The Importance of Employment Applications, Employment Agreements, and Employee Handbooks

By: Ashley Prew

Employment applications, employment agreements, and employee handbooks are sometimes neglected by business owners who hire employees.  When used in together, a properly drafted employment application, employment agreement, and employee handbook can be effective tools to protect the Company and shield the business owner from some of the risks associated with maintaining employees. 

Employment Applications

An Employment Application provides the key information on a prospective hire and grants authority to investigate the prospective hire’s credit, criminal, civil and employment background.  In addition, it sets forth the Company’s at-will employment policy and permits the Company to discharge the employee if he or she falsified information in the employment process based upon after-acquired evidence.

Employment and Engagement Agreements 

An employment or engagement agreement is a contract used to establish the rights and responsibilities of both a worker and the Company.  Properly drafted employment agreements can protect the Company by establishing and addressing the following:

1. Whether the worker is at-will.
2. The relationship between worker and employee.  Specifically, the agreement should define whether the worker is an employee or an independent contractor.  If a Company decides to classify a worker as an independent contractor, it is important that the terms of the engagement and the terms of the agreement meet specific requirements under the IRS guidelines that allow the worker to be classified as an independent contractor; 
3. The responsibilities and duties of both the employer and the worker;
4. The payment structure for the worker. The agreement should also clearly establish how commission is earned and paid, if applicable;
5. The procedure for termination of employment or engagement by either employer or worker; and
6. Appropriate, non-disclosure, nonappropriation, confidentiality, non-solicit and/or non-compete provisions and work made for hire should be included to protect proprietary information, current customers and prospects of the business, and protect the Company from predatory business practices.  

Employee Handbooks

Employee handbooks help to provide a strong basis for defining the relationship between the Company and its employees.  Employee handbooks can benefit a Company in the following ways:

1. Provide an in-depth description of company policies and employee expectations beyond what is contained in the employment agreement;
2. Address industry specific, applicable federal and state laws, and protect the Company and employees by  articulating that the Company will adhere to these laws and regulations; and 
3.   Protect the company from potential disputes regarding the expectations of employees. 

Employment agreements and employee handbooks should be used together to establish employee expectations, maintain employer/employee relations, and to protect the Company and its employees.  An effective employment agreement often references the employee handbook or incorporates the handbook as part of the agreement by reference. 

Agreements and handbooks should always be specialized based on the type of business, the types of employees/independent contractors, and the culture and expectations of the company.  Therefore, we do not recommend using the internet to find a generic employment application, contract or handbook. Instead, working with qualified professionals such as a business law firm and a human resources firm ensures that the agreements and handbook are drafted to meet each specific business’ legal and human resources needs.  When properly drafted, used, and upheld, these documents can protect the business from potential issues with current and former employees.