From Hire-to-Fire - How Old Are Your Agreements?

As the economy continues to show signs of recovery some employers are hiring, creating new positions and/or bringing back previously eliminated positions. During the hiring process employers should be considering what types of agreements they are requiring new hires to sign. For example, does your company have a confidentiality or non-solicitation agreement for employees who are privy to proprietary information or customer contact? In conjunction with hiring, many companies continue to manage difficult termination situations where separation agreements may be the best avenue for avoiding potential future claims. One common problem with all of these types of agreements – from hire-to-fire – is that many of them are printed from an internet site or simply an old agreement from many years ago with a new name and date. This problem becomes a legal issue where the agreement is out of date, from a different state or does not reflect the law applicable to, the characteristics of or likely claims of the person who is being hired or terminated.

Here are some common pitfalls that employers using these types of documents run into:

  • The terms (duration, distance, territory, etc.) of restrictive covenants (non-competition, non-solicitation agreements) are wrong. These are very state-specific and if copied or “borrowed” from other states employers run the risk they will be declared void and unenforceable.
  • It may reference a choice of law and jurisdiction that is incorrect or overlooked. An employer may find itself subject to the law of a different state, or even having to go to court in another state.
  • It doesn’t give the employee the proper time to revoke the agreement. For example, the Minnesota Human Rights Act has a 15 day period the employee has to revoke a waiver and release of claims. If the  employee is not provided notice of these items, the waiver and release may be unenforceable. Lengthy consideration periods are also required for some employees.
  • It is poorly drafted. If it seems too simple, it probably is. If you can’t understand it, chances are the employee can’t either, giving a court a good reason to throw it out.
  • It addresses old law and fails to address important changes in the law. Laws are often changing in the employment world (for example, whether employers have to pay out vacation time and under what circumstances, which may depend on the employer’s policy).

As a result, employers should tread cautiously whenmanaging employment issues from the hiring process, to dealing with difficult termination issues. When deciding whether to require a new hire to sign an employment, non-solicitation or other agreement (or whether to pay severance, fight unemployment or offer some other type of termination assistance), your company’s policies and practices should be current under the applicable law of the state in which you are located – Minnesota, the upper Midwest and beyond in many cases. Although the notion of using old “tried and true” documents may seem like a simple and cost effective solution, the notion of “penny wise, pound foolish” often times comes back to haunt an employer, as we have seen too often recently (prompting this LawFacts). While the concept of paying a legal bill for what you may think is a simple issue may seem foolish, think of it as preventative maintenance, similar to getting your oil changed. A difficult termination decision, or putting in procedures to prevent a new hire from disclosing confidential employer information (both before and after employment), is far less likely to cause headaches and legal expenses down the road if you start off with documents that are legally enforceable, current and properly drafted for the applicable state and/or federal law.

If you have any questions regarding this LawFacts or any other employment or labor law question, please contact Emily Ruhsam or any attorney at Seaton, Peters & Revnew at 952-896-1700. 

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