The Stats

During an economic downturn, employee lawsuits tend to increase because employees feel more vulnerable and seek legal action to protect their rights. According to a report by Seyfarth Shaw LLP, the number of workplace class action lawsuits increased by 17.5% in 2020, partly driven by the COVID-19 pandemic and economic downturn.

The Reasons Why You Need Legally Sound Employee Agreements

Employee lawsuits can be costly for employers, both in terms of legal fees and potential damages. According to The 2015 Hiscox Guide to Employee Lawsuits, the median cost of employment claims that resulted in defense and settlement payment was $200,000. And that’s only the monetary cost. Lawsuits are generally time-consuming and can damage a company’s reputation.

Having employee agreements is essential for both you and your employees as it helps to set clear expectations and protect the interests of both parties. Here are some items you should include in your employee agreements and the key reasons why they are important:

1. Clarify terms and conditions of employment: This can help clarify the terms and conditions of employment, such as job responsibilities, compensation, benefits, and work schedule. This is critical in preventing misunderstandings and disputes between employers and employees.
2. Protect confidential information: This can include confidentiality and non-disclosure clauses, which protect your company's and client’s confidential information. This can help prevent employees from sharing sensitive information or trade secrets with competitors or the public.
3. Set expectations for employee conduct: It is best practice to include clauses related to employee conduct in the employee agreements. This includes expectations for professionalism, compliance with company policies, and restrictions on outside employment or activities. This can help to ensure that your employees behave appropriately and ethically while representing the company.
4. Establish ownership of intellectual property: To prevent intellectual property theft, you can include in the employee agreements the clarification of intellectual property ownership created during employment, such as inventions, patents, trademarks, and copyrights. This can prevent the headache and monetary cost of disputes over ownership and ensure that your company retains the rights to all of its intellectual property.
5. Protect against liability: Include clauses related to liability, such as indemnification and release clauses, which protect the company from legal claims or damages resulting from employees’ actions.

Is Professional Legal Expertise Necessary?

Because employee agreements are legally binding contracts that have significant implications for you, the employer, and your employees, you want to ensure they comply with legal requirements and are enforceable. We do not recommend writing these agreements yourself unless you have a law degree.

If you do not have an in-house attorney or legal consultant, or you need additional legal help that needs immediate attention, and your company’s legal team is tied up in other projects, you should consider using outsourced legal services. There are many benefits to acquiring outsourced legal services, including but not limited to the following:

1. Cost savings: Most outsourced legal services charge by the hour or project, so you only pay for the time spent on your project.
2. Specialized expertise: You can choose the services and expertise your company needs.
3. Improved efficiency: Outsourcing legal services can improve efficiency by allowing you to focus on core operations while leaving legal support to outside experts. This also includes reducing the burden on in-house legal staff and helping them prioritize their workload.

Every business should take proactive measures to protect themselves from legal issues and liabilities by providing clear policies and training to employees. It is just smart practice.