<PAGE>

                                                                   EXHIBIT 10.39

                              EMPLOYMENT AGREEMENT
                              --------------------


     This EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of January
                                      ---------
21, 2000 by and between UNITED ROAD SERVICES, INC., a Delaware corporation (the
"Company") and Harold Warren Borhauer, II (the "Employee"), an individual
 -------                                        --------
resident of the State of Arizona.


                                    RECITALS
                                    --------

     WHEREAS, the Company and its subsidiaries are engaged in the business of
motor vehicle and equipment towing, recovery, repossession and transport
services (the "Business");
               --------

     WHEREAS, the Company desires to employ Employee on a full-time basis and
Employee is willing to be employed by the Company in that capacity on the terms
and conditions set forth in this Agreement.

     NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and Employee hereby
agree as follows:

     1. Employment.

        (a) Retention. The Company agrees to initially employ Employee as
            ---------
President of the Towing Division of the Company, and the Employee agrees to
accept such employment and serve in such position, subject to the terms and
conditions of this Agreement.

        (b) Employment Period. The period during which the Employee shall serve
            -----------------
as an employee of the Company (the "Employment Period") shall commence on the
date hereof, and unless earlier terminated pursuant to this Agreement, shall
expire eighteen (18) months from the date hereof (unless extended by mutual
agreement of the parties hereto).

        (c) Duties and Responsibilities. During the Employment Period, the
            ---------------------------
Employee shall have such authority and responsibility and perform such duties as
may be assigned to him from time to time at the direction of the Chief Executive
Officer and the Board of Directors (the "Board") of the Company, and in the
absence of such assignment, such duties customary to Employee's office as are
necessary to the business and operations of the Company. During the Employment
Period, the Employee's employment shall be full time and the Employee shall
perform his duties honestly, diligently, competently, in good faith and in the
best interests of the Company, and shall use his best efforts to promote the
interests of the Company.
<PAGE>

    (d)   Compensation.
          ------------

          (i) Base Salary and Bonus.  In consideration for the Employee's
              ---------------------
services hereunder and the restrictive covenants contained herein, the Employee
shall be paid during the Employment Period an annual salary equal to $125,000
payable in equal installments (pro rated for portions of a pay period) on the
Company's regular pay days, subject to withholding by the Company of all
applicable federal and state income, social security, disability and other taxes
as required by applicable law (the "Salary").  Employee shall also be eligible
                                    ------
for a performance bonus (the "Bonus") which may be awarded solely at the
                              -----
discretion of the Compensation Committee of the Board.

          (ii) Stock Options.  As an inducement essential to Employee entering
               -------------
into this Agreement, on the date of this Agreement, the Company shall grant
Employee, pursuant to the Non-Qualified Stock Option Agreement attached hereto
as Exhibit A (the "Stock Option Agreement"), options to purchase 60,000 shares
   ---------
of the Company's common stock at an exercise price of $2.375 per share.

        (e) Benefits. During the Employment Period, Employee shall be entitled
            --------
to participate in any insurance programs, pension plans and other fringe benefit
plans and programs as are from time to time established and maintained for the
benefit of the Company's employees of comparable rank and status as Employee,
subject to the provisions of such plans and programs.

        (f) Expenses. In addition to the salary and benefits described above,
            --------
the Employee shall be reimbursed for all out-of-pocket expenses reasonably
incurred by Employee on behalf of or in connection with the business of the
Company, provided that such expenses will be reimbursed only (i) upon the
presentation by Employee to the Company of such documentation as may be
reasonably necessary to substantiate that all such expenses were incurred in the
performance of Employee's duties, and (ii) if such expenses are consistent with
all policies of the Company in effect from time to time as to the kind and
amount of such expenses.

     2. Termination.
        -----------

        (a) Death, Disability and Cause. At any time during the Employment
Period, the Company shall have the right to terminate Employee's employment with
the Company for "Cause." Upon any such termination by the Company for Cause,
Employee or his legal representatives shall be entitled to receive Salary
payments through the date of termination as well as reimbursement for such
expenses as Employee may have properly incurred on behalf of the Company as
provided in Section 1(f) above prior to the date of termination. Upon payment of
such amounts, the Company shall have no further obligations to Employee under
this Agreement. "Cause" under this Agreement shall mean (i) the Employee's
inability to perform Employee's duties and responsibilities as provided herein
due to Employee's death, or any physical or mental disability or sickness
extending for, or reasonably expected to extend for, a period greater than sixty
(60) days, (ii) the commission by Employee of any act materially detrimental to
the Company, including but not limited to fraud, embezzlement, theft, bad faith,
negligence, recklessness, dishonesty, insubordination or willful

