Employment Contracts: What Lawyers Wish You Knew

By William R. Thetford Jr. Esq. and H. Robert Showers, Esq.

At Simms Showers, LLP, a law firm with decades of collective experience in employment law, we speak to potential clients every day who have signed unfair employment contracts, unknowingly violated the law and/or their contracts, or simply find themselves unprepared to litigate a wrongful termination or employment-related legal problem.

If you find yourself in a situation like this, our firm representatives are happy to speak with you to help resolve the issue. However, there are a number of steps you can take now to ensure your employment contract is fair, side-step some of the most dangerous pitfalls that ensnare employees across the United States and be prepared to respond if you are wrongfully terminated.

What Employees Should Know About Employment Agreements/Contracts

1. The number one rule of thumb when it comes to employment agreements, is to understand and keep a copy of your employment agreement. You should also keep a copy of your employment handbook and any employment policies you are given. It may seem obvious, but plenty of employees forget to keep a copy of these documents for themselves.

2. Store employment documents somewhere you can access them if a problem arises at work, such as in your home or on a personal computer. We have seen bad situations become worse when employees experience difficulties responding to accusations and disputes because they are no longer able to access the relevant contracts and policies. If you become embroiled in an employment lawsuit you may not have access to your desk, work computer, or work email.

3. Virginia, Washington D.C., and Maryland have at-will employment laws. That means you can be terminated for virtually any reason, as long as the reason is not illegal discrimination or forbidden by a specific statute or contract. For example, you can be terminated because your boss does not like you, but it is illegal to terminate an employee based upon race, gender, religion, etc. It is also illegal to terminate an employee in retaliation for whistle blowing, filing a human rights complaint under many local statutes and ordinances, or for taking medical leave under the Family Medical Leave Act.

4. In wrongful termination cases, it is common for employers to manufacture and state lawful justifications to cover the illegal reason they are terminating an employee. To protect yourself, maintain good records of any and all performance reviews given by your employer. These records can be an effective rebuttal against manufactured claims used to cover various kinds of discrimination.

5. Many employment contracts or employment handbooks have a grievance procedure. Be mindful of the grievance procedure, and carefully follow the grievance steps in the proper order if a problem arises. Start the grievance procedure sooner rather than later. There are often strict deadlines of which to be aware. Remember that employers can get in legal trouble for firing an employee in retaliation for initiating a grievance. Knowing about and using these procedures appropriately to file a grievance can protect you when you have been discriminated against or subjected to fraud or other wrongful conduct by your employer. If you run into a problem and do not understand your grievance procedure, it may be a good time to seek legal counsel.

6. Be mindful of whether or not your employer is following their own procedures and policies. Keep good records of instances where your employer has not followed its own procedures. Unfortunately for some employees, an unreasonable or ineffective boss usually fails to justify a legal cause of action, however, an employer’s breach of policy or procedure may provide the basis for a contract suit or other claim.

Ways Employees Commonly Get into Trouble with their Employment Contract

1. Never give company information or documents to former employees, friends, or business connections. The information can seem harmless; however, most employment contracts have sharp penalties and provisions regarding non-solicitation and confidentiality. Sharing confidential documents can get you fired, subject you to financial penalties, and in some cases, can even be illegal.

2. Remember to carefully follow complaint and grievance procedures. You are protected from retaliatory firing in cases of legitimate grievances. However, slandering your boss or co-workers can still get you fired (or even become the subject of a costly defamation lawsuit).

3. Pay close attention to provisions regarding medical leave. The Americans with Disabilities Act can protect you from being terminated due to certain injuries and medical problems. However, you can still run into problems with your employer if you do not submit your doctors’ notes or comply with certain requirements. When in doubt, speak with your Human Resources Representative to make sure you are following the proper steps. An employee who just stops showing up for work, even for a legitimate medical reason, can still be terminated in some instances.

4. Always make sure any significant work-related promises are spelled out fully in writing. Oral contracts are quite difficult to prove, especially in a “he said” “she said” scenario. If an oral promise is significant, take the time to put it in writing to ensure it is fulfilled.

5. Remember that you are accountable to the written language of any documents you sign. You are responsible for the written contract, even if the document is explained in detail verbally. You are responsible for the written contract even if you are being rushed to sign. In fact, most contracts contain “entire agreement” clauses that state that the written contract is the “entire agreement” meaning no verbal explanation or verbal promise associated with it will be a binding part of it. It is essential that you carefully read the document before signing. Even well-meaning employers might accidentally misrepresent the contract verbally. In some cases, and if possible, it is wise to get legal counsel to review the contract before signing.

