This article explains the pros and cons of using written contracts with employees. For more information on employment contracts, including a sample offer letter you can use to create an at-will employment relationship, see Dealing With Problem Employees, by Amy DelPo and Lisa Guerin (Nolo).
In addition to clearly describing what the employee is going to do for you (the job) and what you are going to do for the employee (the salary), the contract can address many other aspects of the employment relationship, such as:
When we refer to written employment contracts, we mean a contract that limits the employer's right to fire the employee, usually by detailing the grounds for termination or setting a term of employment (for example, one or two years).
Some employers require employees to sign a written agreement stating that they are employed at will -- that is, that they can quit at any time, and can be fired at any time, for any reason that is not illegal. Employers might ask employees to sign an offer letter, handbook acknowledgment, or other document agreeing to at-will employment, for example. These documents do not limit the employer's right to fire the employee. Instead, they affirm the employer's general right to fire at will.
Employment contracts can be very useful if you want control over the employee's ability to leave your business. For example, if finding or training a replacement will be very costly or time-consuming for your company, you might want a written contract. It can lock the employee into a specific term (for example, two years) or require the employee to give you enough notice to find and train a suitable replacement (for example, 90 days' notice). While you can't force someone to keep working for you, an employee is likely to comply with the agreement's terms if there's a penalty for not doing so.
Employment contracts might also make sense if the employee will be learning confidential and sensitive information about your business. You can insert confidentiality clauses that prevent the employee from disclosing the information or using it for personal gain. Similarly, a contract can protect you by preventing an employee from competing against you after leaving your company. (For more on this, see Nolo's article Will a Noncompete Agreement Stop Employees From Taking Your Trade Secrets?.)
Sometimes, you can use an employment contract to entice a highly skilled candidate to come work for you instead of the competition. By promising the individual job security and beneficial terms in an employment contract, you can "sweeten the deal."
Finally, using an employment contract can give you greater control over the employee. For example, if the contract specifies standards for the employee's performance and grounds for termination, you may have an easier time terminating an employee who doesn't live up to your standards.
An employment contract is not a one-way street. The contract binds both you and the employee, so it limits your flexibility. This may pose a problem if you later decide that you don't like the contract terms or the needs of your business change. In those circumstances, if you want to change the contract or terminate it early, you'll have to renegotiate it -- and there's no guarantee the employee will agree to what you want.
For example, if you decide you want to end a two-year contract after six months because you don't really need the employee after all, you can't simply terminate the employee -- this would be a breach of contract. Similarly, if the contract promises the employee health benefits, you can't later stop paying for these health benefits as a way to save money. The only way to change the terms of the contract is to renegotiate them. This can be done, but it's time-consuming and requires the employee's consent.
Another disadvantage of using employment contracts is that they bring with them a special obligation to deal fairly with the employee. In legal terms, this is called the "covenant of good faith and fair dealing." If you end up treating the employee in a way that a judge or jury finds unfair, you may be legally responsible not only for violating the contract, but also for breaching your duty to act in good faith.
]]>What this means is that if you're a young person looking for a job—or an employer looking to hire one—you need to check the laws of your state to ensure you're following the law.
The FLSA regulates the types of jobs that minors can do by taking into consideration the age of the minor and the nature of the work. In general, the FLSA provides that:
According to the Secretary of Labor, hazardous jobs often involve:
There are also special rules that apply to minors who do agricultural work. Children employed by farms that are not owned by their parents, for example, are not permitted to work during the school day and may need parental consent for certain jobs.
Not all minors are covered by the FLSA. There are exceptions for:
Outside of the FLSA’s general guidelines, child labor is regulated by the state in which you work. This includes whether you will need a work permit to get a job.
In most states, a work permit is necessary for anyone under the age of 18 to become legally employed. The purpose of this document is to ensure that the minor is not underage and is physically fit to work.
State laws vary, but a work permit generally consists of an employment certificate or an age certificate, or both.
An employment certificate shows that the minor meets the state’s criteria for employment, which might include a doctor’s note indicating that the minor is cleared medically. An age certificate, on the other hand, simply provides proof of the minor’s age.
Do not get lost in the terminology. Many states issue one document that covers all the things that a minor would need to get a job, whether it’s called a work permit, work certificate, or employment certificate.
The best way to determine if you need working papers is to check the U.S. Department of Labor's helpful state-by-state guide to work permits.
Work permits are normally issued by school guidance counseling departments and state labor departments. Your school's guidance counselors will most likely have work permit applications on hand and should be able to answer all your questions. Applications and further guidance can also be found online; check the website of your state's department of labor.
Remember, each state has its own set of rules and regulations, but in most cases you will need:
In California, for example, the application needs to be completed by the minor, parent, and prospective employer. The employer will need to describe the nature of the work, and the number of hours the minor will work per day and per week.
New York color-codes working papers depending on whether the minor is 14 to 15 years old, 16 to 17 years old and in school, or 16 to 17 years old and out of school. The original employment certificate must be given to the employer and returned at the end of the job. Employers are not permitted to take photocopies.
Most states have a different set of rules and paperwork for agricultural, entertainment, and newspaper delivery jobs.
If you are a teenager looking to enter the working world, a good place to start is the federal government's YouthRules! website. This site is designed to educate young workers and their parents on everything from workplace safety to wage and hour laws.