                                      -2-
<PAGE>

misconduct; (iii) incompetence or repeated failure or refusal to perform the
duties required by this Agreement and as may be assigned to Employee from time
to time; (iv) conviction of a felony or of any crime of moral turpitude; (v) any
material misrepresentation by Employee to the Company regarding the operation of
the business; or (vi) material breach of any covenant of this Agreement. If
Employee shall resign or otherwise terminate Employee's employment with the
Company, Employee shall be deemed for purposes of this Agreement to have been
terminated for Cause, and from and after such resignation or termination, (i)
the Company shall have no further obligations hereunder, and (ii) except as
provided in Sections 3, 5, and 6 hereof and/or pursuant to the Employee
Confidentiality Agreement attached as Exhibit B hereto, Employee shall have no
further obligations hereunder to the Company.

        (b) Without Cause. At any time during the Employment Period, the Company
shall have the right to terminate Employee's employment with the Company without
Cause effective upon delivery of written notice to Employee. Upon any
termination without Cause, Employee shall be entitled to continue to receive
Salary payments for (i) one (1) year immediately following the date of such
termination, or (ii) the remainder of the Employment Period, whichever is
greater; provided, however, that Employee's right to continue to receive Salary
payments pursuant to this Section 2(b) shall cease immediately upon a violation
by Employee of any of the provisions of Sections 3 or 5 hereof or any of the
provisions of the Employee Confidentiality Agreement attached hereto as
Exhibit B.
---------

     (c)  Vesting of Stock Options Upon Termination.
          -----------------------------------------

          (i) In the event that Employee's employment with the Company is
terminated pursuant to Section 2(b) hereof after the date hereof and prior to
January 21, 2001, thirty-three and one-third percent (33-1/3%) of the stock
option granted to Employee pursuant to the Stock Option Agreement (the "Vesting
Portion") will continue to vest upon the terms set forth in the Stock Option
Agreement and the Company's 1998 Stock Option Plan, as if Employee had remained
employed by the Company.

          (ii) In the event that (A) Employee's employment with the Company is
terminated pursuant to Section 2(b) hereof after January 21, 2001 but prior to
July 21, 2001, or (B) this Agreement is not renewed by the Company on or prior
to July 21, 2001, in addition to any portion of the option that may have vested
under the vesting schedule set forth in the Stock Option Agreement or under
Section 2(c)(i) hereof, thirty-three and one-third percent (33-1/3%) of the
option granted to Employee pursuant to the Stock Option Agreement (the
"Additional Vesting Portion") will continue to vest upon the terms set forth in
the Stock Option Agreement and the Company's 1998 Stock Option Plan, as if
Employee had remained employed by the Company.

          (iii)  If during the period between the effective date of Employee's
termination and the date any portion of Employee's option becomes fully vested
as described in Sections 2(c)(i) or (ii) above, Employee commits a knowing
violation of any of the provisions of Sections 3 or 5 hereof or the
Confidentiality Agreement attached as Exhibit B hereto, the continued
                                      ---------

                                      -3-
<PAGE>

vesting of the Vesting Portion or the Additional Vesting Portion, as the case
may be, of such option shall immediately cease.

     3. Restrictive Covenants. In consideration of the foregoing, Employee
agrees that Employee shall not, directly or indirectly:

        (a) during the tenure of Employee's employment with the Company and for
a period of two (2) years following termination thereof, alone or as a partner,
joint venturer, officer, director, employee, manager, executive, advisor,
consultant, agent, sales representative, independent contractor, owner, lender,
financier, or security holder of any company or business, engage in any activity
in direct or indirect competition with the Business conducted by the Company,
its subsidiaries, successors or assigns (collectively, the "United Companies")
anywhere in the United States or Canada; provided; however, that, the beneficial
                                         --------  -------
ownership of less than five percent (5%) of the shares of stock of any
corporation having a class of equity securities actively traded on a national
securities exchange or over-the-counter market shall not be deemed, in and of
itself, to violate the prohibitions of this Section 3(a);

        (b) during the tenure of Employee's employment with the Company and for
a period of two (2) years following termination thereof, directly or indirectly,
(i) induce any person which is a customer of the Business conducted by the
United Companies to patronize any business directly or indirectly in competition
with the Business conducted by the United Companies; (ii) canvass, solicit or
accept from any person which is a customer of the United Companies, any such
competitive business; or (iii) request or advise any person which has a business
relationship with the Business conducted by the United Companies to withdraw,
curtail or cancel any such person's business with such entity;

