Home renos and employment agreements: How employers can avoid the money pit
“With home repairs, there is risk in DIY. Similarly, employment agreements require the input of an expert. If you’re not an employment lawyer, don’t try this (i.e. drafting or revising an employment agreement) at home.”
I have spent many lazy Saturday mornings watching home renovation shows on TV. I envy the vision and drive of those who undertake these projects and marvel at the final reveal. Through the magic of television, these renovations are always successful (but for the one hilarious yet rectifiable snafu that creates conflict halfway through the episode).
I have neither the vision nor the drive to undertake a home reno—before reality TV, I was scarred by watching The Money Pit, the 1986 movie showing a young couple’s attempts to renovate a house into a dream home become a nightmare. My reno skills are limited to employment law, particularly fixing up employment agreements. My big “reveal” occurs after I slash, burn and then rejuvenate the employment agreements that my clients send to me. I like what I do and I take a (nerdy) sense of pride in sending off the final product, but I don’t relish the fact that such an overhaul is required. I see a lot of confusing, inconsistent and, frankly, worthless employment contracts that are in dire need of repair.
Using the home reno phenomenon as an analogy for employment agreements, employers should consider the following before using an existing employment agreement or attempting to undertake their own revisions:
- Don’t DIY: With home repairs, there is risk in DIY. Similarly, employment agreements require the input of an expert. If you’re not an employment lawyer, don’t try this (i.e. drafting or revising an employment agreement) at home.
- Ongoing maintenance is key: While template employment agreements are helpful as a starting point for many businesses, these templates need to be reviewed and upgraded on at least an annual basis and may need individual tweaking depending on the employee. For example, changes in case law or statute can impact the enforceability of the terms. Changes in the business may necessitate other tweaks (e.g. there may be new policies to consider; the bonus criteria may have been amended; there may be new competitors in the market that warrant an update to the non–competition restriction). Reliance on an old template without fresh eyes on the final draft can lead to problematic drafting and an eventual challenge to the enforceability of the terms.
- Every agreement (and home) is a potential fixer–upper: If you’ve got a poorly drafted employment agreement with an existing employee, it is possible to fix it. There are two main caveats: the employee must agree to the changes to the agreement (or to signing an entirely new agreement) and the employer must provide fresh consideration to the employee in order for that agreement to be enforceable. Take a look at your existing agreements and consider whether updates are necessary and, if so, how you can ensure the employee agrees to sign an updated agreement.
- Some renos can mean throwing good money after bad—so just start over: Some employment agreements are so poorly drafted and organized that it’s better to scrap them and start from scratch. In my experience, it can take twice as long to fix up a poor, existing employment agreement as it can to begin with a fresh one.
- Quick and cheap will come back to bite you down the road: Using an old agreement (or, worse yet, one that you find on the internet) may save on legal fees, but it leaves employers vulnerable to significant employee claims down the road, including with respect to severance packages and bonus entitlements. Invest in good advice at the outset to prevent these kind of claims and the associated payouts.
In short, a well–done flip is a smart investment, whether it’s a house or an employment agreement.
By: Jennifer Heath
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