Employment Contract

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Employment Contract


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About Employment Contract

An employment contract is a signed agreement between an employee and employer. It establishes both the rights and responsibilities of the two parties: the worker and the company.

What Should Be Included in an Employment contract

Job Information

Some key pieces of information to start with include the job title and the team or department with which the employee will work. Explain how performance will be evaluated and to whom the new hire will report.

Compensation And Benefits

Outline the compensation and benefits package. It should include the annual salary or hourly rate, information about raises, bonuses, or incentives and how these may be obtained. Explain what the benefits plan includes — medical, dental, eye care, etc. — what percent the employer pays, and what percent the employee pays. If offered, include information about the 401(k) plan, stock options, and any fringe benefits.

Time Off, Sick Days, And Vacation Policy

Thoroughly explain the time off policy. How many paid vacation days are accrued per pay period? Do vacation days increase with long tenure? Also explain your expectations regarding sick days, family emergencies, or unpaid leave. Can employees make up hours by working after-hours and weekend events?

Employee Classification

Define whether the new hire is an employee or contractor to ensure tax and insurance compliance. Uber has faced many lawsuits due to employment misclassification and continues to fight it. Learn what distinguishes employees from contractors, and classify employees correctly right from the beginning so you won’t have to worry.

The Schedule And Employment Period

The contract should clearly state if employment is ongoing or for a set term. It should also include when the employee is expected to work to define the employer-employee relationship.

Include the amount of hours the employee is expected to work and any flexible working options like working from home or remotely while out of town. If the job requires working nights and weekends, explain when and how often.

Requirements After Termination

The contract should include any restrictions or mandates on an employee after leaving the organization. For example, an employee may not be allowed to start his or her own business in the same industry within the same locale in a specified time period or work with the business’s clients independently. Clearly, define these terms to help protect your business and its clients.

While these basic elements are a good starting point, there are plenty of other things you can include to further define the role or the business relationship. To simplify writing the contract, use a digital template to help guide you.

A Technology Privacy Policy

Clarify what's OK and what’s not regarding the use of social media and email on company property. For example, if you don’t want employees to use company computers or mobile devices to update their personal social media channels or check personal email, say so. If you don’t want employees saying anything negative about work on social media, like these two McDonald’s employees did, prohibit it.

Termination Terms And Conditions

Explain what is required for either party to terminate the relationship, including the amount of notice required and if it should be written.

Severance Or Outplacement Plan Information

It's a bit early to be thinking about this, but should you or the employee decide to part ways, you’ll want to do so nicely to maintain a positive employer brand. Consider offering severance or an outplacement plan.

Confidentiality Agreement

Protect sensitive information like business trade secrets and client data by having the employee sign a confidentiality agreement within the contract. Instead of making this a separate contract or piece of paper, include it as a section of the employment contract and place a field in the section where new hires can sign digitally.

Types of Employment Contracts and Compensation Agreements

Confidentiality Agreement

An employee confidentiality agreement is a contract (or part of a contract) in which the employee promises not to share any information about the details of the employer's business or the employer's secret processes, plans, formulas, data, or machinery. Usually a confidentiality agreement lasts even after the employee no longer works for the employer.

Non Competition Agreement

In the noncompetition clause, the employee agrees that for a certain amount of time after he or she stops working for the employer, the employee will not become employed by a rival company or any company engaged in a similar type of business, and the employee will not set up a company that will compete with the employer's business (or solicit the employer's customers). Usually the noncompetition clause is limited to a particular geographic area.

Ownership Of Inventions

This provision applies to employees who invent things as part of their jobs. In this part of the contract the employee agrees that anything he or she invents at work (or during a set period of time after termination) becomes the employer's invention, not the employee's own invention. Additionally, employees usually agree to assign their inventions to the employer, cooperate with the employer in getting inventions patented, and keep information about the invention confidential like any other trade secret.

Best Efforts

Although it is often just assumed that the employee will work hard for the employer, sometimes employers add a best-efforts provision to the employment contract. It states that the employee promises to work to the best of his or her ability, and to be loyal to the employer. Sometimes it also states that the employee specifically agrees to make suggestions and recommendations to the employer that will be of benefit to the company.

Exclusive Employment

In this provision, the employee promises that as long as he or she works for the company the employee will not work for anyone else in the same or similar type of business. It may also extend to a promise not to be a shareholder or director in a similar business, or even to provide services voluntarily to a competitor business.

No Additional Compensation

The "no additional compensation" clause states that if the employee becomes an elected director or officer of the company or serves on a company managing committee, the employee will not be entitled to additional compensation for doing that work.

No Authority To Contract

Sometimes this part of the contract is called the "agency" provision. It makes clear that the employer and employee have an employment relationship only, not an agency relationship; the employee has no right to enter into a contract or otherwise obligate the employer, unless the employer gives express written consent to do so.

Termination

A standard part of any employment contract is the "termination" clause. It states that either party may terminate the employment contract for any reason by giving a certain amount of notice, such as two weeks' notice. It may also give the employer the right to just terminate the contract without notice if the employee violates the contract in any way. Another aspect of the termination clause is a statement that the employer has the right to terminate the contract if the employee becomes permanently disabled because of ill health or physical or mental disability such that the employee can no longer do the job.

Arbitration

Arbitration clauses are found in many types of contracts, including employment contracts. In this provision, the parties agree at the onset of the relationship that, if they ever have a dispute about any aspect of the employment relationship, they will submit that dispute to arbitration rather than seek resolution by a court of law. The "arbitration" clause may include details about the arbitration, such as whether the arbitration decision will be binding and how the parties will find an arbitrator when the time comes.

Choice Of Law

Employment laws vary from state to state. Some states have laws that are generally viewed as more favorable or beneficial to employers than employees, or vice versa. The "choice of law" provision in an employment contract is an agreement that, if the parties ever have a dispute that results in a lawsuit, the laws of a particular state will govern it, no matter where the lawsuit itself is filed.

Frequently Asked Questions

When should you be given a contract of employment?

Employee's right to written details about the employment contract. All employees, regardless of the number of hours they work per week, are entitled to receive a written statement from their employer within two months of starting work. The statement should describe the main terms of the contract of employment.

A contract of employment is a legally binding agreement between you and your employer. A breach of that contract happens when either you or your employer breaks one of the terms, for example your employer doesn't pay your wages, or you don't work the agreed hours. Not all the terms of a contract are written down.

All employment agreements are legally binding on the employer and, therefore, employers are best served by having them drafted and reviewed by an experienced employment law attorney. Contract law is a particularly complex discipline that relies largely on common law, which is law as developed by judges and court cases.

A contract of employment is an agreement between an employer and employee and is the basis of the employment relationship. Most employment contracts do not need to be in writing to be legally valid, but it is better if they are Starting work proves that you accept the terms and conditions offered by the employer

A contract of employment is an agreement between an employer and employee and is the basis of the employment relationship. Most employment contracts do not need to be in writing to be legally valid, but it is better if they are Starting work proves that you accept the terms and conditions offered by the employer.

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