        (c) during the tenure of Employee's employment with the Company and for
a period of two (2) years following termination thereof, directly or indirectly,
employ, or knowingly permit any company or business directly or indirectly
financed or controlled by Employee to employ, any person who is, at that time,
employed by the United Companies, or in any manner seek to induce any such
person to leave his or her employment with the United Companies;

        (d) at any time following the date hereof, directly or indirectly, in
any way utilize the United Companies' customer lists or pricing data in
connection with any business activity directly or indirectly in competition with
the Business; and

        (e) except pursuant to court order or other judicial decree (and with
prior notice to the United Companies thereof), engage in any pattern of conduct
that involves the making or publishing of written or oral statements or remarks
(including, without limitation, the repetition or distribution of derogatory
rumors, allegations, negative reports or comments) which are disparaging,
deleterious or damaging to the integrity, reputation or good will of any of the
United Companies, their management, or of management of corporations affiliated
with the United Companies;.

      4.  Change of Control.
          -----------------

                                      -4-
<PAGE>

          (a) Operation of Section 4.  This Section 4 shall be effective, but
not operative, immediately upon execution of this Agreement by the parties
hereto and shall remain in effect so long as Employee remains employed by the
Company, but shall not be operative unless and until there has been a Change of
Control, as defined in subsection 4(b) hereof.  Upon such Change of Control,
this Section 4 shall become operative immediately.

          (b) Definition.  For purposes of this Agreement, a "Change of Control"
means (i) the sale of all or substantially all of the assets of the Company to
any person or entity that, prior to such sale, did not control, was not under
common control with, or was not controlled by, the Company, (ii) a merger or
consolidation or other reorganization in which the Company is not the surviving
entity or becomes owned entirely by another entity, unless at least fifty
percent (50%) of the outstanding voting securities of the surviving or parent
corporation, as the case may be, immediately following such transaction are
beneficially held by such persons and entities in the same proportion as such
persons and entities beneficially held the outstanding voting securities of the
Company immediately prior to such transaction, (iii) any transaction or series
of transactions which results in any person or "group" becoming the beneficial
owner, directly or indirectly, of securities representing more than fifty
percent (50%) of the outstanding voting securities of the Company, or (iv) any
time that, as a result of a tender offer, merger, consolidation, sale of assets
or contested election, or any combination of such transactions, the persons who
were directors of the Company immediately before such transaction(s) cease to
constitute a majority of the Board of Directors of the Company or of any
successor to the Company within one year of such transaction.

          (c)  Employee's Election Upon Change of Control. If, while Employee is
employed by the Company, a Change of Control (as defined in subsection (b) of
Section 4) occurs and one or more of the following events occurs:

               (i) The assignment to Employee of duties, responsibilities, or
     status inconsistent with his duties, responsibilities, and status prior to
     the Change of Control or a reduction or alteration in the nature or status
     of Employee's duties and responsibilities from those in effect prior to the
     Change of Control;

               (ii) A reduction by the Company in Employee's base salary or
     bonus (as in effect prior to the Change of Control);

               (iii)  The failure to continue in effect the Company's insurance,
     disability, stock option plans, or any other employee benefit plans,
     policies, practices or arrangements in which Employee participates, or the
     failure to continue Employee's participation therein on substantially the
     same basis, both in terms of the amount of benefits provided and the level
     of Employee's participation relative to other participants, as existed
     prior to the Change of Control;

               (iv) The failure of the Company to obtain a satisfactory
     agreement from the successor to the Company to assume and agree to perform
     this Agreement;

                                      -5-
<PAGE>

               (v) Any purported termination by the Company of Employee's
     employment other than pursuant to Section 2(a) hereof; or

               (vi) The persons who were directors immediately before the
     transaction cease to constitute a majority of the Board of Directors of the
     Company;

