Tennessee is an at-will employment state, meaning employees can leave a job at any time for any reason or no reason, and employers can discharge an employee at any time for any or no reason – except for illegal reasons like discrimination and retaliation.
While most employees on a company’s payroll will be at-will employees, on occasion it’s important to forge an employment agreement with certain key employees. These employees may bring skills to the table that are hard to replace, so you as the business owner want to lock them in.
If you’re opening or operating a business in or around Murfreesboro or Berry Hill, Tennessee, and you wish to draft an ironclad employment agreement – or have your existing one reviewed – contact McCarter | East PLLC. Our attorneys can review what you have with an eye to achieving exactly what you want, or they can work with you from scratch to tailor an individual or generalized employment agreement.
Why Use an Employment Agreement?
Since Tennessee is an at-will employment state, as affirmed by the Tennessee Department of Labor & Workforce Development, why would an employer need an employment agreement? The Department’s website definitively asserts: “Employers may legally terminate an employee at any time for any reason, or for no reason without incurring legal liability.”
But it doesn’t stop there, asserting:
“However, an employer may not discriminate against any employee on the basis of the employee's race, sex, age, religion, color, national origin, or disability. Likewise, an employee is free to leave a job at any time for any or no reason with no adverse legal consequences.”
There are certain positions and personnel you find so essential to your operations that may necessitate you, the business owner or employer, to put safeguards in place so they don’t leave at a moment’s notice and create a void. This means that the two of you are going to have to forge an employment agreement as a condition of assuming the position – a contract, in other words.
What Terms Are Covered?
The agreement may specify a term of employment – one year, two years – or place a requirement on the employee to give 90 days’ notice before leaving, affording you time to find and integrate a replacement.
Other reasons for creating an employment agreement are to prevent a departing employee from leaving with trade secrets or proprietary information that could be used by the employee to become a competitor or could be shared with a competitor. You may even want to include a clause to bar the employee from working for a direct competitor.
Of course, you can also create separate non-compete and nondisclosure agreements that you can have your at-will staff sign, but an employment agreement is a more focused, individualized document that is all-encompassing for that individual.
Pros and Cons of an Employment Agreement
The obvious benefit of employment agreements is to give you, the owner and employer, peace of mind, along with protections against an employee leaving and becoming – or joining – a competitor. However, it also locks you in as the employer. If in short order, you discover that the employee isn’t really up to the task, you may be stuck. You may have to hire a redundant employee to do what the first hired isn’t doing, or isn’t capable of doing.
This brings up another key point to an effective employment agreement: It should specify terms and conditions of termination, along with complete job specifications. If worded correctly, and the employee fails to perform to the specifications, you may be able to terminate the relationship. The employee, in response, can always take you to court to claim the reason for the termination was really something else – for instance, you wanted to hire your brother’s son or daughter, or you just wanted to save money.
In short, then, employment agreements are a double-edged sword. They give both you and the employee promises that, if not fulfilled, can end up in court, where anything can happen.