Copyright ©1999-2008 Ethan A. Winning. All Rights Reserved.
In this highly competitive world, there are times when an employment contract is one of the few ways to entice an individual into coming with a company. Though an employment contract completely negates at-will employment, there are many advantages for both the company and the management employee if the contract is done correctly. Presented here is about three-quarters of an actual employment contract written by Ethan Winning (and for which we have charged as much as $2,500). The contract presented is for the position of president of a smaller company, and assumes a corporation with a knowledgeable Board of Directors...at least knowledgeable in the duties of a president and the general operations of a company. The contract can certainly be modified for other positions or types of organization.
The Employment Contract
Especially at the highest levels in a company and in high tech companies in general, the employment contract spells out the rights, obligations, and expectations of the company and the individual. While an employment contract does indeed negate employment at will, in addition to most policies in an employee handbook, it still presents the conditions under which the employee will be rewarded and, if necessary, terminated.
What follows is an actual employment contract for the position of president of a smaller firm. It is -- perhaps with some effort -- a contract which can be modified for lower level management positions. It is strongly advised that, before actually using this contract, you contact corporate counsel or a good labor lawyer (see also disclaimer at the end of the contract). Parenthetically, it is true that there is a lot of legal mumbo jumbo included the style of the contract, but when one is "running with the bulls..."
Employment Agreement
This Agreement is entered into between XYZ Corp., a California corporation, and John Q. Smith ("Smith" herein).
XYZ Corp. is an electronics firm chartered and authorized to do business in the State of California. Smith shall be serving as XYZ's President and Chief Executive Officer. These parties wish to provide in this Agreement for terms of continued employment of Smith as President and CEO of XYZ Corp.
The parties hereby agree as follows:
1. Duties of Smith: XYZ employs Smith as President and Chief Executive Officer to perform the customary duties of those positions set forth in the By-laws, and as XYZ, by action of its Board of Directors, may provide from time to time. During the term of this Agreement, Smith shall devote his full time, ability and attention to the business of XYZ on a regular, "best efforts," and professional basis and at all times such efforts shall be under the direction of the Board of Directors.
2. Noncompetition: During the term of this Agreement, Smith shall not, directly or indirectly, engage in any business, commercial or professional activity which the Board of Directors of XYZ deems to interfere with the business of XYZ, or with the performance of duties by Smith hereunder. Smith agrees not to have or enter into any other written or oral agreement of employment with any entity or person other than XYZ during the term of this Agreement. Smith further agrees not to provide any services for any other entity on a formal or informal basis which may compete, directly or indirectly, with any of the services XYZ currently provides or may provide during the term of this Agreement or which may result, directly or indirectly, in the diversion of customers from XYZ.
3. Nondisclosure of Confidential Information: Smith agrees that he will not, at any time during or after the termination of his employment under this Agreement, use for his own benefits, either directly or indirectly, or disclose or communicate in any manner to any individual, corporation, or other entity, other than XYZ, any confidential information acquired by him during his employment, regarding any actual or intended business activity, product, service, plan or strategy of XYZ. As used in this Agreement, confidential information shall include all information disclosed to or known by Smith as a consequence of or developed through or during his employment by XYZ including all knowledge, information and materials regarding XYZ's products, services, processes, know-how, customers, suppliers, product and/or service development, business plans, and research, as well as confidential information about financial, marketing, pricing, cost, compensation or any other proprietary matters relating to XYZ whether or not subject to other protection (except that such knowledge known to Smith prior to Smith's employment by XYZ that is publicly disclosed with XYZ's permission). Any breach of this paragraph shall constitute a ground for termination for cause and such other relief as may be afforded by applicable law.
4. Period of Employment: XYZ employs Smith and Smith accepts employment for the years 1997, 1998, and 1999. ("Years" are to be construed as employment years from the date of acceptance of this Agreement and formal employment of Smith.) Smith is hereby given the option of renewing this Agreement for an additional two years, viz., 2000 and 2001 but only if XYZ has an after-tax profit in each of the years 1997, 1998, and 1999.
5. Compensation:
a. Salary: As compensation for the services rendered by Smith under this Agreement during the employment year 1997 and during the employment years 1998 and 1999 (and for 2000 and 2001 if the option is exercised for those years), XYZ shall pay Smith a salary in equal semi-monthly installments as follows:
Employment year 2008 - Base Salary = $895,000
The entire updated contract can be found in the subscriber's section of this site. To subscribe, click on the appropriate link above or below.