What to put into an employment contract?
January 1, 2018 11:06 AM   Subscribe

My father is retiring from the small business he built and selling his shares to his long-time partner. I've been the office manager for 20+ years. Dad has, as part of his sale contract, is including an employment contract for me, so that I can continue working there until my retirement. I've only worked for small businesses and haven't ever done this before. I have the following covered: Compensation, Vacation, Working Hours, Working remotely, Insurance, Retirement age. Am I missing anything?
posted by sarajane to Work & Money (13 answers total)
 
Not to be glib, but yes: a lawyer.
posted by rhizome at 11:12 AM on January 1, 2018 [22 favorites]


Very generous (as in Golden parachute) severance package?
posted by ArgentCorvid at 11:18 AM on January 1, 2018 [5 favorites]


Definitely a good idea to consult a lawyer in situations like these as a matter of course.

I'd also suggest including something about reporting relationships (e.g. you will report to the head of the company, so that they can't decide to bring their kid in as an intern and make them your boss), evaluations (e.g. a yearly one, done by your boss, so that you can show a track record of achievements and performance) and some kind of severance arrangement in case they suddenly decide to restructure or sell to someone else, (e.g. if they want to eliminate your position or let you go for whatever other reason they have to pay you a month's salary--or whatever you can negotiate-- for every year you've worked for the company).
posted by rpfields at 11:23 AM on January 1, 2018 [4 favorites]


Response by poster: Forgot to add: yes, this will be run past/drafted by a lawyer, we just want to do the groundwork.
posted by sarajane at 11:25 AM on January 1, 2018


In the compensation part, have you covered periodic raises? Bonuses?
posted by LOLAttorney2009 at 11:32 AM on January 1, 2018 [2 favorites]


You want to address what happens if they fire you with or without cause, or if you quit with or without cause, what happens if you die or become disabled, whether any benefits you accrue go to your estate or not, etc. These are all things a good lawyer will ask you about and build in to the agreement but it’s useful to have thought about your position before you sit down with the lawyer.
posted by devinemissk at 11:34 AM on January 1, 2018 [3 favorites]


Am I missing anything?

Yes - what's your best alternative to a negotiated agreement (BATNA)?

Every marginal benefit to you in the employment contract will be paid for. Benefits to you are long term liabilities to the company, which makes the value of the company drop. Hence, your father's partner will have to value the corporation lower and pay your father less in order to compensate for the cost of employing you.

There's a reason long-term contracts are uncommon in business. Even short-term contracts are almost always written to be mutually severable by both parties with minimal notice. There're both legal reasons and practical reasons for this. Legally, courts frown on indentured servitude - both on employers forcing their employees to work or employees forcing their employers to employ them. Practically, long-term contracts without serverability force an employer to pay someone regardless of value, which is rarely in the employer's interest.

This is not to say you shouldn't do this - you should take the suggestions here (especially the lawyer one!), incorporate as much language to your benefit as possible, and present it to your father's partner. However, you should then be prepared to negotiate those terms with your father's partner given that the terms are not in your father's partner's interests. Whenever you negotiate, you should know your BATNA because at some point you need to know when to walk away. You are talking about a potentially very long term obligation here and it should be very carefully considered. For instance, I would find it very strange if your father's partner agreed to you terminating the contract with no notice, but mandating an extremely large severance payment with significant notice on his part (for an office manager?). Maybe he takes it - all the better for you. However, you'll likely have to agree to either mutual severance with no notice (as is common, but then this is basically a job like any other) or significant notice/payment for termination (significantly less common, as it binds both parties to potential indentured servitude).

Good luck!
posted by saeculorum at 11:56 AM on January 1, 2018 [2 favorites]


Yes, get a lawyer.

And (as alluded to above) if you are really concerned about job security, then your contract will have to address that expressly - i.e., the circumstances under which and the process by which you can be fired. (Nobody's going to agree to a long-term contract under which you could never be fired. And a contract that doesn't speak to circumstances or process of termination will, in many places at least, be construed to mean that you can be fired at any time for any reason or no reason at all.)
posted by sheldman at 1:10 PM on January 1, 2018 [1 favorite]


On the positive side, I'd assume there is some comfort level with your father's partner, since you've worked in the business 20 years. The obvious thing that bothers me about the situation is - why doesn't he give you at least some ownership in the business? Even a minority stake would give you significant leverage compared to a mere employment contract.

Feel free to DM me; I'm a 2nd generation family business veteran, and the position you are in (both in terms of your job role and your family role) is classically undervalued. Perhaps it hasn't worked out that way for you; I hope so. If you're 40-something (just an assumption given your tenure in the business), the timing could not be more critical to your career to make sure you do this right.
posted by randomkeystrike at 1:58 PM on January 1, 2018 [7 favorites]


Is there a reason you don't trust the partner to treat you fairly based on your past and ongoing work performance?

I would agree with what saeculorum said - the more bullet proof the contract for you, the less it's worth to the buyer. Having been a partial owner of a small businesses in the past, if my partner had wanted guaranteed employment for life for their child as part of the deal, I'd either have turned them down or greatly reduced what I was willing to pay. You might be a great worker now, but people can change and if the new owner is facing a $60-100K/year drag on profits if that were to happen and he can't get rid of you, that's a giant liability.
posted by Candleman at 2:09 PM on January 1, 2018 [1 favorite]


Old and settled contract law says that any ambiguities in a contract that later cause problems are to be resolved counter to the better interests of the side that drafted the (flawed) agreement.
(So get a lawyer.)
posted by Fupped Duck at 4:55 PM on January 1, 2018


Just to be totally clear, you should hire a lawyer who represents you and your interests alone. You should not rely on a lawyer hired by the company.
posted by burden at 9:48 PM on January 1, 2018 [2 favorites]


Whether or not it should be part of the contract, you should probably have a clear job description. Likely the sale of the business means that things will be different in the future and it would be good to have clearly set out what your responsibilities are in the business going forward.

I probably live in a different country to you, but my employer has generous standard redundancy payment of approx 1 month per year of service, and employees have a 3 or 6 month notice period depending on seniority. So you might want to consider that as a model.

To be honest, I'd still be polishing up my CV. If you are approx 20 years from retirement, then no contract, however watertight is going to ensure your continuing employment in this business for that length of time, and in any case you may not like the way the business goes.
posted by plonkee at 9:52 AM on January 2, 2018 [1 favorite]


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