Why employment contracts matter more than you think

Most business owners treat employment contracts as a formality — something to tick off before a new hire starts. In reality, a poorly drafted employment contract is one of the most common sources of legal risk for growing businesses.

The employment relationship is governed by law from the moment it begins. Your contract either reflects that legal framework clearly — or it leaves gaps that become expensive to resolve later.

What every employment contract must include

At a minimum, every employment contract should clearly set out the job title and description, the start date, the place of work, the hours of work, the salary and any additional benefits, the notice period on both sides, and any probationary period.

These aren't optional extras. In many jurisdictions, failing to provide written terms within a specified timeframe is itself a legal breach — regardless of whether a dispute arises.

The clauses most businesses get wrong

Confidentiality and non-disclosure. Many contracts include confidentiality clauses that are so broad they are effectively unenforceable. A well-drafted confidentiality clause is specific about what information is protected, for how long, and under what circumstances.

Restrictive covenants. Post-termination restrictions — such as non-compete and non-solicitation clauses — are notoriously difficult to enforce if they are drafted too widely. Courts will not enforce a restriction that goes further than necessary to protect a legitimate business interest. If you want these clauses to hold up, they need to be carefully tailored to the specific role.

Intellectual property ownership. If an employee creates anything in the course of their work — software, designs, written content, processes — your contract should make clear that the intellectual property belongs to the business. Without an explicit clause, ownership can become contested.

The contractor trap

One of the most common and costly mistakes we see is misclassifying employees as contractors. The distinction matters enormously — for tax purposes, for employment rights, and for liability.

If someone works regular hours, uses your equipment, follows your processes, and is integrated into your business, they are likely an employee regardless of what the contract says. Getting this wrong can result in significant backdated liability.

What to do if your current contracts are out of date

Employment law evolves constantly. Contracts written five years ago may not reflect current legal requirements or best practice. If you haven't reviewed your standard employment contract recently, now is a good time to do so.

At Lawden, we review and redraft employment contracts regularly. The process is straightforward, the cost is predictable, and the protection it provides is significant.