If you currently have employees, or if you are thinking of adding employees to your growing business, you have probably wondered whether you need a formal employment contract. There are many benefits to having a written employment contract. However, a formal written contract is not always necessary. Written employment contracts make the relationship between employer and employee clear by ensuring each party understands its obligations to the other, but they can also result in added liabilities for the employer.
The first questions to consider are how long you anticipate the employment relationship will be and how much discretion you want to separate employees from their employment with you. Generally, employment relationships in Montana are governed by the Wrongful Discharge from Employment Act (“WDEA”), which allows an employer to terminate an employee only in certain circumstances. However, written contracts for a specified period of time are usually exempt from the requirements of the WDEA. Thus, if you know an employee is only going to be employed by you for a finite period of time, a written employment agreement governing the terms of that relationship makes sense.
Other valid reasons for written employment agreements include defining the employment relationship when the employee will have a great deal of discretion and decision-making authority, such as a management position. Although the WDEA may still apply to these written agreements (if they are not for a finite period of time), clarifying the authority, duties, and expectations for your employees makes good sense. Additionally, if you intend to have an employee agree to other terms as a condition of his or her employment, it is a good idea to have an employment contract. For example, if you have an employee handbook and a Non-Disclosure Agreement that you want the new employee to abide by, even if only for a short time, then it makes sense to append those documents to an employment contract that provides clarity for both employer and employee. If you are hoping this employee will stay with your company for a long time, whether an employment agreement is necessary or advisable depends on the specific needs of your business.
A clear and thorough employment contract assists employers in defining the employment relationship because it takes out the guesswork for the employer, the employee, and any third party who may be helping resolve a dispute between them. If you are not sure whether you need an employment contract for your growing business, or if you would like your current contracts reviewed and updated, Jones Law Firm can assist you in adding clarity and peace of mind to your employment agreements.