Your employees are crucial to your business’s success, and when you add a new member to your team, you need to clearly establish the terms of their employment. This protects their rights as a worker and your best interest as their employer, too.
Ohio employers need to therefore carefully consider the type of employment agreement they use and its legal implications. In this article, we’ll review two primary types of contracts used: verbal and written. We’ll also share some best practices to consider as you enter into a work agreement with your new team member.
Verbal vs. Written Contracts: Which is Best?
Verbal Employment Agreements
Ohio businesses may know verbal employment agreements by another name: handshake contracts. These often involve smaller businesses hiring someone based on a conversation. Choosing to employ someone based on a spoken contract is convenient, helps your employees feel more trusting of your company, and avoids formalities like signing contracts.
Unfortunately, the level of risk is significant. Verbal contracts are legally binding in Ohio. Yes, it may be hard for an employee to prove what you both agreed to when they joined the organization with enough evidence to support their version of the agreement. But you could still find yourself on the losing end of an employment dispute. You could also be hit with state and federal penalties for various non-compliance issues that are not documented, but which could have been.
Written Employment Agreements
While not required for every job type, written employment agreements provide a concrete framework of how an employer-employee relationship will operate. The kind of agreement will depend on the regulations within your industry.
A written agreement is commonly multiple pages that outline the name of all parties involved and information that includes:
- Payment frequency
- Sick leave, holidays, and vacation time
- Intellectual property rights
- Privacy agreements
- Confidentiality policies
- Workplace conduct expectations
- Contract termination procedures
A written agreement also clearly specifies the role of the employee within your company. However, these contracts can limit many of your potential liabilities as a business owner and employer compared to an oral agreement.
What Must Every Employment Agreement Have?
An employment agreement, whether verbal or written, is considered a contract under Ohio law. It must contain the following elements to be valid:
- Offer of employment by the employer
- Acceptance by the applicant
- Consideration of the work performed and compensation to be paid
- Both parties entered into the agreement of their own will without undue duress or influence
Additionally, any agreement you come to must meet any legal requirements that have jurisdiction over your employer-employee relationship.
Best Practices for Ohio Small Businesses When Creating an Employment Contract
- Many companies use former employment agreements for executives and “offer letters” for non-executives. In either case, both should be counter-signed by the employee.
- State in the offer letter or employment agreement that the employment remains “at-will”, meaning that either the employer or the employee can terminate the employment for any reason or no reason, provided same is not discriminatory or prohibited by law or public policy.
- If the employer wants to guarantee employment for a certain period of time, subject to certain reasons for termination (like theft or absenteeism or failure to meet objectives or other behavior), then a definition of “for cause” termination should be included. Under these circumstances, the employment is no longer “at-will”.
- Have the employee agreement signed before your employee’s first day of work. Allow your employee time to review the contract before signing. It’s best to send it to them well before they come in to accept the job and sign it formally.
- Any and all terms you agreed to verbally should be added to the written version to ensure nothing is missed and open to interpretation later. Include all essential terms and conditions in the employment contract.
- Any other terms and conditions agreed to, like a Code of Conduct or Non-Disclosure Agreement, should be attached to the written employment agreement too. The same is true for non-poaching, non-solicitation, and non-competition provisions, though employers should understand the difficulty in drafting and enforcing these provisions correctly.
- Use language that is clear and explicit. Using purposely ambiguous terminology to give you an advantage may render your agreement unenforceable in a court of law.
- Specifically, address any termination or other onerous clauses in the contract when first presenting it for review. This allows the new employee time to review the terms of such a clause carefully and strengthens the contract’s enforceability by enabling them to do so.
- Be cautious when asking an existing employee to agree to a new employment contract. Give them reasonable notice that you wish to change the terms of the contract. Failing to do so could be seen as forcing them to agree under duress.
- Make sure to document all issues. Should any disputes arise, a signed copy of the agreement can prove invaluable in protecting your company from false allegations (for example, wage theft).
Learn More about Employment Agreements in Ohio
Please contact Gertsburg Licata, home of CoverMySix®, for more information about our services, including assessing your current employment agreements and the process used to create them. At Gertsburg Licata, we help you through the legal challenges facing your business so that you can focus on making it grow. We invite you to call 216-573-6000 or fill out our contact form for a complimentary consultation with one of our attorneys.
Gertsburg Licata is a full-service, strategic growth advisory firm focusing on business transactions and litigation, M&A, and executive talent solutions for start-up and middle-market enterprises. It is also the home of CoverMySix®, a unique, anti-litigation audit developed specifically for growing and middle-market companies.
This article is for informational purposes only. It is merely intended to provide a very general overview of a certain area of the law. Nothing in this article is intended to create an attorney-client relationship or provide legal advice. You should not rely on anything in this article without first consulting with an attorney licensed to practice in your jurisdiction. If you have specific questions about your matter, please contact an attorney licensed to practice in your jurisdiction.