The Necessity of Drafting Proper and Foolproof Employment Contracts

What Are Employment Contracts ?

Employment contracts are covenants between the employer and the employee which provide the basis and the terms and conditions for the employment relationship.

Employment Contracts usually state how much salary would be paid, what the perks are, the nature of the employment relation, the basis for firing when the employee is found to have violated organizational policies, and the specifications for legal arbitration and dispute resolution.

Indeed, the employment contracts are drafted in such a way that there is no ambiguity and confusion in the type of the employer and employee relationship.

Necessity of Drafting Precise and Proper Employment Contracts

Having said that, it is also not the case that employment contracts are always precise and proper as well as foolproof.

For instance, there are several cases in which the wording and the clauses in the employment contracts have resulted in legal matters and other disputes wherein each party has tried to sue the other for noncompliance.

To take an example, the cases involving Sexual Harassment in the United States in recent months have highlighted the need for explicit provisions that protect the employer as well as the employee.

Indeed, the point to be noted here is that unless everything in the employment contract is spelled out in black and white and all the terms and conditions stated and specified, there is always a likelihood of legal disputes arising from misinterpretation and misunderstanding between the parties concerned.

Ambiguity and Confusion Must be Avoided

Thus, there is a need to draft proper and foolproof employment contracts that do not leave scope for ambiguity and confusion.

In our experience, this can have serious as well as somewhat hilarious consequences if the terms and conditions in the employment contracts are not specified clearly.

For instance, in our experience, there have been cases where the Non-Disclosure Clause, as well as the Non-Compete Clause, have not been defined properly leading to theft of intellectual property as well as disclosure of propriety information to third parties and competitors by disgruntled employees.

It can also have hilarious consequences as some employees we know have refused to work beyond 6 PM every day since the contract did not specify so.

Given the fact that work in contemporary corporates is not time-bound, there is a case to be made for clearly specifying the terms and conditions in the contract.

What Employment Contracts Must Address

Typically, employment contracts often state the nature of employment wherein the employee is told in clear terms if he or she is taken on a temporary basis, on a contractual basis wherein each party reviews the contract after a specified period, or on a permanent basis wherein the employee is informed of the long-term nature of employment.

However, the emergence of the Freelance and the Gig Economy has opened up new forms of employment that do not fall into any of the usual categories.

As can be seen in the way there are several class action lawsuits in the United States between firms such as Uber and its drivers; there is a need to change with the times and draft proper and foolproof employment contracts.

Moreover, whenever organizational policies are violated, it is often the case that the lawyers on either side tend to point to noncompliance by the other side when arguing their case.

As can be seen in the way some women have sued the Silicon Valley firms in recent months, there needs to be a clear specification of what constitutes harassment and what constitutes a ground for dismissal.

In other words, while the employees can claim that they were harassed, the employers too can claim that such alleged victims have violated organizational policies by going public with their allegations.

Some Sticking Points in Employment Contracts

A key sticking point in most disputes is the definition and meaning of what constitutes non-disclosure and non-compete.

For instance, the employment contracts of executives and other senior positions often state how long they have wait after resignation to join rivals and competitors and how much they can reveal the information that they have gained from their employment as it relates to intellectual property.

Indeed, as can be seen in the recent dustup in the Indian IT Bellwether, Infosys, there needs to clear exit and separation clauses specifying non-disclosure and non-compete so that there is no ambiguity on account of this.

Thus, it is clear that there are several aspects to the need to draft proper and foolproof employment contracts and hence, it is our contention that the Human Resources Managers apply adequate thought and do their due diligence by consulting lawyers and other company law experts so that the employment contracts do not leave room for doubt and misinterpretation.

On the other hand, there is a need to protect the employee as well, and hence we suggest prospective as well as working professionals to study their employment contracts and see if their rights are protected.

Conclusion

Lastly, while we are not saying that there is an ideal scenario where both employer and employee win with clearly worded and clearly stated employment contracts since legal disputes often arise in situations that cannot be completely predicted, nonetheless, a well drafted and proper employment contract can be made foolproof against major disputes.

To conclude, with the changing nature of the employer-employee relationship, more than ever there is a need to draft proper and precise employment contracts where the employer and the employee are “on the same page” most, if not all the time.