Additional Employment Agreement Considerations for Arizona Employers

When it comes to employment agreements, employers typically fall into one of three categories:

  1. companies that never use employment agreements (but should);
  2. companies that use employment agreements with almost every employee (but shouldn’t); and
  3. companies that dredge out their old, standard agreement and simply change the employee’s name, title and salary without considering alternative ways to structure the document.

In reality, there are times and places for written employee contracts. As an employer, you should be aware of the various factors to consider when thinking about employee contracts.

What Arizona Employer’s Should Consider

To break it down simply, an employment contract is a document that both you and your employee sign that dictates the terms of your professional relationship. There is no requirement that you have to enter into a written employee contract with every employee that you have, and, it is often not advised that you even should enter into a written agreement. Note that Arizona is an at-will state, which means the employer or the employee can terminate the employment relationship at any time, with or without cause or reason, and with or without advance notice. An employment agreement binds you (the employer) just as significantly as it binds the employee. Although it is generally more beneficial to retain the at-will standards, there are some situations in which it makes sense to enter into an employment contract with your employees (high level executives or employees with access to sensitive information, for example).

Advantages and Disadvantages

There are some cases where using an employment agreement is advantageous. For example, if you have spent a considerable amount of time and money training a key employee, you can lock that employee into a specific length of employment under the contract, or you can put in notice clauses that will give you enough time to train a new employee (perhaps 90 days’ notice). Another situation in which employment contracts make sense is when you will have employees that are learning and working with your company’s trade secrets. In this instance, it is beneficial to put confidentiality clauses into your contract that will prevent employees from disclosing your trade secrets or client lists.

However, with all the advantages that can come to you with an employment contract, you should never lose sight of the potential disadvantages. It is important to remember that an employment contract is a two way street — you have obligations that you must fulfill as well. If an employee does not turn out how you want, or if the needs of your business change, you will be bound by the employment agreement.

If you are considering using severance agreements in your business, please contact our office for a consultation.

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