An employment contract is an agreement that is formed between an employer and employee regarding an employment situation. The employer and employee are the parties to the contract. An employment contract contains terms and provisions regarding the employment relationship. For example, it might state that the employee will work for the employer for a certain number of hours for an hourly wage or yearly salary.
An employment contract might specify benefits, such as paid time off or the provision of health insurance. The contract might state what the grounds are for termination and how much notice each party must give if they want to terminate the contract.
Employment contracts are not entered into in every employment situation. If the employment is not informal, however, it is usually good to have one. Employment contracts do not have to be written. They can be oral. If the parties are serious about the contract, however, it should probably be in written form. If a dispute arises between an employer and employee, the contract is available to help resolve it.
An employment contract becomes legally binding when certain requirements are met. They are as follows:
- Offer and acceptance – the first step in making a contract is for one party make an offer to another party that is accepted;
- Consideration – this is a legal term which means that the two parties agree to exchange something of value, e.g. in the employment context, this usually means that the employer offers monetary value in exchange for the employee’s labor and expertise;
- Legality – the exchange defined in the contract must be legally enforceable, so a contract for the employee to work in the employer’s illegal drug trade business would not be allowed; no court would enforce the contract;
- Capacity – both parties must be old enough and mentally fit enough to enter into a contract.
In addition, some courts have held that an employee must have time to contemplate the terms of the employment contract before starting the job. Handing the employee the contract to sign after the employee has begun working or on the first day of the job is probably not good practice.
Additionally, as with any contract, the agreement may not be signed as a result of duress, coercion, misrepresentation, or undue influence.
A sales representative is a type of employee who is likely to have a formal written employment contract. The contract might identify the key accounts to which the sales representative will sell the employer’s products or services. The contract might also specify other duties, such as attendance at sales meetings and training sessions. The contract will specify the salary and the commission that the sales representative will be paid. The commission will probably be a percentage of the amount of sales the representative concludes. The contract is also likely to include sales goals.
Once an employment contract is made, it is binding on both the employer and the employee. This means that if either party fails to perform as promised in the contract, then that party can be held legally responsible in court.
What is Usually Included in an Employment Contract?
An employment contract usually includes important details regarding the employee’s work-related responsibilities. It addresses such important features of the employment relationship as wages, benefits, termination procedures, and the duties of both the employer and the employee.
An employment contract typically has terms and conditions that address the following:
- Job Title – The contract will state the employee’s job title and provide a complete description of the employee’s duties;
- Time Frame – A time frame may be added to the contract for anything ranging from a start date to an employee’s work schedule, to the length of a particular project and an employment end date (i.e., term of employment);
- Salary – An employment contract can specify the type of salary the employer will pay the employee, whether is will be a salary, wage, commission for sales volume or some other kind of monetary value; the contract should state how much will be paid, when and how, whether bi-weekly, monthly annually or other;
- Benefits – The contract may also state the types of benefits that the employee can receive. For example, the employer may provide health, dental and vision insurance, and access to a 401K savings plan and the like;
- Vacation and Sick Leave – An employer may include its company’s policies for taking days off as part of the contract provisions, such as vacation or holiday breaks, and sick or disability leave;
- Confidentiality Clauses – A contract may contain confidentiality clauses, also known as non-disclosure agreements (NDAs), to ensure that an employee does not provide any proprietary information to competitors of the employer;
- Dispute Resolutions – It may define a method for resolving employment disputes, for example, arbitration or mediation, rather than a complaint in a court of law;
- Termination – The contract may describe what actions will be grounds for termination;
- Covenants Not to Compete – It may have provisions concerning covenants not to compete. These are clauses that prevent an employee from working for a competitor of the employer for a certain amount of time;
- Severance – A contract might discuss severance details, which involves any financial amount or other benefit that an employee may be entitled to when they leave the job.
While this list includes most items that can be found in standard employment contracts, it is not comprehensive. An employee and an employer can add any provisions they want to the contract, as long as the terms are not fraudulent, illegal, or against public policy.
