Many new employers hiring for the first time, or converting from 1099 contractors to W2 employees ask about whether they should give employees an employment contract. The answer is, it depends.
In Pennsylvania, by default, employees are "at will." At will means that an employee works at the will of the employer and can be dismissed for any reason or no reason, as long as the basis is not discriminatory in nature. In contrast, an employment contract is generally for a set length of time and the employee can normally only be dismissed "for cause," as would be defined in the contract. "For cause" can be drafted broadly, so that most instances of non-compliance with employment policies could result in termination. However, many times a for cause provision is not drafted properly, is too narrow, or is open to interpretation and makes termination more difficult.
Whether to have employees be "at will" or subject to an employment contract is not a decision to take lightly. A good business lawyer versed in employment law can help draft a great employment contract or advise as to whether to keep employees "at will."
Some new employers confuse an employment contract with what we'd call an employment agreement. In an employment agreement, the employee can still be "at will," but all of the terms and conditions of employment will be spelled out and agreed to by the employee prior to starting work. Terms typically included would include a broad description of job duties, the job title, rate of pay, frequency of pay, any benefits offered, business holidays, sick time and any restrictions such as non compete or non solicitation provisions. Sometimes new employers get generic forms online or from their payroll provider. This can be dangerous, especially if the business owners has not taken the time to think through their policies and procedures and made them consistent.
If you need help hiring employees, drafting an employment contract or an employment agreement, reach out to our firm for help.
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