6. Be cautious with what you disclose to your employers. Obviously, you should never lie on any disclosures to your employer. However, you can also face significant consequences for saying too much. Anything you tell your employer may have consequences. Oftentimes your employer will not be required to keep what you say confidential and may be able to terminate you based upon what you disclose.

7. Many employment contracts will include a waiver provision. In certain cases, ignoring serious breaches of a contract “waives” the ability to enforce it in the future. To prevent this from happening many employers will include as a term in the agreement, that it reserves the right to enforce a provision or section of the agreement at any time, even if it has allowed you to breach that provision previously. This means that just because your employer has allowed you to breach small parts of the employment agreement in the past, does not mean breaching it again will not cause severe repercussions.

How to Negotiate and Understand Your Employment Contract

When you are negotiating a new employment contract, it is helpful to understand the meaning of several key terms, as well as some generally accepted standard provisions.

1. Evergreen Provision. An evergreen provision means that contract automatically renews after a period of time, usually a year. An evergreen provision might look like this:

“This agreement shall last for a period of one (1) year from May 30, 2018 through May 29, 2019. And shall continue from year to year thereafter.”

This provision is incredibly significant. For example, your contract may have a salary locked in with an evergreen provision. This would result in your salary getting locked into a lower bracket for another year if you did not ask for a raise before the renewal of your contract.

2. Notice Provision. Many employment contracts will have a required period of notice before ending employment. Often the period ranges from two weeks to a month. However, for some positions, the notice period is much longer. Keep in mind that an extraordinarily long period of notice could prevent you from being able to accept better work opportunities, or quickly escape from a hostile work environment.

3. Non-Compete Clause. These clauses prevent an employee from working for an industry competitor or in a specific competing role for a specified amount of time after ending employment. Non-compete clauses vary greatly in duration and specificity. Some non-compete clauses have strict long-term requirements that might make finding your next employment opportunity extremely difficult. It may be possible to negotiate your non-compete to be more specific and short term. Narrowing down what types of companies and jobs would be in violation of the non-compete will preserve more potential open opportunities in the future.

4. Non-Solicitation Clauses. These clauses refer to not soliciting clients or customers for another entity or business during and after employment with severe penalties for doing so. They often also apply to directing or enticing employees to another entity or business to the detriment of your current employer. Non-compete and non-solicitation clauses often are 1-2 years in duration after employment and are sometimes geographical and industry specific in nature, but you will have to review to understand your responsibilities.
5. Dispute/Mandatory Arbitration. Many employment agreements will include a clause that determines the appropriate method for resolving disputes over the agreement. For example, some contracts will require that the disputants enter arbitration before attempting to litigate the dispute in the court system.

6. Liquidated damages. Liquidated damages mean that there is a specified damage amount a party is liable to pay upon certain breaches or violations. Your employment contract might state a damage amount for which you are liable for upon breaching the contract. Be mindful of liquidated damages provisions. A seemingly insignificant breach might have severe legal consequences.

7. An indemnity clause means one party is shifting legal responsibility for a set of potential legal issues to another party and agreeing to hold them harmless in those circumstances. Being indemnified is a good thing. It is a complex legal principle, but it has a real impact even in simple employment agreements. Specifically, many employment agreements will “indemnify” the employee for conduct in the course of their work at the company or under certain conditions. That simply means that the employee cannot be held liable in certain circumstances where he or she was just doing their job.

This may be especially important if your job might expose you to liability such as serving as a security guard (especially armed security) or operating heavy machinery. It is worth looking to see what kind of protections you are given under an indemnification clause.

Conclusion-Employees forewarned is forearmed.

The attorneys at Simms Showers, LLP have decades of collective experience dealing with employment law issues. However, since many states are at-will employment states, it means you can be terminated for any or no reason, but just not the wrong discriminatory reason or one that violates your employment contract or handbook. However, be aware that you can be liable if you violate the terms of your contract, especially the non-compete, non-solicitation, and confidentiality provisions. If you have questions about your employment contract, or if you need representation, our legal team would be happy to speak with you.

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Disclaimer: This memorandum is provided for general information purposes only and is not a substitute for legal advice particular to your situation. No recipients of this memo should act or refrain from acting solely on the basis of this memorandum without seeking professional legal counsel. Simms Showers LLP expressly disclaims all liability relating to actions taken or not taken based solely on the content of this memorandum. We greatly appreciate the contributions to this article by Daniel Thetford, Paralegal. Please contact Will Thetford at wrt@simmsshowerslaw.com for legal advice that will meet your specific needs.