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Creating High Expectations with Employee Contracts

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SHOP STATS: Star Motors  Location: SAN JUAN CAPISTRANO, CALIF.  Operator: Chris Knuth  Average Monthly Car Count: 130  Staff Size: 9  Shop Size: 10,500 sq ft  Annual Revenue: $1.5 million  

When it comes to employee contracts, many business owners are against them. But employee contracts should be looked at more like a set of written-out expectations for their staff rather than a liability.

“Even though this all sounds technical and corporate, it’s really not that bad, and it makes everyone feel better and makes it look like more of a legitimate company,” says Chris Knuth, owner of the 8-person, $1.5 million-per-year Star Motors in San Juan Capistrano, Calif.

Knuth says he notices that a lot of shops do not have employee contracts, including onboarding paperwork or even written-out guidelines on what the job entails. Knuth says there are so many legal pitfalls for small business owners, especially for auto repair shops, that having one is a good idea.  

Not only does an employee contract allow the shop the ability to measure progress for performance reviews, Knuth says, but having concrete papers will also protect you legally and set the boundaries and tone for the environment and culture of the company.

Knuth shares his tips on what every small business should have in order to protect it and avoid any blurry lines when it comes to employee expectations.

The No. 1 thing is a clear offer, which basically outlines the terms of the employment, whether it’s full-time or part-time, exempt or non-exempt. And then we have hours of business, site location, the basic outline of the compensation plan, how they get paid. Everyone has a written job description, so the offer letter is a rough outline. Basically, all of the expectations that we set during the interview process are solidified in the offer letter. They sign the offer and by them doing so, they agree to the terms set forth on what will be expected. 

If someone has not worked in a certain area, we let them know what the job entails. By the time we actually hire someone, everyone is pretty much on the same page—we just put it into writing, so that there is a clear expectation.

For instance, I just hired a technician. I gave him a formal offer letter and that’s what made him decide to come and work with us. The other places where he interviewed made it all verbal, whereas he said this was a concrete thing he could take home to his family, show them the details of the offer, and they were then able to make a better decision for their family by having that.

We have a non-compete and non-disclosure agreement. Non-disclosure means no trading information; service advisors have to protect and maintain our customer database and are not allowed to distribute it, copy it, take it home⁠—it’s all in the proprietary, non-disclosure agreement. Basically, it says when you work here, to just focus on working here, but it’s more after they have resigned or have been terminated that it comes up the most. If a service advisor leaves the company, and they go to a shop down the street and they start specifically calling our customers to come to their new shop, that’s what the non-solicit, non-compete is for.

We also have a non-solicitation agreement, so if someone leaves, they are not supposed to take employees with them or customers. It’s a little harder to manage that one, but I do have something in place. 

There’s also a company contract that shows what is company property, what items they have to return upon resignation or leaving the shop—it could be shop keys, tools, computer laptop, uniform. They sign it when they start working, and in their exit interview, we go through making sure we have all of those items before they can get their last paycheck.

The other part of the contract is the employee handbook. During the onboarding process, we go over the employee handbook together so they understand paydays, policies of the shop, so there’s no question if an issue comes up. 

Policies to include are on sexual harassment, drug use, items like that. During the post-offer, there are three conditions they have to pass: a drug screening, a background check, and eligibility to work in the United States. These are things in the post-offer process that could nullify the agreement.

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