Employment Agreements: A Case for Contract Lifecycle Management
An employment agreement exists to protect both the employer and the employee. It records the rules, rights, and responsibilities of their relationship. This creates an understanding between both parties about what the job is.
Most employees don’t have written contracts, but are employed at will. Some employees are covered by a group contract, like a labor union agreement. Your legal team typically uses and keeps track of formal written contracts. These agreements specify the who, when, and where of the work and the responsibilities of the employer and the employee.
For example, you’ll find several examples of employment contracts at a construction site. Most of the workers there are at-will and can quit or be fired at any time. Some skilled employees sign union contracts that can cover pay, hours worked, and other issues. The company may offer skilled employees a term contract, such as the electrician who the contractor uses for many jobs. Supervisors are likely to have a yearly written contract that provides stability across job sites.
Purpose of an employment agreement
Agreements bring stability and clarity to a professional relationship, granting benefits to both parties. Everyone knows their duties and the terms of their agreements. These terms give the employer some control over the work done. They also give the employee rules they can hold their employer to.
When do I need an employment agreement?
You need an employment agreement when at-will employment doesn’t work for the situation. These employees tend to be highly skilled and working on long-term projects. You may need one to clarify the rules of the workplace to a new employee or to assure them you want them long-term. With an employment agreement and its negotiation, both sides know what to expect. A final agreement puts those negotiations on paper, where they can be used to settle disputes.
Parts of an employment agreement
An employment agreement should clearly list what both parties hold important. It records salary and benefits — bonuses, retirement, and insurance, for example — along with the terms of employment, work responsibilities, and performance goals. It will contain the rules for performance reviews and spell out the results. It will give terms by which the parties can end the contract.
The employer will often set a probationary period and include a best-efforts statement, which requires that the employee offer their “best efforts” on the job to meet contractual obligations. Today, many employers want clauses that guarantee confidentiality. If the employee leaves, the company wants a promise the employee will not join a competing company or solicit from the company’s clients for a set time.
Limitations of employment agreements
Limitations of employment agreements include locking the parties into the terms of the agreement. They can be very tough to get out of or change. This limits flexibility greatly both for a company that wants to rearrange staff and for an employee whose life circumstances change.
How to create an employment agreement
Most employment agreements start with either an old agreement or a sample copy of one. The employer will start by listing, in the agreement, their desired terms to describe the job. For higher-skilled positions, several parts of the contract are open to negotiation. Then you will fill in the details to fit the parties and the work situation.
Managing employment agreements
Once signed, the company needs to keep all its employment agreements. While filing them is easy, retrieving and using them is not. For each employee, the company needs to monitor its and the employees’ contractual obligations. If everyone has the same contract, that’s straightforward. But everyone doesn’t. Without a system that manages the lifecycle of the contract, additional uses take time and extra energy.
Dealing with a pile of paperwork
Employment agreements can be time-consuming and hard to keep track of because you typically need to amend, audit, and modify them often. You may also need these agreements to generate reports and eventually renew contracts. A company may mix at-will, union, and written contracts with its employees. Additionally, written contracts will differ because of negotiations. Different clauses make using contracts more complex to use and follow.
Employers typically keep a copy of each person’s employment agreement in paper or electronic form. Oftentimes, these agreements need to be pulled up to answer a question or address an issue. If the files are computerized, they may not be fully searchable or comparable. If the files are in paper form, it can just be an all-out mess.
Digital contract management automates workflows by breaking the contracts into blocks, such as name, date, and wage, for example. These blocks are what make entire contracts searchable and accessible. You can find everyone who was hired in January, for example, or find workers who have non-standard vacation clauses. From this, you can work to build new contracts or standardize ones. Before you negotiate with a potential employee, you’ll know what terms everyone in their sector has agreed to. With automated workflows, employment contracts become easier for everyone to use and understand.
Simplify workflows by using templates
Ironclad’s program breaks each contract down to its basic parts. These parts can be recombined to create new templates and new contracts. More than just contracts, you now have a great amount of data that you can use to improve things such as retention and business operations.
A new hire can answer a series of yes-or-no questions, designed around the most common bargaining points at your company. This will steer people to what they want without fracturing your records into a million different employment contracts. As this process works, you minimize your risk exposure by gaining greater control over the employment process.
Problem: Employment contracts are difficult to manage
Contract recordkeeping can be messy. If the records are disorganized, using them becomes impossible. This is generally caused by:
- Separate systems. Do you hunt down each contract individually? Do you have it at Legal? Is it kept at HR or the employee’s department? Is it at the end of a long chain of emails? What computer program is it formatted in?
- Isolated processes. Do departments in your organization do employment agreements differently? How well do they communicate with each other? With you? How much time do you spend reviewing each individual contract?
- No transparency. Can you find the contracts? Understand them? Use them? Compare them as a group? Analyze them?
Solution: Contract lifecycle management with Ironclad
Lifecycle management for your contracts enables you and others in your organization to use and analyze agreements. With this, you can make sure all of your contractual agreements renew on time. It can help make future contracts more standardized and easy to use, providing:
- An all-in-one solution. All of your contracts will be in one place and one system. Everyone can find them. Everyone can use them.
- Full transparency. Now you can find every contract immediately, no searching through individual files. You can find all the contracts meeting your criteria, avoiding lapsed deadlines and lawsuits.
- One truth. People may disagree about what a contract says. You have one official version of the contract that everyone can reference. This settles a lot of problems before they grow into lawsuits.
“If we didn’t have Ironclad, could we extend a day to have 48 hours instead of 24 hours? Because that might be what we’d need. It would’ve been difficult without tools like Ironclad.” — Anushree Bagrodia, Senior Managing Counsel and Legal Transformation Lead, Mastercard
Ironclad can help
Ironclad has a set of product features designed specifically to make work easier for the legal department. More than record-keeping, our program makes employment agreements usable, allowing you to build a personalized process that can turn the contracts themselves into data. Here are a few other ways Ironclad can help.
Broadly collaborative. Legal can create employment agreement templates with blanks to fill in and yes-or-no questions. The employee’s department starts a contract. HR does its thing on it. When it reaches your desk, you know that it is correct and can rapidly review it.
Process metrics reporting. Ironclad’s searchable repository enables you to answer questions using contract data and metadata. How many notaries are on staff? When do we do the most hiring? You can use that data to prioritize staffing and chart workloads over time. Your agreements are renewed on time and all changes recorded.
Workflow designer. With Ironclad, you can see and use your workflow. You can break it down into steps and see where logjams are and how to improve the hiring and contracting processes. It will also let you automate many of the more boring and repetitive tasks, so your time is used better.
Ease of use. Ironclad’s program is easy and intuitive to use, even for non-technical people. You don’t have to use code and all departments can use the program. Through this program’s use, standardizing contracts across departments happens automatically. This speeds up the process for your legal department. It also lessens the possibility of rogue contracts because executives are more likely to at least use the system when they go behind your back. Your legal team can make sure all the parts required for federal and state regulation are included.
Why use digital contract management for employment agreements?
Using digital contract management over the lifecycle for employment agreements lets you standardize your processes while keeping everyone on board. You can improve hiring and retention as well as your own workflow. A dynamic repository holds everything without the headaches of searching across different systems.
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Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney. Use of and access to any of the resources contained within Ironclad’s site do not create an attorney-client relationship between the user and Ironclad.