What are Some of the Advantages of Having an Employment Contract?
There are some important advantages to having an employment contract. One of the primary advantages is that it allows the parties to describe the employee’s responsibilities in detail. This can give valuable guidance to employees regarding what they need to do to succeed in their position.
if the employer or employee wants to set a certain hourly wage, salary or commission structure, for example, then the parties can include this as part of the agreement. Both parties then know exactly what is expected of them.
Ideally both parties participate in negotiating the terms until they find the compromises they want. This feature is especially important for employers who need to protect particular trade secrets or copyright material.
An employment contract can help the parties avoid a dispute. If a dispute arises over a particular aspect of the employment, the parties can simply review the terms of the contract.
As for employees, an employment agreement can provide a degree of stability and job security, especially if the agreement sets the time frame for the period of employment.
What are Some of the Disadvantages of Having an Employment Contract?
There are also some disadvantages to having an employment contract. An employment contract may limit the flexibility of the parties to the contract. If the parties want to do something different from what is spelled out in the contract, they must renegotiate the contract’s terms.
An employee may also face challenges when attempting to change employment. The contract may fix the time period for the employment. If so, then the employee is locked in until the time period ends. Or, again, the parties will have to renegotiate the agreement.
It is important to be aware of the fact that an employment agreement creates an implied promise to act honestly and fairly when dealing within the employment relationship. This obligation is binding on both parties and can have legal consequences if either party breaches the contract’s requirements. For example, a simple act of lying or acting dishonestly towards the other party, could have legal consequences.
An employment contract will only be as good as the terms and provisions that it contains. That is why both parties would ideally have a good employment contract lawyer representing them when the contract is negotiated. A good employment contract lawyer can make sure that the contract’s terms and provisions protect a party’s interests..
What About a Breach of an Employment Contract?
A party commits a breach of an employment contract if they do either one of two things. The first is to fail to do what is promised in the contract. The second is to do an act that is prohibited by the contract.
For example, a contract might require an employee to give notice of 30 days if they plan to terminate their employment. If the employee leaves without giving 30 days’ notice, it is a breach of the contract. The employee may have to pay money damages to the employer for this failure to do as promised.
A valid employment contract can be enforced in a court of law. Some contracts specify a different process for resolving disputes about the contract. The contract might say that the parties must go through arbitration or mediation rather than turning to a court of law if one party claims a breach of the contract.
A party who breaches an employment contract can have to pay money damages to the other party. Sometimes the contract itself specifies the amount of damages.
When it comes to breach of an employment contract, it is important to seek the advice of a good employment contract lawyer to represent your best interests. Also, when negotiating an employment contract, it is a good idea to pay attention to the terms and conditions for resolution of disputes or claims of breach. The contract may require the parties to give up important rights, such as the right to trial by jury. It is important to consult an employment law attorney regarding the conditions for resolution of disputes or claims of breach of the contract.
Do I Need a Lawyer to Help with Contract Issues or to Review My Employment Contract?
An employment lawyer can be a great help to parties who are negotiating an employment contract. A lawyer can explain to you the advantages and disadvantages of having an employment contract.
A lawyer can help you negotiate terms and conditions that best protect your interests in the employment situation. A good contract lawyer should be able to deploy effective negotiating tactics and strategies so that you get the contract you want. Finally, it is crucial that both parties retain a separate lawyer, so that the terms of the employment contract are fair and just.
A legally binding employment contract can be enforced by a court. So you need an experienced lawyer if you are entering into an employment contract.
If you already have an employment contract, a qualified contract attorney can review it and explain the legal effect of its terms and conditions. If you have been accused of breaching your employment contract, an attorney can help you defend against the claim of breach and represent you in court, if necessary.
An attorney can also represent you in a mediation or arbitration. It is always a good idea to consult with an employment contract lawyer if you have a serious dispute with an employer about an employment contract.