One thing to keep in mind is that employers can have their own age and hour requirements so long as they do not conflict with state and federal law. You might be a mature 15-year-old who is ready to balance school and work, but to work at many fast food chains, for example, you need to be at least 16 years old.
Finally, while most teenagers now conduct their job hunt online, don't underestimate the value of visiting the places you want to work and trying to chat with the manager about any openings. A friendly smile and firm handshake can help you stand out from the crowd.
]]>However, you don't have an unfettered right to dig into applicants' personal affairs. Workers have a right to privacy in certain personal matters, a right they can enforce by suing you if you dig too deeply. And, you may be legally required to follow certain procedures -- such as getting the applicant's consent in writing -- before you can get certain records.
Many employers conduct background checks of job applicants during the hiring process. A background check usually involves verifying information such as employment history, education credentials, criminal records, credit history, and references.
Employers may want to conduct background checks to assess the credibility and suitability of job applicants for a particular position, ensuring they have the necessary qualifications, experience, and character to perform the job effectively.
Background checks also help mitigate potential risks, maintain a safe work environment, and protect the company's reputation and interests.
Employers conducting background checks should follow these tips to stay out of trouble:
In addition to these general considerations, specific rules apply to certain types of information:
For more information on hiring, see Dealing With Problem Employees, by Amy DelPo and Lisa Guerin (Nolo).
]]>When you hire employees, you must get an employer identification number (EIN) to use on tax returns and other documents you submit to the IRS. To get an EIN, you must file IRS Form SS-4. You can download the form from the IRS website at www.irs.gov.
Once you bring on employees, you will have to pay state unemployment compensation taxes. These payments go to your state's unemployment compensation fund, which provides short-term relief to workers who lose their jobs. Go to the Department of Labor's website for a list of state unemployment insurance tax agencies.
You should have workers' comp coverage to protect workers who might suffer on-the-job injuries. Workers' comp insurance is required in the vast majority of states, although some make an exception for very small employers.
You'll need to withhold a portion of each employee's income and deposit it with the IRS, and also make Social Security and Medicare tax payments to the IRS. For more information, get IRS Publication 15, Circular E, Employer's Tax Guide from the IRS website at www.irs.gov. (You may also have to withhold taxes for your state. For more information, check with your state's tax agency; you can find links to each state's agency at the website of the Federation of Tax Administrators at www.taxadmin.org/state-tax-agencies.)
On the W-4 form, employees tell you how many allowances they are claiming for tax purposes, so that you can withhold the correct amount of tax from their paychecks. (You don't have to file the form with the IRS.) You can find this form at www.irs.gov. You should ask employees to fill out a new W-4 form each year if they want to change their allowances.
U.S. Citizenship and Immigration Services (USCIS, formerly known as the INS) requires employers to use this form to verify that every employee they hire is eligible to work in the United States. (You don't have to file this form with the USCIS, but you must keep it in your files for three years and make it available for inspection by officials of Immigration and Customs Enforcement, known as ICE.) You can obtain the form online at www.uscis.gov. Note that these filled out forms should be kept in a separate I-9 folder for all employees -- not in each employee's personnel file.
The new hire reporting program requires employers to report information on all new employees for the purpose of locating parents who owe child support. Each state has a different new hire reporting agency. To find the name and address of your state's new hire reporting agency, see the State New Hire Reporting page at the Administration for Children & Families website (www.acf.hhs.gov).
Several government agencies require employers to post notices providing information on worker rights for their employees. For information on required federal posters, go to the Department of Labor website at www.dol.gov/elaws/posters.htm. The DOL's "Poster Advisor" will help you determine which posters you must display in your workplace. In addition, you must comply with your state department of labor's poster requirements. A list of state departments of labor is included on the federal Department of Labor's website.
You must file IRS Form 940 to report your federal unemployment tax for any year in which you paid wages of $1,500 or more in any quarter or for any year in which an employee worked for you in any 20 or more different weeks of the year. You can find the form at www.irs.gov.
Virtually every employer must comply with the requirements of the Occupational Safety and Health Act (OSHA) by, among other things, providing a workplace free of hazards, training employees to do their jobs safely, notifying government administrators about serious workplace accidents, and keeping detailed safety records. For information on these rules, go to website of the Occupational Safety and Health Administration at www.osha.gov.
Although not required, it is an excellent idea to have a handbook describing your business's employee policies and making it clear that employment is at will unless an employee has signed a written employment contract. A great resource is Create Your Own Employee Handbook: A Legal & Practical Guide, by Lisa Guerin and Amy DelPo (Nolo).
For each employee you hire, create a file in which to keep job-related documents, such as job applications, employment offers, IRS Form W-4, performance evaluations, and sign-up forms for employee benefits. Medical records should be kept in a separate, confidential file, in a locked cabinet. And you should store I-9 Forms, which document an employee's immigration status, in a separate file as well. For more information on developing a system for storing and maintaining personnel records, including state-by-state rules about employee access to their files, see The Employer's Legal Handbook, by Fred Steingold (Nolo).
If your business has established employee benefit programs such as health insurance or a 401(k) plan, you'll need a sign-up procedure so employees can enroll, name their dependents, and select options.
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