Comprehensive Guide to Employee Equipment Contracts

What Are Equipment Contracts?

An equipment contract for employees is a simple, contractual agreement between an employer and an employee that governs who owns a piece of equipment, such as a phone, tablet or laptop, and the amount of time an employee has before he or she needs to return it to the employer. These agreements also make it clear when, and under what circumstances, the employee must return the equipment, and what will happen if the employee does not return the equipment in good condition.
An equipment contract is important because it ensures that both parties (the employer and the employee) are on the same page regarding property ownership and how long an employee can keep equipment . An equipment contract can be helpful if the employee leaves the company, as it will make it clear that they initially had possession of the property only while they were employed, and that they must return the property when they leave. An equipment contract can be enforced until the statute of limitations runs out. Additionally, in the event of a legal dispute, an equipment contract can be used as evidence in court and can support a failing party’s argument in court.

Essentials of an Equipment Contract

If you are among the modern-day business executives who incentivize your employees through equipment, it helps to have a contractual agreement detailing the terms of their use. Here are some key components for such an equipment contract:
Description of Equipment
Being specific about the term "equipment" can help protect you from liability in advance by having provisions that provide for different potential equipment features and types. Even the condition of the equipment should be stipulated. "The equipment is used" or "the equipment is new" should be stated in the contract.
Terms of Use
It is your responsibility to provide employees appropriate tools to do their jobs. What is also important is to define the type of use for each piece of equipment. Does the employee need to work from home? Or is the equipment for use at a primary place of business? Is it specific to the employee’s desktop, or regularly switched out to different employees?
Maintenance Responsibilities
One of the key risks in managing equipment through employees is the fragility of electronics. It is important to make clear on the maintenance responsibilities for each piece of equipment. For example, if the software of a laptop stops working, is that the responsibility of the employee or IT?
Return Policy
In an employment relationship, what happens to a company’s equipment when the employee leaves the company? Will they turn over the equipment to the new person in their position? Or will they be expected to turn it into HR before they leave? If the employee takes the equipment with them, does that amount to embezzlement and what are the consequences?
Clearly articulated provisions in your employee equipment agreement can help you mitigate risk in these areas.

Equipment Contracts From the Employer’s Perspective

When drafting an equipment contract, employers must consider many legal issues that may arise. Employment relationships are unique to each employer, and most have their own set of rules. However, employers in all jurisdictions face certain legal issues to which they must pay special attention when drafting employee contracts.
When drafting an employment contract, it is essential to comply with local labor laws. The laws in New York and California are particularly employee-friendly and differ from federal labor law in many important aspects. Employers must ensure that all provisions comply with these labor laws, and they should consult a labor attorney when they are drafting an employment contract.
In addition, a contract between an employer and an employee can be considered a "trade secret" if the employee is given privileged access to sensitive company information as a result of his or her employment. For this reason, employers should inform their employees that the contract itself contains confidential information. Courts will protect an employer’s trade secrets so long as the information can be considered confidential. If you wish, you can put a "confidential" marking at the top of a document, and a notice that reads, "Confidential. For Company use only." In addition, it is already implied that members of the company are required to keep all company information confidential. However, you can spell this out in the employment contract.

Advantages of Equipment Contracts for Employees

The first benefit to an equipment contract for employees is it gives clarity. Clarity helps both you and the employee know what is to be done with the equipment after they leave. A good contract will reduce the chances of litigation, and clear up confusion regarding the use and care or replacement of the equipment.
An equipment agreement can help protect an employee’s rights as well. In some cases, particularly with computers and other tech, it may contain personal information. Issues can arise if you own the equipment and access the employee’s personal data. By having a written agreement that discloses the uses of the equipment, and protects the employee’s rights, you can help limit any legal issues that may arise.

