Five Essential Documents for
US-Based Employees

October 16, 2017 Meira FerzigerAndrea R. Bernstein

To read the article in Hebrew, click here.

When hiring US-based employees, companies routinely require employees to complete certain legally required documents, such as an I-9 form for purposes of confirming that the employee is legally authorized to work in the US, and a W-4 form, as required for tax purposes. As a matter of good practice, however, and to minimize future exposure, companies employing US-based employees should also make it standard to provide new employees with each of the following essential documents:

  1. Agreement Setting Forth Terms of Employment
  • All US-based employees should have some form of written document (whether in a letter or formal agreement format) setting forth the terms of the employee’s employment, including but not limited to:
    • Start Date
    • Compensation
    • Benefits (health insurance? 401k? paid time off? disability coverage?)
    • Location of work (home office, company office, travel)
    • Termination of Employment / Resignation (required notice period and/or severance payments)
    • Method of Dispute Resolution (court or arbitration)
    • Governing law (generally, the state in which the employee is located, or the state in which the company’s main office is located)
    • A statement that the written document controls the relationship between the company and the employee, to the exclusion of all other communications, unless such communications are written and signed by both parties
  • The signed document will then govern the relationship between the company and the employee.  Absent such an agreement, casual statements by a supervisor such as “sure, take as much vacation as you want!” or an email stating “don’t worry- the company would never terminate you without at least one month’s notice…” could become promises binding the company.  A written document signed by both parties will legally control the work relationship, making the terms and conditions of employment clear, and clarifying any ambiguities.
  1. Non-Disclosure Agreement
  • A company’s uniqueness and success is often based on the value of its confidential and proprietary information, trade secrets, and inventions. For that reason, every US-based employee should be required to sign some form of non-disclosure agreement (generally referred to as an “NDA”) protecting all company property of this nature. The NDA should invoke the most recently enacted enhanced protections of the Defend Trade Secrets Act, and should clearly assign to the company any inventions created by the employee during the period of employment.
  • No less important are post-employment restrictions that limit the employee’s ability to compete with the company and/or to solicit company customers and/or employees.  The permissible scope and enforceability of these restrictions will depend very much on applicable state law. Restrictive covenants must be individually tailored  based on factors such as the employee’s position at the company, the type of information to which the employee will be exposed, the geographical area in which the company operates, and the potential harm to the company’s business.
  • Note that, depending on the state, the timing of the signing of an NDA may affect its enforceability. For example, some states require an NDA to be signed before the employee starts working, and will not enforce the NDA terms if the agreement is signed after the employee’s first day of employment (unless, in some situations, the signing is accompanied by independent consideration such as a bonus payment). Accordingly, employers should keep track of an employee’s timing with respect to signing of the NDA.
  1. Incentive Plan
  • If an employee’s compensation is in any part incentive-based, a clearly written Incentive Plan should set forth the goals and targets to be achieved during the designated incentive period, as well as the timing with respect to calculation and actual receipt of such payments by the employee. Clear distinctions should be made between objective standards (such as fixed commission rates based upon the achievement of sales), as compared to discretionary payments (such as “upon the company’s success” in a given year). Note that most states require Incentive Plans to be explicitly written and to be given to an employee before the applicable incentive period, so that it is clear to the employee what must be achieved for purposes of securing the applicable payments.
  1. Employment Policies/ Employee Handbook
  • As a matter of routine practice, many companies distribute to their employees a comprehensive employee handbook setting forth various employment-related company policies that apply to matters such as hours of work, payroll practices, safety and security, and company procedures. Companies that do not circulate a detailed handbook should at the very least have in place an Equal Employment Opportunity Policy, as well as a Non-Discrimination and Non-Harassment Policy, and should make sure that all US-based employees acknowledge in writing their receipt of such policies.
  • In addition, it is strongly advisable for companies with US-based employees to have clear time off policies establishing the terms of vacation and sick leave- such as the manner in which such days are accrued, and whether accrued but unused days are carried over from one year to the next year and/or paid out upon termination of employment. Note that state and local law often impose specific requirements regarding vacation and/or sick leave, and so each employee’s location must be taken into consideration when developing a company’s policies.
  • Although not required, companies that have employees who travel regularly for purposes of work-related matters will benefit from having a well-drafted Business Expense Policy that defines which expenses will be reimbursable, thereby averting conflicts with employees with respect to over-spending.
  1. Workplace Posters
  • Often overlooked are federal, state and local law requirements to post certain information in the work place. Posters of this nature can simply be ordered from payroll or human resource companies, or may be easily downloaded from the internet (for example, see https://www.dol.gov/whd/resources/posters.htm). Failure to display required posters creates unnecessary legal risk, and so it is well worth the few minutes it takes to obtain and post all required information, and to update such posters regularly, as required by law.

The above is a brief outline and overview of essential written documents for companies with US-based employees. The manner in which these documents should be prepared with respect to specific employees should be evaluated on a case by case basis in consultation with legal counsel. For further information please contact Meira Ferziger at mferziger@swalegal.com or Andrea Bernstein at abernstein@swalegal.com.

Meira Ferziger is the head of the labor and employment practice at Schwell Wimpfheimer & Associates and has significant experience in drafting policies, agreements, employee handbooks and guidelines in compliance with U.S. federal and state law. Meira functions as an integral part of the day to day operation of corporate clients by counseling them through their employment-related practices and decisions, and also advises clients as to employment issues that arise from corporate transactions, such as restructurings and acquisitions.

Meira can be reached at 646 328 0794 or mferziger@swalegal.com

Andrea Bernstein is a member of the labor and employment practice at SWA and represents U.S. companies with respect to all facets of U.S. employment law. Andrea has significant experience litigating employment cases on behalf of employers, with emphasis on litigation of restrictive covenants, wage and hour matters, and discrimination, harassment, and retaliation claims. She also has broad experience in counseling HR personnel and in-house counsel on legal compliance and risk avoidance issues in the employment law context.

Andrea can be reached at 646 328 0775 or abernstein@swalegal.com

This SWA publication is intended for informational purposes and should not be regarded as legal advice. For more information about the issues included in this publication, please contact Meira Ferziger or Andrea R. Bernstein. The invitation to contact is not to be construed as a solicitation for legal work. Any new attorney/client relationship will be confirmed in writing.