Role
Position, duties and reporting line
A clear description of the job and to whom the employee reports. Vague duties invite disputes about whether a later change in role amounts to a demotion.
Contracts · Key hires and executives
Employment Agreements for the People Your Business Depends On
Most staff in New Jersey work at will under a simple offer letter. Senior managers, top sales people and executives usually need more: a written agreement that settles pay, the grounds for termination, severance and what they may do after leaving.
When a contract makes sense
Not every hire needs one — but the important ones usually do
Employment in New Jersey is generally at will, meaning either side can end the relationship at any time for any lawful reason. A written employment agreement changes that default by design, so it should be used deliberately.
For a business owner, a key-employee agreement does three jobs. It attracts and keeps the person by making compensation and expectations clear. It protects the company by setting out confidentiality, ownership of work and post-employment restrictions. And it lowers the cost of separation by deciding in advance what happens if the relationship ends, rather than negotiating it under pressure.
The firm drafts these agreements for employers and reviews them for incoming executives, as part of its broader contract drafting and negotiation practice. For company-wide policies such as leave, harassment prevention and at-will statements, see the separate page on employee handbook review; a handbook drafted carelessly can create contract obligations of its own.
Core terms
What a key-employee agreement has to settle
Pay
Salary, bonus and equity
Base pay, how bonuses are calculated and when they are earned, and any equity or profit-sharing. Bonus language that reads as discretionary in one sentence and guaranteed in the next is a common source of claims. Deferred compensation should be reviewed with your tax advisor.
Term
Fixed term or at will
Some agreements run for a set period; others keep at-will employment but add notice and severance terms. A fixed term without a clear early-exit mechanism can make a separation expensive.
Exit
Termination and severance
The grounds on which either party can end the relationship, the notice required, and what severance, if any, is paid in each scenario. This is usually where most of the negotiation happens.
Defining cause
How the definition of cause changes the outcome
Whether a departure counts as for cause often decides whether severance is owed. The definition deserves more attention than it usually gets.
| Approach | What it typically covers | Effect for the employer |
|---|---|---|
| Narrow definition | Fraud, theft, conviction of a serious crime, gross misconduct | Easy to understand, but ordinary poor performance will not qualify, so severance is often payable |
| Broader definition | Adds material breach of the agreement, repeated failure to follow lawful directions, violation of key policies | More flexibility, but executives often negotiate to narrow it |
| With notice and cure | Requires written notice and a chance to fix curable problems before termination | Fairer and more defensible, but adds procedural steps that must be followed precisely |
| Good reason (employee side) | Lets the employee resign and still receive severance after a pay cut, demotion or relocation | Common in executive agreements; define it tightly so routine reorganization does not trigger it |
Whatever approach you take, follow the procedure the agreement sets out. Skipping a required notice step can turn a justified termination for cause into a claim for unpaid severance.
Protecting the business
Confidentiality, inventions and post-employment restrictions
An employment agreement is the natural home for the protections that matter most when a senior person leaves. A confidentiality clause covers the company's pricing, customer data and plans. An inventions or work-product clause confirms that what the employee creates in the course of the job belongs to the company. Restrictive covenants, including non-solicitation and, where justified, non-competition terms, limit what the employee can do for a period afterwards.
- Draft confidentiality terms for employees, not a generic vendor form, and include the notices federal trade secret law expects
- Avoid terms that would conceal details of discrimination, harassment or retaliation claims, which New Jersey law generally makes unenforceable against employees
- Size any covenant to the role; the non-compete page explains the reasonableness standard courts apply
- Make sure the employee receives something of value for signing if the agreement is introduced after hiring
When severance is paid, it is normally conditioned on the employee signing a release of claims. Releases of age-discrimination claims for workers aged 40 or older must meet specific federal requirements, including timing for review and revocation, so the separation document should be prepared with care.
How the firm works
From offer to signed agreement
Agree the business terms
You settle the headline deal with the candidate: title, pay, bonus structure, start date and any equity. Paul can advise on these before they are offered.
Draft around the deal
The agreement is drafted to match what was agreed, with termination, severance and covenant terms suited to the role rather than copied from another hire.
Negotiate with the candidate
Senior hires often have their own lawyer. Paul handles comments and markups so the relationship starts on good terms.
Keep it current
Promotions, new compensation plans and changes in law can make an agreement stale. Review it when the role changes, not only when someone leaves. If you are buying a company, the seller's existing agreements raise separate issues covered under employment agreements in an acquisition.
Questions & answers
Employment contracts — questions owners ask
Does every employee need a written employment contract in New Jersey?
No. Most employees work at will under an offer letter and the company's policies. Written agreements are usually reserved for executives, senior managers and people with access to sensitive information or key customer relationships. For everyone else, a clear offer letter, confidentiality terms and a well-drafted handbook normally provide adequate structure.
What does termination for cause mean in an employment agreement?
It means ending employment for a reason the agreement itself defines, such as serious misconduct or a material breach. The definition matters because it usually decides whether severance or unvested benefits are forfeited. If the agreement requires written notice and a chance to cure, those steps should be followed exactly before relying on cause.
Should an employment agreement include severance?
That depends on the role and the market for the candidate. Severance can help recruit senior people and makes separations smoother, especially when paired with a release of claims. It should be tied to clearly defined triggers, set out how it is paid, and be conditioned on continued compliance with confidentiality and other post-employment obligations.
Can an offer letter create a binding contract?
It can. Language promising employment for a period, guaranteeing bonuses or limiting the grounds for dismissal may be read as contractual commitments that override at-will status. Offer letters should state that employment is at will unless a separate agreement says otherwise, and they should avoid promises the company does not intend to keep.
Your attorney
Paul H. Appel, Esq.
Every matter at the firm is handled personally by Paul — the same attorney reads the documents, gives the advice and negotiates on your behalf.
- Education
- Columbia Law School, Juris Doctor (1967)
- Experience
- 58+ years in commercial and business law
- Focus for this matter
- Drafting, reviewing and negotiating commercial agreements
- Office
- Freehold, NJ — serving Monmouth, Middlesex & Ocean Counties
Contact
Discuss Your Business Matter With Paul
Describe what the business is dealing with — a contract on your desk, a deal in progress, a dispute or a company you are about to form. You will hear back from the attorney who handles the work.
- Phone917-748-6124
- Office11 Crestwood Drive, Freehold, NJ 07728
- ConsultationsBy phone, video or in person by appointment
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