Employee may, in his sole discretion, within six (6) months after the effective
date of the Change of Control, give notice to the Company that he intends to
elect to exercise his right to terminate his employment and receive the payments
provided for in Section 4(d) hereof (the "Notice of Intention").  The right to
give such Notice of Intention shall continue for six (6) months from the date of
the Change of Control irrespective of any action by the Company pursuant to
Section 2(b) within such six (6) month period.  In the event that Employee
elects not to exercise such rights, Employee's employment with the Company shall
continue on the terms and conditions provided in this Agreement.  In the event
that Employee does elect to exercise such rights, Employee's employment with the
Company shall terminate effective as of the date upon which the Notice of
Intention is received by the Company.  Within ten (10) business days after the
Company's receipt of the Notice of Intention, payment by the Company to Employee
of the amounts set forth in Section 4(d)(i) below shall be made by cashier's
check, accompanied by a written notice to Employee setting forth the Company's
computation of the amount payable pursuant to Section 4(d).  If Employee takes
exception to the Company's computation of such amount, Employee may (but shall
not be prejudiced in his right to later contest the amount actually paid by
failure to do so) give a further written notice to the Company setting forth in
reasonable detail Employee's exceptions to the Company's computation.  If the
Company and Employee are unable to resolve any dispute over the total amount to
be paid to Employee pursuant to Section 4(d)(i) hereof in accordance with
Section 10 hereof within thirty (30) days after the date of the Notice of
Intention, such dispute shall be submitted for resolution to an independent
third party agreed upon between the Company and Employee and any additional
amount that is determined to be owed by the Company to Employee pursuant to
Section 4(d)(i) hereof shall be paid to Employee by cashier's check within ten
(10) business days after such dispute has been finally resolved.

          (d)  Compensation Upon Change of Control.

               (i) If Employee gives the Notice of Exercise described in Section
     4(c), the Company shall pay Employee a lump sum amount equal to Employee's
     Salary for (A) a period of one (1) year, or (B) the remainder of the
     Employment Period, whichever is greater.  Notwithstanding anything to the
     contrary in this Agreement, in the event that the Company determines in
     good faith that any portion of the payments or other benefits set forth in
     this Section 4(d) constitutes an excess parachute payment under Section
     280(G) of the Internal Revenue Code of 1986, as amended, then the Company
     shall have no obligation to provide such portion to Employee.

               (ii) Payment of the amount set forth in Section 4(d)(i) shall
     terminate Employee's rights to receive any and all other payments, rights
     or benefits pursuant to Sections 1 and 2 of this Agreement from the date of
     termination, other than any payments,

                                      -6-
<PAGE>

     rights or benefits arising from any other agreement, plan or policy which
     by its terms or by operation of law provides for the continuation of such
     payments, rights or benefits after the termination of Employee's
     relationship with the Company.

               (iii)  The lump sum payment referred to in subsection (i) above
     shall be in addition to and shall not be offset or reduced by (x) any other
     amounts that have accrued or have otherwise become payable to Employee or
     his beneficiaries, but have not been paid by the Company, at the time
     Employee gives a Notice of Intention pursuant to Section 4(c) including,
     but not limited to, salary, disability benefits, retirement benefits, life
     and health insurance benefits, or any other compensation or benefit payment
     that is part of any valid previous, current, or future contract, plan or
     agreement, or (y) any indemnification payments that may be or become
     payable to Employee pursuant to the provisions of the Company's Certificate
     of Incorporation, By-laws, or similar policy, plan, or agreement relating
     to the indemnification of directors or officers of the Company under
     certain circumstances.

               (e) Vesting of Stock Options Upon Change of Control. In the event
of a Change of Control, in addition to any benefits provided to Employee upon a
Change of Control pursuant to the relevant stock option plan or stock option
agreement governing any grant of stock options to Employee, and regardless of
whether Employee intends to give a Notice of Intention pursuant to Section 4(c)
hereof, any and all stock options granted to Employee pursuant to any of the
Company's stock option plans prior to the effective date of such Change of
Control that are unvested as of the effective date of such Change of Control
will become fully vested and exercisable beginning two business days prior to
the effective date of such Change of Control without regard to any vesting
schedules established in the relevant option plan or option agreement.

          5.  Confidentiality. Employee acknowledges that Employee has, as a
              ---------------
material inducement to the Company entering into this Agreement, entered into an
Employee Confidentiality Agreement, substantially in the form of Exhibit B
                                                                 ---------
attached hereto (the  "Confidentiality Agreement"), with the Company as of the
                       -------------------------
date hereof.  Employee shall comply with all requirements and provisions of the
Confidentiality Agreement.

          6.  Acknowledgments of the Parties.  The parties agree and acknowledge
              ------------------------------
that the restrictions contained in Sections 3 and 5 are reasonable in scope and
duration and are necessary to protect the United Companies and that a portion of
the compensation paid to Employee under this Agreement is paid in consideration
of the covenants contained in Sections 3 and 5, the sufficiency of which
consideration is hereby acknowledged.  If any provision of Sections 3 or 5 as
applied to any party or to any circumstance is adjudged by a court to be invalid
or unenforceable, the same shall in no way affect any other circumstance or the
validity or enforceability of any other provisions of this Agreement. If the
scope of any such provision, or any part thereof, is too broad to permit
enforcement of such provision to its full extent, the parties agree that the
court making such determination shall have the power to reduce the duration
and/or area of such provision, and/or to delete specific words or phrases, and
in its reduced form, such provision shall then be enforceable and shall be
enforced.  Employee agrees and acknowledges that the breach of Sections 3 and 5
will cause irreparable injury to the United Companies and upon breach of any
provision of such Sections,

