September 21, 2023

Important Clauses of an Employment Agreement

What is an Employment Agreement?

An Employment Agreement is the sole legal document between the Employer and Employee, which lays out the rights, duties, and obligations of both parties during the employment period. An Employment Agreement is a crucial document in managing employees as it lays down the rights and obligations of both the Employer and the Employee. From the junior-most level to the CEO, everyone is an Employee, and to manage the employees efficiently, one needs to have an Employment Agreement.

Why do you need an Employment Agreement?

In case of any conflict between the employer and employee, the Employment Agreement acts as a validation of the terms that were conjointly agreed upon by the employer and employee. The agreement is peculiar yet comprehensive with the aim to address any discrepancy and also includes the remedy in case of a breach of the agreement.

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In leading case law, an employee’s employment contract was concluded without giving him any reasonable explanation for such termination and the apex court held that despite the fact that the employment agreement clearly stated that it was the manager’s choice to terminate any employment but the same could not be done without a reasonable explanation and a notice to the effect.

To make things convenient, an employment agreement checklist has been given below which lists all important clauses to be included in an agreement.

1. Title of Position Offered- The status, responsibilities, and duties, lie under this category. Employment lawyers make sure that this information is added in the most peculiar manner.

2. Benefits- The higher the position, the more benefits are given to the officials usually, like the provision of an office car with a chauffeur.

3. Vacation and Leaves- This provision deals with the number of holidays that are allowed by the organization. Sick leaves also lie under this provision itself.

4. Confidentiality Agreement- The employer may at times include this provision to ensure non-disclosure of important trade secrets of the organization. This provision at times is made in effect even after the term of employment to prevent the dissemination of proprietary information of the organization even after they have left the organization. 

5. Remuneration- The amount to be paid to the employee for rendering services must be mentioned in the remuneration clause. 

6. Termination of Contract- The why, where, and how of the termination of the agreement is dealt with in this provision. This shall include conditions when the organization wants to suspend the services of its employee or when the employee wants to quit from the job position.

7. Reimbursement of Expenses- While carrying out the normal activities of a business, the employees may have to do some expenses that are essential for the Implementation of the business objectives. This includes having a business meeting over dinner, phone calls with clients of the organization, and for all the above expenses the organization must be, liable to pay such expenses.

8. Golden Parachute- A ‘Golden Parachute’ must be included by labor lawyers. It is a payment or benefit guaranteed to an employee if he is fired as a result of a takeover of the company.

9. Disability and Death- Often, large organizations that have concentrated on employee relations tend to provide for the family of the employee in instances of death and disability in the form of monetary compensation, or by providing job opportunities to the family members of the deceased.

10. Dispute Resolution and Remedies- The remedies and the method to be followed for dispute resolution needs to be specified by employment lawyers in case of breach of an employment agreement and that is what this clause in particular deals with.


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