Advantages and Disadvantages of Employment Agreements

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What Is an Employment Agreement?

An employment agreement, or employment contract, is a binding contract between an employer and employee. It is usually a written, rather than an oral, contract. Employment agreements generally address important aspects of the employment such as wages, benefits, termination procedurescovenants not to compete, and the duties and responsibilities of employer and employee.

What Are the Advantages of Employment Agreements?

One of the main advantages of using an employment agreement is that it allows for a high level of specificity regarding the details of the employment. If either the employer or employee desires a certain wage rate, for example, they can specifically list this in the agreement. It allows for both parties to negotiate the terms under which they are willing to cooperate with one another. This feature is especially important for companies who need to protect particular trade secrets or copyrighted material.
 
Another advantage is that the agreement can be referred to in the future if a dispute arises over a particular aspect of the employment. The written document can be used as evidence if necessary.
 
Finally, employment agreements are important for fostering a positive relationship between the employer and the employee. Employers usually feel that an employment agreement creates an enhanced degree of organization and structure in the work relationship. For employees, an employment agreement can provide a sense of stability and security, especially if the agreement lists the time frame for the period of employment.

What Are the Disadvantages?

A main disadvantage of working with an employment agreement is that it may limit the flexibility of the employment arrangement. It often limits the ability of either party to renegotiate terms.
 
Employees may also find it difficult to change employment if they have agreed to a set time period in the contract.  
 
Another disadvantage of using an employment agreement is that it creates an implied promise to act honestly and fairly in dealing with the employer. This obligation is binding on both parties and can lead to legal penalties if either party breaches requirement, for example by acting dishonestly toward the other party.

Should I Contact a Lawyer Regarding Employment Agreement Issues?

Employment agreements are binding and have their share of both benefits and drawbacks. The decision to enter into one should not be taken lightly. If you need advice on whether to enter into an employment agreement or the terms included in it, you should contact an employment lawyer. They will be able to provide you with valuable services whether you are an employer or an employee in need of an employment agreement.

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Last Modified: 01-22-2014 03:08 PM PST

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