Employment & Management Contract Agreements

WHAT IS A MANAGEMENT CONTRACT?

A management contract is an agreement between the owner or investor of a project, and a third-party management company hired for coordinating and overseeing a contract.

It usually details the amount of control given to the management company, the terms of payment and termination policies.

When considering drafting management contracts, there are a few merits and demerits to management contracts and their uses that business owners might need to bear in mind.

ADVANTAGES OF HIRING A MANAGEMENT COMPANY

There are several benefits from hiring a management company.

  • It allows business owners to be free of day-to-day detail managing work of the company, and thus have more time to plan and develop their businesses. This trivial work may include recruiting, terminating and train staff.
  • Instead of hiring an in-house manager, a third-party management team will bring experience in a number of management fields, including but not limited to marketing, accounting and taxing.
  • They are able to coordinate a business or project with consistency. A third-party management team will not disturb the business model of the company very much when they experience employee turnover. As a contractor, they have to maintain a level of continuity and accuracy as specified in the contract, and they usually have a home office to turn to when things go wrong.

DISADVANTAGES OF HIRING A MANAGEMENT COMPANY

On the flip side of the coin, there can be disadvantages as well.

  • There is a sacrifice of privacy and confidentiality. In order to hand over the management of the company to a third party, business owners have to give out some of confidential information, such as employee records, insurance and other personal information.
  • In some cases, company’s financial information is also accessible to the outsiders, leaving business owners vulnerable to potential fraud and public exposure. Therefore, it is extremely important for business owners to negotiate with the third-party management company on how much control is given before signing the paper.
  • Business owners should also think about conflicts that may arise with the contractor. There is a chance that the management team steps over the boundary and takes on the management of, say, clients or suppliers. In that case, price changes, discounts and forecasts might be compromised.

A properly-drafted management contract should provide solutions to these conflicts and specify a legal way to solve these issues.

EMPLOYMENT CONTRACT

An employment contract or agreement is used upon hiring an employee and it usually states the compensation the employee will receive, as well as other terms and conditions of employment that may exist.

Normally, an employment contract must contain principles and terms of following areas:

  • There must be an offer of employment
  • An employee must accept this offer
  • There should be consideration for each party for the other
  • The terms of the employment contract must be certain and precise.

Some basic terms of an employment contract would be:

  • Job title
  • Job description
  • Remuneration
  • Benefits
  • Vacation policy
  • Implied duties
  • Termination policies

Duties and Responsibilities

An employment contract should clearly spell out the employee’s duties and responsibilities. However, employer can make any changes that are allowed by the contract to this section.

That is to say, that the employer is entitled to make changes to the extent that is agreed upon by both parties when they enter into the contract. Therefore, employees should reserve the right to make changes to the job title and job description in the employment contract.

Remuneration

Remuneration section should state the employee’s salary or hourly wage, along with the frequency of payments.

Unless stipulated otherwise, it is usually implied that salaried employees are entitled to have additional remuneration for overtime.

As such, employers will sometimes include an additional statement such as “additional hours may be requested or necessary from time to time”.

Benefits

Employees’ benefits can include:

  • Medical and dental benefits
  • Long term disability insurance
  • Life insurance.

In the event where the employer wishes to make the policy part of the employment contract, the contract should attach those policies as a schedule, and the employee should receive a copy of the contract acknowledging his/her receipt in a written format.

Vacation

In the light of vacation policy, an employment contract should state the amount of vacation time employees are entitled to.

Employees should also reserve the rights to determine dates on which they take vacations.

Implied Duties

There are usually some implied duties required by law, which the employment contract may not necessarily cover.

These duties can be:

    • Faithfully serving the employer
    • Not revealing confidential information
    • Not disclosing important information to the employer.

It is important for employees to understand those implied rules or terms, because they help employees avoid conducting harmful behavior to the employer.

In conclusion, a carefully-drafted employment contract not only helps employers protect its interest and reduce the risk, but also enables employees to protect their rights and clarify their duties and responsibilities owing to the employer.

Employers should think through when drafting an employment contract and include some basic terms in the paper.

DRAFT YOUR CONTRACTS WITH PATROLA LAW’S LEGAL EXPERTS

Our Surrey BC employment and management contract lawyers at Patrola Law can help draft and review these contracts to ensure that all parties are fully protected.

Call us at (778) 565-4700 or get in touch through our contact form.