I formerly employed an assistant who held a Masters Degree in Human Resources. On occasion she’d say “I love working here. I’ll never quit.”
Of course, as a good employer I felt an urge to reply with equal commitment, but I couldn’t. I’d say “You realize that you can say that every day for the next 1,000 days, and then just never show up to work again. There is no penalty. But if even once I reply ‘And I’ll never fire you,’ I’ve offered a verbal contract and can be sued if I change my mind.”
We’d both laugh, because we knew it was true. The continuing employment relationship is completely stacked in the workers’ favor. Any verbal or written promise of continuing employment creates an obligation on the part of the employer. The company must document any change in those conditions.
Under the Worker Adjustment and Retraining (WARN) act an employer of more than 100 people must give at least 60 days notice of a layoff. I’ve known several companies of that size who experienced a sudden downturn in business. Faced with a choice between compliance and having the company go under, they took their chances with ignoring the law.
Yet your most critical employee, your second in command, top salesperson, or an engineer in the middle of a large and complicated project, can just call one day and say they’ve gone to work for a competitor. The law says they have that right unless contractually prohibited.
The verbal or written promise is one reason why many small companies avoid employment agreements. That’s like entering into any other long-term business agreement on a handshake. It may feel like an expression of trust, but a contract makes sure that both parties understand what is expected.
The employee should commit to following company policies, appropriate use of social media (you can’t dictate that in your handbook, but they can agree to it in exchange for employment), to hold proprietary company information confidential, give appropriate notice of voluntary termination, and non-solicitation of other employees after they leave.
Appropriate notice can be spelled out as different lengths of time for different levels of responsibility.
In return the employer promises to follow written policies for discipline and performance review, and give appropriate notice of termination except for cause, with pay in lieu of notice if such arises.
Let’s face it, most employers who avoid employment agreements do so because they don’t want to hold up their end. Their handbook is either nonexistent or a dusty tome that people sign off without reading. They conduct employee evaluations rarely or not at all. They don’t want to be obligated to pay anything at termination merely because they’ve failed to sufficiently document the reasons.
Our economy is based on over 70% services. In a service business, employees are almost invariably the number one expense. You can either look around at your staff every day and know that they may all be gone tomorrow, or you can treat their employment for what it is, a critical component of your business.
By the way, the assistant eventually left (everyone does), but she did so with appropriate notice, and we are still friends.
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