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What are Employment Agreements? Are They Different From Employment Contracts?

Employment contracts and employment agreements are essentially the same thing with different names. The terms may be used interchangeably, but they basically refer to the same thing- an agreement between an employer and employee which specifies the core terms for employment. Employment agreements may be negotiated before or after hiring and are binding by both parties once signed. 

Although they may be oral or implied from conduct, it is highly preferable to have the agreement preserved in writing so that it can be referred to if necessary in the future. Employment law highly favors written documents over oral or implied agreements. 

What is Contained in an Employment Agreement?

The exact terms contained in any employment agreement will vary depending on the circumstances.  They will usually contain all the key provisions that will govern the employment arrangement. These may include the duties of the employee, the employer’s responsibilities, and compensation (wages). 

Other common provisions included in an employment agreement are;

  • The length of the employment term, including date of hire and date of termination if applicable
  • Benefits such as insurance, stock options, and medical expenses
  • Terms for vacation and leave
  • Various clauses including:
    • Non-compete clause- governs such items as protection of copyrights and trade secrets, ownership of work product, and client lists
    • Arbitration clauses- for dispute resolution and reporting violations
    • Termination clauses- covering termination, transfers, and retirement

As stated, these terms may be renegotiated at anytime after signing. However, many employees and employers are reluctant to do so, as the process may be time consuming. Also, employees are generally seeking stability in their work environment, and a renegotiation may unfavorable especially if it involves a downgrade in pay or demotion to a lower position.

What if the Employment Agreement is Broken?

Employment agreements are legally binding, and if either party disregards the terms contained in the writing, they may be subject to a penalties. Both the employer and the employee may become subject to an investigation by an employment administrative agency, or it may lead to a lawsuit. 

The remedy for violations of an employment agreement will often be specified in the agreement itself. This will usually be contained in the arbitration clause, which outlines what type of relief a party is entitled to in the event that the contract is breached. 

What if I Was Hired With No Employment Agreement?

If no employment agreement is created between employer and employee, then it is usually assumed that the employment is based on an “at-will” relationship. This means that the employment period may be terminated at the will of either party at any moment and for any reason, so long as it is not illegal and sufficient notice is provided. 

Employers will often provide their workers with an employment handbook which lists provisions pertaining to working conditions. In some instances the handbook can function like contract. For example, if the employer has violated a provision in the handbook, it may be binding on the employer as if it were a duty imposed in a formal contract. 

Do I Need a Lawyer for Employment Agreement Issues?

In dealing with employment agreements, it is often essential that you contact an employment contract lawyer. Employers often need a lawyer to help them draft the contract, and employees should be represented by an attorney so that they are aware of their employment rights. In the event of a dispute, a lawyer can help obtain the proper remedy according to federal and state employment laws. 

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Last Modified: 04-09-2013 01:52 PM PDT

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