Are Employment Contracts a Good Idea?

As an employer, you are free to offer employment contracts to all, some, or none of your employees. It's a very common practice for companies to offer contracts to higher-level personnel but not to the rank and file. The only limitation on your ability to offer contracts to some but not all employees

The advantages of employment contracts are that for key positions they can provide an employer with a greater sense of security that a specific employee will not leave the company abruptly. Reasonable non-compete clauses can also assure that an employee will not take his or her knowledge of your company's practices to a rival business. The most obvious disadvantage of an employment contract is, of course, that it limits the flexibility of an employer, who may find letting an employee go or even reducing his or her benefits becomes impossible.

Even where no formal contract exists, state courts will often "imply" an employment contract by looking at the circumstances of employment to determine whether certain promises (actual or implied) were made to the employee. There are two ways to minimize this risk:

1. Ask employees to sign a written acknowledgement that they are employed "at-will" and that nothing provided or told to them is a contract.
2. Offer employment contracts to all your employees. However, the "contract" here should state only the most basic information (hire date and salary). It should also explicitly provide that the individual is an at-will employee. By doing this, you use a contract to try and preempt the court's ability to later imply a contract limiting your discretion as an employer.