Put it in writing!

Written employment agreements – Implications of using them too late in employment relationship

Lawyers are often asked whether it is necessary to have a written employment agreement. I’m sure most people can guess that lawyers will almost always recommend to both employers and employees to ‘put it in writing’. This will help ensure that both parties are clear about their duties and obligations in the employment relationship and can minimize the risk of ending up in expensive litigation down the road.

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The follow-up question that many employers ask is, "I have several current employees that do not have written agreements in place, can I ask them to sign an employment agreement now?" This can be a tricky situation because the contract must have proper consideration to be enforceable in a court of law. “What is consideration?” Consideration is the contractual principle that there must be a mutual exchange of promises in order to make a contract binding.

In the scenario above, there was a verbal agreement between the parties when the employee commenced employment. The consideration was that the employee would do work and the employer would pay the employee. If an employer is asking the employee to sign a written agreement that has additional terms (such as termination, benefits, etc.) the employer must include ‘fresh consideration’ in the written employment contract. This means that they should be giving the employee an incentive to enter into the written agreement - this can include a signing bonus, a promotion or some other form of benefit. Without including this fresh consideration an employer runs the risk of the written employment agreement not being enforceable.

Article written by Greg Pratch

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.