An employment agreement sets the terms between an employer and a new hire: what the job pays, what the employee owns, how either side can end the relationship, and what happens in between. A good one prevents disputes before they start.
Core terms every agreement needs
- Compensation — salary or hourly rate, bonus structure, equity if any, and the pay schedule.
- Job duties — enough detail to set expectations without being so rigid that changes require a new contract.
- Start date and term — at-will (no fixed end date) or fixed-term (contract expires on a date).
- Work location — on-site, remote, or hybrid. Matters for tax and benefits.
Intellectual property clauses
This is where most disputes happen. The agreement should address:
- Work product ownership — everything the employee creates on company time or using company resources belongs to the company. This is called a "work made for hire" clause.
- Prior inventions — the employee lists anything they created before starting, so there's no confusion about what the company doesn't own.
- Non-solicitation — whether the employee can recruit coworkers or clients after leaving.
Without a clear IP clause, the default legal rule may not favor the employer. Courts have ruled that ideas and code created outside company time belong to the creator, even when related to the company's business.
Termination provisions
- At-will termination — either side can end the relationship at any time with no cause (most US employment is at-will).
- For cause termination — defines what constitutes grounds for immediate dismissal (misconduct, policy violations, performance).
- Severance — if offered, specify the amount, duration, and any conditions (like a non-disparagement agreement).
Restrictive covenants
- Non-compete — limits where the employee can work after leaving. Enforceability varies dramatically by state. California, Minnesota, and several others ban them almost entirely.
- Non-solicitation — prevents poaching clients or coworkers. Generally more enforceable than non-competes.
- Confidentiality — survives termination. The employee can't take trade secrets to a new job.
Make it legal
- Both parties sign.
- The employee gets a copy.
- Keep the signed original in the personnel file.
An expert-drafted employment agreement tailored to your state takes about ten minutes.