Don’t Ditch the JD for ChatGPT: Employment Agreements

• This contains no obligation for the employee to abide by the company’s rules, regulations, and guidelines, which can be important when enforcing an employee’s obligations under the agreement.

• This should affirmatively state that the employment is “at will”.
• Is the employee exempt or non-exempt? Exempt employees are salaried and receive a monthly wage divided into pay periods.  Additionally, exempt employees are not subject to the Fair Labor Standards Act’s (FLSA) overtime regulations and are therefore not entitled to overtime pay.  A non-exempt employee, however, is typically paid hourly and is entitled to overtime pay if they work more than a specific number of hours (generally 40 hours) in any given week.

• This provision does not include any language allowing for changes to salary based on performance in order to allow for a salary decrease if needed.  Although this is not a common scenario, situations do arise when an employee is unable to perform at the job they were hired for and a company needs to demote them to a lower position. When this arises, a company may understandably want to decrease the employee’s salary to match what is reasonable given the new position and a failure to include that in the agreement may mean a company is opening itself up to liability.

• This does not specify when an employee is eligible to begin receiving benefits.  Is there a 90-day period? It is common for a company to implement a specified period of time in which the employee must be employed at the company before they receive health care benefits, retirement benefits, paid time off, etc.
• Fails to specify the amount of the employer match and provides no context at what level of contribution the company is required to make to the employee’s 401(k).  As written, the provision can be interpreted (another word you do not want associated with a contract provision) to require a company to match an employee’s 401(k) contribution dollar-for-dollar.

• There are no definitions for key terms like “trade secret”, “proprietary information”, or “data”, and it fails to provide any examples of what types of information are subject to this provision. It should also separately define “confidential information” and “trade secret” information.
• The provision is potentially unenforceable under Illinois law because it continues indefinitely for confidential information—it should include a limitation on temporal scope. This can be contrasted with information that is a “trade secret” of the company, which is protected indefinably (or as long as the information remains a trade secret).
• This does not include any of the standard carve-outs for confidentiality provisions, including when an employer or employee may be required by Court Order to disclose certain confidential information as part of a lawsuit.

• Non-compete provisions are barred for most employees based on the FTC ruling.
• Depending on where you are located, there were pre-existing limitations to non-compete provisions prior to the FTC ruling. In Illinois, the Freedom to Work Act provides that Employers be prohibited from entering into a “covenant not to compete” with any employee unless the employee’s actual or expected annualized rate of earnings exceeds $75,000.
• Since there is not a severability provision in this agreement, the whole contract could be voided if even one provision is held to be unenforceable. A severability clause allows other parts of the agreement to remain in effect even if others are illegal or unenforceable.

• This does not include any obligation to return company property/documents, including requiring the deletion of company confidential and trade secret information from the employee’s personal devices and accounts on termination of employment.
• This provision essentially handcuffs the company to its employees because it facially requires a severance package, even where one may not be required.

• This does not allow for mediation or other potential forms of alternative dispute resolution, which may result in a resolution without the need to incur the costs of an arbitration.
• It does not allow for equitable or injunctive relief, which is generally obtained in Court, not through arbitration. There are times that a company may be in imminent danger of significant losses because a former employee has misappropriated and is using the company’s trade secret or confidential information with a competitor.

1.      Fee Shifting: In jurisdictions that allow fee shifting (such as Illinois), it is prudent of an employer to include a provision that requires a breaching employee to re-pay the legal fees and costs incurred by the company in enforcing the employee agreement.

2.      Integration: This avoids confusion over exactly what contractual provisions the employee is bound by because it states that the terms of the employment agreement are the complete and final agreement between the parties.

3.      Intellectual Property Assignment: An employer will want to protect its rights to any intellectual property that is created by an employee as part of their role with the company.

4.      14-day notice: Include a notice advising employees to discuss the terms of the agreement with an attorney and providing them at least 14 days to review and sign (required in IL).

Note that there may be other specific provisions that are relevant to your business, and the particular role and duties of the employee.