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Should you use contracts or at-will employees?

On Behalf of | Jul 17, 2022 | Business Formation & Planning

As you start your business, you begin to look into hiring your workforce. Most employees in the state are at-will employees, meaning that they don’t have a contract. But you may be wondering if it’s worth it to use contracts with your employees instead.

Generally speaking, contracts are typically used with executives and other high-level positions, while lower-level employees are hired through at-will practices. You can certainly use contracts for all of your employees, or at-will employment, as you choose. What are the differences between the two?

Contracts change how you have to treat the employees

The big thing to remember is that giving an employee a contract means that you now have to honor this legally binding document. Even if it is different than the base laws in the state, you have to honor the contract because you agreed to it, and the employee only took the job under those terms.

For example, if you decide that you want to let an at-will employee go, you don’t need to give them any warning, and you don’t need to have a reason. You can simply fire them at any time without violating their rights.

However, if you gave the employee a contract saying that they would be with the company for three years, then you can probably only fire them for a reason. Without one, you can’t break the contract early.

This also works in the other direction. An employee with a contract needs to fulfill the terms of that contract, while an at-will employee can simply quit whenever they like.

There’s no right or wrong answer. You simply have to determine what will work best for your company and what legal steps to take to put it into practice.