                                      -7-
<PAGE>

the United Companies shall be entitled to injunctive relief, specific
performance or other equitable relief; provided, however, that this shall in no
way limit any other remedies which the United Companies may have (including,
without limitation, the right to seek monetary damages). Each of the covenants
in Sections 3 and 5 shall be construed as an agreement independent of any other
provisions in this Agreement, and the existence of any claim or cause of action
of Employee against the United Companies (including the subsidiaries thereof),
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the United Companies of such covenants. It is
specifically agreed that the time periods stated in Sections 3(a), 3(b) and 3(c)
shall be computed by excluding from such computation any time during which
Employee is in violation of any provision of Section 3 or Section 5.

          7.  Notices. All notices, requests, demands, claims and other
              -------
communications hereunder shall be in writing and shall be deemed given if
delivered by certified or registered mail (first class postage pre-paid), by
guaranteed overnight delivery or by facsimile transmission if such transmission
is confirmed as received, to the following addresses and telecopy numbers (or to
such other addresses or telecopy numbers which such party shall designate in
writing to the other parties):

           if to the Company:

               United Road Services, Inc.
               17 Computer Drive West
               Albany, NY 12205
               Attention:  Gerald R. Riordan, Chief Executive Officer
               (Telecopier:  (518) 446-0580)

           with copies to:

               McDermott, Will & Emery
               600 13th Street N.W.
               Washington, D.C.  20005
               Attn:  Karen A. Dewis, Esq.,
               (Telecopier:  (202) 756-8087); and

           if to the Employee:

               Harold Warren Borhauer, II
               6940 W. Acoma Drive
               Peoria, AZ 85381
               (Telecopier:  (623) 979-4707)

           with copies to:

               Paul M. Levine, Esq.
               3636 North Central

                                      -8-
<PAGE>

               Suite 1050
               Phoenix, AZ 85012
               (Telecopier: (602) 230-9277

          8.  Amendment; Waiver. This Agreement may not be modified, amended,
              -----------------
supplemented, canceled or discharged, except by written instrument executed by
all parties.  No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege.  No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties.  No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.

          9.  Assignment. This Agreement, and the Employee's rights and
              ----------
obligations hereunder, may not be assigned or delegated by Employee.  The
Company may assign its rights, together with its obligations hereunder, to any
subsidiary of the Company, or any successor to the Company or any subsidiary.

          10.  Resolution of Disputes. The parties will attempt in good faith
               ----------------------
promptly by negotiations to resolve any dispute or controversy arising out of or
relating to this Agreement or to the employment or termination of Employee by
the Company. All negotiations pursuant to this clause are confidential and will
be treated as compromise and settlement negotiations for purposes of the Federal
Rules of Evidence and state rules of evidence.

          11.  Severability; Survival.  In the event that any provision of this
               ----------------------
Agreement is found to be void and unenforceable by a court of competent
jurisdiction, then such unenforceable provision shall be deemed modified so as
to be enforceable (or if not subject to modification then eliminated herefrom)
for the purpose of those procedures to the extent necessary to permit the
remaining provisions to be enforced.  The provisions of Section 3, 5 and 9 and
this Section 11 will survive the termination for any reason of Employee's
relationship with the Company.

          12.  Counterparts. This Agreement may be signed in any number of
               ------------
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.

          13.  Governing Law. This Agreement shall be construed in accordance
               -------------
with and governed for all purposes by the laws of the State of New York.

          14.  Agency.  Nothing herein shall imply or shall be deemed to imply
               ------
an agency relationship between the Employee and the Company.

                                      -9-
<PAGE>

          15.  Entire Agreement. This Agreement (including any Schedules and
               ----------------
Exhibits attached hereto) and the Confidentiality Agreement executed in
connection herewith, contain the entire understanding of the parties in respect
of its subject matter and supersede all prior agreements and understandings
(oral or written) between or among the parties with respect to such subject
matter.


                            (Signature page follows)

                                      -10-
<PAGE>

               IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.

                              UNITED ROAD SERVICES, INC.


                              By:      /s/ Gerald R. Riordan
                                 ---------------------------------------
                                       Gerald R. Riordan
                                       Chief Executive Officer


                              EMPLOYEE


                                       /s/ H.W. Borhauer II
                              ------------------------------------------
                                       Harold Warren Borhauer, II

                                      -11-