The Wall Street Journal reported last week that the recent dip in the US Unemployment Rate indicated a slight acceleration in hiring by US Businesses in the third quarter of 2012.
One of the most common questions I am asked by a small business owner is whether it is better to hire an employee or use an independent contractor. This is one of those questions where my answer is always a definite “it depends.” Each business model, owner and circumstances are unique and may lead to a different answer from a legal, tax and headache standpoint. In some instances an employee is preferable and other times it makes more sense to utilize an independent contractor.
Lately I have had a number of clients ask me to prepare employment agreements in anticipation of continued economic recovery. As more businesses experience sustained growth and anticipate expansion in the near future, it may make sense to convert their independent contractors into employees. An employment agreement is an important step in that conversion process – it allows the employer and employee to establish the scope of their relationship and address some potential pitfalls at the outset.
Why draft an employment agreement? There are plenty of good reasons from an employers’ perspective, but four that immediately come to mind include: 1) It addresses the issue of termination before employment begins and lays out the reasons that the employer or employee may terminate the relationship and the consequences associated with such action; 2) It allows employers to clearly hire employees for specific purposes or specific periods of time; 3) It expressly protects the employer’s intellectual property and trade secrets; and, 4) It provides for resolution of any disputes outside of the court system through mediation or arbitration.
We all hope the economy continues to improve and more businesses begin to hire employees. Employers should be ready to dust off their old employment agreements or draft entirely new ones in order to prepare for their expanding workforce in the months to come. An attorney with experience in employment agreements is a great resource to help employers address many of the “what ifs” that can come with that new hire.