A client called me recently to tell me his company was growing and that he needed to re-hire some employees he had laid off at the beginning of 2009. Given his current growth and the possibility of additional expansion in 2010, he thought it was time to brush off the company's hiring letter and discuss the use of a non-disclosure agreement for key employees.

Good news, I thought, particularly in this economy. Plus, he was to be commended for thinking ahead and focusing on how best to articulate the employment and benefit terms for his re-hires.

When he sent along his current hiring letter, it was immediately clear that some updating was in order. On first review, three red flags jumped out:

1. The offer letter referred to "employment contract." Uh oh! My client had no intention of offering an employment contract to a new employee. Rather, he contemplated "at will" employment and had simply overlooked the implications of these words in the draft.
   
   As a fix, the first sentence of the letter might read: "We are pleased to confirm our offer to you of at-will employment in the position of XXX."

2. The offer letter referred to employee benefits which included "80% employer-paid health insurance." While the company does indeed currently provide such benefits, what happens if it needs to cut that back to a lesser percentage in the future? Particularly given the annual, double-digit increase in the cost of this benefit that we are all experiencing, my client ought to reserve the right to adjust the amount going forward.
   
   The solution here would be another sentence: "Health care benefits are included with a current company contribution of 80%, although benefit policies and contribution levels are subject to change, at the discretion of the company."

3. The offer letter made employment contingent on the employee signing a "non-disclosure agreement to be provided in the future." Hmm! I could see that we needed to get that nondisclosure agreement drafted post-haste and make it an attachment to the offer letter.
   
   Here, we might add a final sentence which reads: "You will be required to sign the non-disclosure, confidentiality, and non-solicit agreement which is attached to this offer, as you will be privy to sensitive business information belonging to both the company and the company's clients in the ordinary course of carrying out your duties."

Contract Signature Mechanics

I always love it when I get feedback from my readers… questions, comments or suggestions for future topics are most welcome. Last month, this column elicited some questions from a client — Tom Hastings of The Interface Financial Group — on the mechanics of signatures on contracts:

Question: "How about the mechanical side of signing a contract in the electronic age?"

My Answer: Both parties can agree to accept final, enforceable versions via signatures which arrive by facsimile or PDF. Similar to other contract provisions, the contracting parties can simply agree… by inserting a provision in the contract itself… that a faxed or PDF signature is sufficient to create a legally binding contract.

Question: "Are there other forms of electronic signatures that are acceptable?"

My Answer: Parties to a contract can agree to conduct the transaction by "electronic" means, in which case an "electronic signature," defined as "an electronic sound, symbol or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record," is acceptable.

Parties to a contract may also agree that a "digital" signature [which requires encryption software for use] has the same force and effect as a manual signature.

Question: "When should the signer initial every page of a contract?"

My Answer: In the fast-paced, electronic world we inhabit, initialing every page may seem like the act of a dinosaur, but this brontosaurus believes strongly in the procedure, when possible. Boilerplate contracts, in particular, all look alike and pages get shuffled… you want your pages to align and make sense. Take the extra time and the excess of caution by adding your initials to the corner of every page on which there is no signature. You ask why? … I ask, why not!

Widett and McCarthy specializes in advising small business owners in the area of contracts. Whether reviewing a contract for services with your customer, negotiating a lease with your landlord or finalizing financing documents with your lender, we make sure your best interests are protected.

In addition, and for those clients whose successful growth requires a more comprehensive relationship, we act as "general counsel:" On-call when you need us as a sounding board, legal advisor and strong right hand.