solicits:
- Be as narrow as possible (e.g. restricting the geographic scope, specifying certain clients, having a shorter time limit on the non-solicit, etc.).
- Provide adequate “consideration”. In Illinois, this usually means:
- Reasonable compensation, like a signing bonus, or
- Employment for at least two years after signing.
- Make sure the employee is making at least $45,000 (set to increase in 2027), otherwise the non-solicit will not be valid in Illinois.
- Advise the employee in writing to consult with an attorney before signing the non-solicit and give the employee at least 14 days to review the agreement before signing.
Non-Compete
A non-compete provision restricts employees from working for competitive businesses. Together, non-competes and non-solicits are called “restrictive covenants.”
Courts are very reluctant to enforce non-compete provisions. They often find them to be against public policy in that they restrict fair trade and can violate federal antitrust law. When courts do enforce them, it is under very specific circumstances. They must be very narrow and include consideration. In general, employers need to do the following with non-competes:
- Be as narrow as possible (e.g. restricting the geographic scope, having a shorter time limit on the non-compete, restricting to relevant areas, etc.).
- Provide adequate “consideration”. In Illinois, this usually means:
- Reasonable compensation, like a signing bonus, or
- Employment for at least two years after signing.
- Make sure the employee is making at least $75,000 (set to increase in 2027), otherwise the non-compete will not be valid in Illinois.
- Advise the employee in writing to consult with an attorney before signing the non-compete and give the employee at least 14 days to review the agreement before signing.
We highly recommend retaining an attorney to draft any restrictive covenants.
Other Possible Terms
There are many other provisions an employer may want to include in an employee contract, including: invention assignments, handling and return of company property and materials, no moonlighting, no conflict, employee duties and expectations, HIPAA safeguards, safety procedures, education or training reimbursement, publicity rights, etc.
We highly recommend retaining an attorney to draft any employee contracts. This can be a tricky area of the law. Reach out to G & G Law today to see how we can help keep your house in order.
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