Subscribe to our Vets to Ventures newsletter
“People don’t do what you expect, but what you inspect.” – Louis V. Gerstner Jr., former CEO of IBM.
Gerstner’s quote is often repeated in the military and in business. It is a proactive strategy leaders can implement to achieve better results.
Clear and firm expectations are no stranger to anyone with military experience: counseling statements, ratings, officer evaluation reports, operations orders, even your MOS with a paragraph and line number provided words on paper to hold you and the military to account. The business world is no different: business leaders should clearly communicate expectations and inspect compliance regularly.
This strategy applies to any employer-employee relationship. While all employment relationships are unique, an employer should lay the foundation of what the employee can expect, and the employee must realize and accept those responsibilities and expectations.
Employment agreements are not necessarily needed for every employee; policies, procedures, and other documents that do not constitute contracts can adequately communicate an employer’s expectations to most employees. But to the extent you do need to enter into an employee agreement, you should consult legal counsel regarding the content of any such agreement and its implications.
Best Practices and Legal Considerations for Employment Relationships
- Comply with all employment laws: Employers must take care to adhere to all applicable federal, state, and local employment laws. This includes following anti-discrimination regulations, adhering to minimum wage and overtime requirements, and following proper protocol for terminations. It is important to seek legal counsel because employment law varies widely by jurisdiction and can be complex.
- Define specific job roles, tasks, and responsibilities: Employers should define and inform the employee of the scope of employment, job description, and expectations. Drafting a specific scope of employment is helpful legally and practically. Plain language reduces the risk of misunderstandings.
- Get a ‘John Hancock’ upon hire on handbooks/policy documents: Employee handbooks or policy manuals should contain a disclaimer stating they are not a contract or guarantee of any benefits or compensation. Without that language, such documents could create a contractual entitlement that the employer may not necessarily intend. It is useful to have employees read and sign an acknowledgement that they have read, understood, and will abide by the policies contained in a handbook or manual. Doing so will help an employer demonstrate clear communication of expectations in the event it needs to enforce the policies contained in those documents.
- Specify pay structure, compensation, and benefits: When bringing in an employee, clearly outline compensation and benefits packages, including salary, bonuses, commissions, health insurance, vacation time, sick leave, etc. Make sure these terms meet minimum legal requirements and seek legal counsel if you are unsure what those requirements are. These do not necessarily need to be in an employment agreement or contract. In fact, outlining them in a document that disclaims any contractual entitlement can give you flexibility to make prospective changes as business needs require.
- Review agreements, policies, and business practices: Employment laws and regulations change frequently due to new federal, state, and local legislation, as well as regulatory action at both the federal and state level. It is important to keep abreast of those changes and review agreements, policies, and business practices with counsel at least once a year to ensure compliance.
Understanding At-Will Employment
In 49 of the 50 U.S. states, excluding Montana, employment is generally presumed “at-will” meaning an employer can fire an employee for a good reason, a bad reason, or no reason at all, unless there is a contract specifying termination clauses. Employers can let someone go even if the employee performs their duties well, and similarly, an employee can quit without giving a reason or notice.
A standard exception to at-will employment is illegal discrimination based on race, religion, gender, age, disability, or other factors protected by law. Another illegal reason includes firing an employee for filing a workplace complaint or whistleblowing on illegal activity. At-will employment can also be changed if the employer and employee enter into an agreement for employment for a definite period of time. Employers should exercise care in statements made to employees, whether oral or written, that could be construed as such an agreement.
Although employers can fire without notice, it is important to follow documented procedures to avoid potential wrongful termination claims. Also, it is best practice to document, document, document. Maintain all communication, including e-mails, or as the kids says, “keep receipts,” and write down reports of any incidents that can be used in litigation should a dispute arise. In the event a dispute arises, it may be difficult to recall specific circumstances of a termination or a person who was involved may become unavailable. Timing is also critical in employment disputes, so having contemporaneous records is often key to a successful defense.
Loose Lips Sink Ships: Confidentiality Agreements and Noncompete Clauses
Operational security is just as much a concern in the private sector and confidential information about your company should be protected. Confidentiality and noncompete clauses protect a company’s valuable information upon an employee’s termination.
However, noncompete agreements are in the national news after the Federal Trade Commission (“FTC”) issued a “final rule,” calling for a comprehensive ban on noncompetes nationwide (read the Adams and Reese client alert). The rule will not go into effect until 120 days after publication in the Federal Register, and it already has been challenged through a lawsuit filed in federal court by the United States Chamber of Commerce.
Prior to the announcement of the FTC’s new rule, confidentiality provisions, non-disparagement provisions, and other restrictive covenants had already been the subject of action by the National Labor Relations Board (“NLRB”).
In 2023, the NLRB issued its order and decision in McLaren Macomb, holding that employers violate the NLRA by enforcing — or even offering — severance agreements containing overly broad confidentiality and non-disparagement provisions (read the Adams and Reese client alert).
Adams and Reese labor and employment attorneys Ben Bard and Erica Pope discuss how a cross-petitions filed by the NLRB’s General Counsel and McLaren Macomb may impact severance and other employment agreements, and why it is important “for employers who wish to continue utilizing restrictive covenants to protect their business interests . . . to revisit existing employment agreements for non-supervisory, non-managerial employees in light of current developments to avoid legal exposure and ensure the enforceability of those protections.”
Additionally, it is important to ask prospective employees if they have a noncompete agreement from a previous employer that would prevent them from performing the duties of their sought position. If so, you may be exposing yourself to a lawsuit from that prospective employee’s prior employer. Being fully informed on this issue will allow you to make an appropriate decision and potentially avoid legal fees responding to the prior employer or its counsel.
Conclusion
Theodore Roosevelt, the 26th President and former U.S. Army Colonel, once said, “The most important single ingredient in the formula of success is knowing how to get along with people.”
Your employees are your greatest assets. Leaders lead by treating their employees the way they would want to be treated, and clear communication of expectations with your employees is essential to the employer-employee relationship, as well as avoiding exposure to potential liability. Effective communication plants the seed for your company’s success.
All business owners, particularly veterans who may be new to running a company, should consult a legal professional, employment law attorney, or someone experienced in human resources to manage employee expectations, or assist in employment agreements should you deem them necessary.
Adams and Reese Vets to Ventures Series
For Our Veterans, by Our Veterans - Adams and Reese is proud to feature a series of informative articles addressing hot topics of legal interest for service members transitioning back to the private sector. Sean Buckley, a veteran U.S. Navy Officer, is a corporate services attorney in the Houston office. John Woods, a former infantry officer in the U.S. Army National Guard, is a litigation attorney in the Memphis office.
- “Succession Planning for Veteran-Owned Businesses with Federal Certification”
- “From Battlefield to Boardroom: Applying Military Principles to the Business World”
- “Operation Litigation: Top Tips if Your Business is Threatened with a Lawsuit”
- “Forming an LLC or Corporation: Which Business Entity is Right for You?”
- “Legal Intel for Veteran Entrepreneurs”