The Final Postings of the Lawdepot.com Employment Agreement: The Bad Business Advice Continues

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Here we are…the final two provisions of the employment agreement that I bought on lawdepot.com. My other postings dealt with illegal provisions and also two others that were just bad business advice, like these last two provisions. The final recommendation from my experiment with online documents: don’t waste your time and your money. Go to an attorney who knows what he or she is doing. It is true that you save a lot using sites like lawdepot.com or legalzoom and it is true that they are easy to use. However, you will spend a whole lot more money to pay an attorney to correct any problems you unknowingly created when you used this document and supposedly “saved” so much.

Really Bad Idea #3: Termination with “Just Cause”

An important tenet of employment in Minnesota and indeed in almost all states is at-will employment. Both the employer and the employee have the right to terminate employment without notice and without cause. Employment lawyers go to great lengths to preserve the employment at-will status in employment agreements and in employment manuals and also advise their clients to avoid written documentation or oral statements that would modify the at-will relationship. The lawdepot.com agreement avoids completely the issue of at-will employment, another piece of very bad legal advice contained in the document.

First, the website gave me the choice of making the employment indefinite, which is a principle of at-will employment, or for a set period of time (from 1 to 5 years). Few employment lawyers would recommend that employment be made for a definite period, other than for positions such as athletes, entertainers or perhaps or perhaps for other high-level positions, for the simple reason that it binds an employer’s hands and makes it more difficult to terminate an employee.

And then to makes matters worse, the agreement allows the employer to terminate the employment relationship only with “just cause,” whether the employment is for a definite or indefinite period of time: Where the Employee has breached any terms of the Agreement or where there is just cause for termination, the Employer may terminate the employee without notice. This too is a lawsuit waiting to happen. What exactly is just cause? Would poor performance that would allow an employee to collect unemployment benefits (incapacity or inability, for example) be just cause, or only more serious offenses like stealing on the job? Is coming in late to work on one occasion just cause, or does tardiness have to be more frequent to be a just cause? You can see the problems that a provision like this creates, as these are the type of issues that lawyers argue about. Moreover, if the employer terminates with notice, can it be without cause? That too is unclear from this badly written provision. It is always recommended that an employment agreement leave no doubt as to both parties’ unfettered right to terminate the relationship without cause and without notice and without incurring any liability.

Really Bad Idea #4: Employee’s Agreement to Work as a Consultant

The lawdepot.com employment agreement contains one other provision that isn’t unlawful but instead just isn’t a very good idea. The provision obliges the employee to make himself available to continue working for the employer as a consultant when the employee resigns from his position:

Should the Employee terminate her employment pursuant to this Agreement, and there is no constructive discharge, the Employee agrees to be reasonably available as a consultant for the purposes of maintaining any projects or development created while employed by the Employer . . . In her capacity as a consultant for the Employer pursuant to this paragraph, the Employee agrees to provide her present residential address and telephone number, as well as her business address and telephone number.

I wonder why any employer, or employee for that matter, would want to include such a provision in an employment agreement. First, an employee who resigns from a position usually does so because she has found another job that is more suitable or more challenging or that has better pay or better hours. The employee won’t want to continue working for her former employer. Second, the employer could risk a wage and labor dispute by paying who was only recently an employee as an independent contractor. The Department of Labor and the IRS pay careful attention to the classification of individuals, as many employers prefer to call and pay someone as an independent contractor, even though relationship is actually an employer-employee one, for tax benefits. It is unlikely that this arrangement would be considered a true independent contractor relationship.

Finally, employment at-will means that an employee can leave a job with no liability and no obligations to the employer, and this provisions seems to fly in the face of this principle of employment law as it requires an employee to do anything for a former employer, even to be “reasonably available” after the termination of the employment relationship. If the employee does not make herself “reasonably” available, the question remains of that individual’s potential liability if the employer were to bring a claim and what would constitute being “reasonably available.” It is best to avoid such terms in an agreement when they can be a lawsuit waiting to happen.

In sum, the employment contract that I purchased on lawdepot.com was a mess. There were several provisions that were clearly illegal in Minnesota and likely in other states, such as the overtime and the termination for “permanent disability” provisions and others that just shouldn’t be there, like the termination for just cause and the independent contractor ones. The enthusiasm of the users of the sites is understandable, although naive. Unless you are trained in the law, you have no way of knowing just how bad the document is. I imagine that the users will be less than enthusiastic about the document they purchased for just $15.00 when an employee or former employee files a claim for wrongful termination, unpaid overtime or disability discrimination and the employer spends even tens of thousands of dollars defending the claim, only to discover that the problems likely could have been avoided by paying an attorney a thousand dollars or so to draft an agreement that reflects the employer’s interests and the position at hand and does not violate the law.

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Discussion

  1. Cindy Perusse  March 21, 2010

    Your conclusion doesn’t surprise me. You get what you pay for with these DIY forms. Thanks for the doing the experiment.

    (reply)
  2. Eric Talsness  March 22, 2010

    Thanks for all your ror the postings! Good Stuff.

    (reply)
    • Karen Lundquist  March 23, 2010

      You’re welcome. Thanks for reading!

      (reply)
  3. Layne  March 24, 2010

    What a great mini-series Karen. Excellent job.

    (reply)
    • Karen Lundquist  March 24, 2010

      Thanks!

      (reply)
  4. Frank White  May 25, 2010

    What is the best site to purchase legal docs from if you had to choose?

    (reply)
    • Karen Lundquist  May 27, 2010

      I have had little experience with legal docs outside of lawdepot.com and legalzoom.com (through a colleague, Greg Luce, who evaluated a will he purchased from legalzoom.com and found it lacking in many respects) so am not really qualified to say. I am also biased as an attorney. I would not recommend purchasing legal documents from an online site, for the simple reason that you don’t know who prepared the documents or if that person was familiar with the laws of your state. State law vary greatly from state to state, and just because something is legal in Iowa doesn’t mean that it is legal in Minnesota.

      My recommendation is to pay the extra money upfront for an attorney who is licensed and experienced in the practice area to draft the documents. That way, the documents will reflect your wishes and interests and will conform to the laws of your state. Those who try to save money upfront by purchasing documents on the cheap, or copy them from ones they found on the internet, risk paying more later.

      Just my two lire (or pesos…or cents).

      (reply)

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