Common Pitfalls of Equipment Contracts

Employees armed with company-issued equipment are an integral part of modern business, but understanding the rights and obligations contained in those equipment contracts can be a minefield for employers and employees alike. By understanding common challenges and pitfalls associated with these contracts, however, employers can make more informed decisions when choosing the right employee equipment contract for their business.
Potential Challenges and Pitfalls of Employee Equipment Contracts
There are a number of challenges and potential legal pitfalls inherent in employee equipment contracts for employers to consider. These include:
Electronic Agreements: While electronic agreements are increasingly utilized by employers in lieu of more traditional contracts, enforcing electronic agreements can be trickier, and may depend on specific "terms and conditions" governing online transactions and employee agreements. In particular, ensuring that the employee is aware of the contract, and not merely presented with a click-through window, is vital to the enforceability of a contract viewed remotely.
Clear Definitions and Requirements: Any ambiguities in an equipment contract can become loopholes for evasive employees who, armed with a legal document, may believe they have a struggling case regardless of the employer’s position. For example, an electronic equipment contract should clearly define what is meant by "lost," and whether it includes, for example, damage beyond physical loss beyond repair . In particular, employers should ensure that their definition of "lost" encompasses both tangible loss of the item and financial loss associated with its loss, which may not be covered under most employee insurance plans.
Low-Ball Valuations: Specifying the value of lost equipment in an employee contract can be risky. If a piece of equipment is lost, stolen, or damaged, the employee may be expected to compensate the employer for the full cost of replacement, even if the same item can later be found at a greatly reduced price on the used market. Rather than specifying a dollar amount, a provision requiring replacement "of equal or greater value" can prevent employees from being unfairly penalized when they seek to fulfill and settle a contract provision.
Injunction: Most employee equipment contracts incorrectly include a provision allowing for injunctive relief, but without a contractual agreement to pay damages for the breach. Rather than simply compelling performance, these contracts often provide for the employer to pay only the damages associated with the employee’s future earnings or value of their work. The issue is that while allowing for an injunction, the contract fails to open up the real option available to employers: out-and-out termination of the employee. Before signing any employee equipment contract, employers should consult with an experienced attorney to ensure they are fully protected.
While this doesn’t mean that no equipment contract is worthwhile, it does mean that employers must carefully evaluate their options and the potential impact of employee equipment contracts before they sign on the dotted line.

Creating Effective Equipment Contracts

When it comes to creating an equipment contract, there are several best practices that employers would do well to adhere to.
Be Clear and Conclusive
First and foremost, be as clear and concise as possible when drafting an equipment contract. This means covering all of your bases so that nothing is left to interpretation or deduction. Generally speaking, the fewer questions there are about the contract, the better off you and your employee will be.
Encourage Negotiation
Second, when you sit down with your employee to draft the contract, encourage negotiation. If your employee is not satisfied with the terms you are presenting, find out why. If you are explaining the terms of your contract poorly, then take time to ensure that they understand what you are trying to convey. If you are offering less than what they feel they deserve, consider an alternative that may be more appealing to them. Creating a contract that is acceptable to both you and your employee is necessary to maintain a good relationship going forward.
Avoid Surprises
Finally, never let an equipment contract come as a surprise to your employee. Give them plenty of time to review the terms of the contract prior to the signing date. Explain why you are offering what you are offering, and if they have any questions, answer them. If they continue to have questions, it is likely a sign that your contract is poorly worded and requires adjustments.
Creating a foolproof contract is as much about drafting as it is about negotiating. Take time to draft a strong equipment contract so that you protect yourself, your business, and your employee.

Example and Template of Equipment Contracts

For those who are part of HR and are familiar with creating contracts, providing a template help aid in the further creation of equipment contract forms. For employees who are, in tandem, creating these contracts for their own workforces, feel free to use the template provided here to create an employment contract that suits your own business’ needs. With all contracts, however, it’s best to run each one through a lawyer before you present them to your employees. Despite the checklist of necessary clauses, there’s always the chance that a lawyer may see something that you don’t.
Equipment Contracts
EMPLOYEE’S NAME:
EMPLOYMENT EQUIPMENT LOAN AND REIMBURSEMENT POLICY

1. "COMPANY" refers to XXXXXX XXXX
2. "EMPLOYEE" refers to employee

Equipment Loan

Equipment refers to any Company owned technology tools, including, but not limited to, laptop / desktops / tablets / cell phones / etc.
All employees must first obtain approval from Director or CFO to purchase any assets which will be used for company business and/or travel.
The employee must complete, sign, and have their Director and CFO sign this Equipment Loan and Reimbursement Policy.
Any individual equipment purchases just over $XXXXX must also be approved by XXXXXX XXXXXX
Subsequent requests for a single employee for a single purchase may be denied

6 . All employees who are terminated must turn in all equipment to their Department Manager or Supervisor

7. All employees who resign must turn in all equipment to their Department Manager or Supervisor