Employment Templates

A comprehensive employment agreement should include: (1) job title and description of duties; (2) compensation details — base salary, bonus structure, equity grants, and payment schedule; (3) benefits — health insurance, retirement plans, vacation, and sick leave; (4) employment classification — full-time, part-time, exempt, or non-exempt; (5) term — at-will or fixed duration; (6) termination provisions — notice periods, cause definitions, and severance terms; (7) confidentiality and non-disclosure obligations; (8) intellectual property and invention assignment clauses; (9) any restrictive covenants — non-compete, non-solicitation; and (10) dispute resolution procedures.

Non-compete enforceability varies dramatically by state. California, Oklahoma, North Dakota, and Minnesota effectively ban non-competes for employees. Many other states enforce them only if they are "reasonable" in scope — typically limiting duration to 1-2 years, geographic reach to areas where the company actually does business, and activity restrictions to actual competitive roles. The FTC proposed a nationwide ban on most non-competes in 2024, though its implementation remains in legal dispute. Even in states that enforce non-competes, courts often modify overly broad agreements rather than enforcing them as written. Legal Tank's templates are drafted to maximize enforceability in each state.

At-will employment means that either the employer or the employee can end the employment relationship at any time, for any reason (or no reason), without advance notice. This is the default rule in 49 states (Montana is the exception, requiring "good cause" after a probationary period). However, at-will employment has important exceptions: employers cannot terminate employees for discriminatory reasons (race, gender, religion, age, disability), in retaliation for protected activity (filing a workers' comp claim, whistleblowing), or in violation of public policy. A written employment agreement can also modify at-will status by requiring cause for termination or specifying a notice period.

A severance agreement is typically used when an employer terminates an employee (especially in layoffs or without cause) and wants to provide compensation in exchange for a release of legal claims. Severance is generally not required by law, but is offered to: reduce the risk of wrongful termination lawsuits; ensure the departing employee signs a non-disparagement and confidentiality agreement; enforce post-employment restrictions; and maintain goodwill. For employees over 40, the Older Workers Benefit Protection Act (OWBPA) requires specific language and a 21-day consideration period. Typical severance ranges from 1-4 weeks of pay per year of employment.

The distinction between an employee and an independent contractor has significant legal, tax, and benefits implications. Employees receive W-2 tax forms, have taxes withheld, are entitled to benefits and labor law protections, and work under the employer's direction and control. Independent contractors receive 1099 forms, pay their own taxes, are not entitled to benefits, and maintain control over how they perform their work. Misclassifying employees as contractors can result in significant penalties, back taxes, and liability for unpaid benefits. The IRS, DOL, and state agencies use multi-factor tests emphasizing behavioral control, financial control, and the nature of the relationship.