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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 refer to the same thing - an agreement between an employer and employee that specifies the core terms for employment. Employment agreements may be negotiated before or after hiring and are binding on both parties once signed.

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

What Is Required In An Employment Contract?

The employer and employee may enter into a binding contract to better define the terms of their relationship, and neither the employer nor the employee can end that contractual relationship outside of the methods discussed in the employment contract. Contracts usually require an ending point or termination date. 

An employment contracts defines the terms and conditions of employment, like: pay rate, hours, duties, benefits, job procedures to be followed, termination requirements, grievance procedures, non-competition agreement, overtime requirements, confidentiality, and many more. If either the employer or the employee breaks the contract, the other party may be entitled to damages and can enforce the contract in court.

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:

These terms may be renegotiated at any time 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 is unfavorable 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 the breach 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?

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 a 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. 

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. To terminate an at-will relationship, the termination cannot be for an illegal reason and sufficient notice should be provided. 

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: 09-14-2015 10:09 PM PDT

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