What to know about the documents a new employer may require you to sign
Even in information technology, employment contracts are rare, but that doesn’t mean that new hires aren’t signing documents.
Gone are the days of contracts that cover the terms and conditions of employees’ compensation, their duties, length of employment, benefits and bases for termination, and spelled out the rules about agreements not to compete (aka “noncompetes”), confidentiality, reimbursement and grievances. “There’s always an employment contract of some kind, even if it’s just ‘come work for me, and I’ll pay you.’
“But formal, written contracts are the exception rather than the norm,” says Robert Style of Philadelphia, an attorney in private practice and general counsel to the National Association of Personnel Service.
Even in information technology, employment contracts are rare. The reason, say recruiters and temporary-staffing agents, is that all states except Montana have adopted employment laws giving either party the right to terminate employment at will.
“Employers are loath to enter into a contract employment agreement with IT staff, even very senior-level management, because it creates an obligation on their part,” says Michael Rossman, director of global IT services and information security for spice-maker McCormick & Co. in Hunt Valley, Md. “Without a contract, benefits and provisions can be changed at will instead of having to renegotiate every time policies dictate.”
Contracts still common in consulting
That doesn’t mean that new hires aren’t signing documents. Their signatures are on an increasing number of documents that cover everything from employee compensation and duties, to benefits agreements, noncompetes, ethical behavior (antiharassment and appropriate use policies, for example), reimbursement, grievances and, most commonly, confidentiality and nondisclosure agreements, Rossman says. The decades-old recipes for spices his company makes for brand-name food chains are a particularly competitive part of its intellectual property, so employees are asked to renew some of their nondisclosure agreements every year.
All these types of agreements have been vetted for legality by the employer, says Joyce Brocaglia, CEO of executive IT security placement firm Alta Associates in Flemington, N.J. So there’s not much room for negotiation. Still, she strongly advises giving any contractual obligation, particularly any related to noncompetes and intellectual property, a thorough look-over before accepting an offer or quitting your current job.
“If you read anything that seems overly restrictive, it’s always best to have an attorney who specializes in employment law review and jointly prepare suggested edits to the contract in question,” she adds.
Some noncompetes are overly restrictive because they’re so broad, say experts. For example, by not specifying conditions, such an agreement could prevent a software developer from ever writing code again, or could exclude an executive from working in an entire sector, says James Del Monte, president of JDA Professional Services, an IT staffing services agency in Houston.
A reasonable noncompete would limit the obligation to only the company’s direct competitors and for a specific period, Style says. With or without a contract, you should be sure to find out under what circumstances you can be fired, and what activities are restricted (common ones are sexual harassment and personal use of assets), he continues.
The lack of discussion about severance packages is linked to the reluctance of most companies to negotiate such packages upfront, Brocaglia says. You’ll probably be signing a severance document at some time in your career, however, and in the event you do, you should inspect the language of the agreement carefully. For example, according to an Equal Employment Opportunity Commission’s lawsuit against Land O’Lakes in September, the company had put in its severance documents a requirement that terminated employees waive their rights to file discrimination claims in exchange for their severance pay.
In addition to noncompetes and confidentiality agreements, lost-compensation agreements are fairly common at the executive level. “The most common executive contracts that corporations are willing to negotiate involve making new executives whole for money they leave on the table by exiting their current company,” Brocaglia says. “Executives often receive contracts buying out their stock and option awards or reimbursing them for bonuses lost. They need to be sure this amount is calculated correctly and, preferably, paid upfront.”
