Types of Employment Contracts for Startups

A startup requires a number of employment agreements, contracts, including documents from offer letters to NDA etc. Time and effort could be saved by drafting well written documents in advance, which could save a lot of misunderstanding and liability in the future for the company. 

Hence, it is important for the entrepreneurs to understand the basic legalities involved in employment through well-drafted legal documents. Following article discusses the most common legal documents and employment agreements required for any startup in  India.

Offer Letter

1. One of the most important legal documents and primary legal documents prepared by any startup. It is usually provided to a prospective candidate after he has been selected for employment in the Startup.
2. A well-written offer letter shall include a congratulatory message, information about the candidate, the position offered, the proposed salary, other incentives, proposed start date of employment or any other information which is considered important by the employer of the Startup.

Appointment letter

1. An employment letter is a written document which includes the terms and conditions of the employment put forth to the candidate while starting the employment. A well-drafted appointment- letter shall contain the name of the candidate, address, age, designation, responsibilities, employment start date, the information to the supervisor, leave policy, incentives, confidentiality, the probation period, termination, transfer, notice period or any other important detail required. 
2. The candidate will get the employment, appointment letters on the letterhead of the company on the day he joins for the job. The employer will have another copy of the document. 

Non-Disclosure Agreement (NDA)

1. A non-disclosure and a non-compete agreement is a legal document  which restricts disclosing any confidential information, it is executed on a non-judicial stamp paper. During the course of employment, the employee may have some confidential information, future plans of the startup, any software codes, or any other such information which is important  for the startup, while performing his duties, it is necessary that no such information is divulged to any other outside source. 
2. The NDA is between the employer and the employee, so as to restrict the employee from using the sensitive information such as the proprietary information gained during his employment against the startup. 

Non-compete or non-solicitation agreements

1. It would be helpful if the non-compete or non-solicitation agreement is included in the employment contract , so as to restrict the employee from using any proprietary information or any other information related to the Startup, which he had gained during the course of his employment, against his employer if he joins any other competitive business against his employer.
2. The non-compete agreements or non-solicitation agreements could be signed separately, the courts generally are of the view that such clauses are enforceable normally, unless it appears that such agreement is one-sided or excessively harsh or one sided. 

Contractor Agreement

1. A startup may minimise its labour cost or energy by hiring contractual workers or a consultant, hence requiring a contractor agreement or work for hire agreement for the contract workers who have been hired for a specific purpose or for a temporary period of time.
2. The objective  behind such agreements is to ensure that the intellectual property and other trade secrets are safe and are retained by the hiring party and not by the creator of such intellectual property. 

There could be many other such contracts which are required to be signed by the newly appointed employee, or employees during the course of their employment, these may include contracts such as- 

1. Equipment/ Technology Lease Agreement
2. Strategic Alliance Agreement
3. Vendor-Supplier Agreement

Many other contracts may be required for the safety of a newly formed startup. As the startup is new, it is necessary to understand that not every minute detail could be known or understood by the employer or there could be a regulation or law which has been introduced or changed which may not be known to the employer. It would be thus favourable for the startups to hire legal help to ensure that no such lapse has taken place during the course of starting their business, which may affect their future dealings. Lead India offers you a wide pool of experienced advocates who could guide you through these regulations as well as help you draft a watertight contract for your startup.