In general, an employment contract is defined as an agreement that is formed between an employer and employee, which provides the terms of employment. While not every worker may enter into an employment contract with their employer, it is often beneficial to have one since they can be used to clarify any disputes that may arise between the parties.

For instance, suppose you and your boss signed an employment contract when you were first hired. Once that contract was signed, it became binding on both parties. This means that anything included in the terms of the final contract must be complied with or else the party in violation could be held legally responsible for their actions.

So, for example, if your employment contract contained a provision that stated you should be paid a certain salary for the year and your boss refused to pay you that amount, you could sue him in court for damages based on a claim for breach of contract.

What is Usually Addressed in an Employment Contract?

A standard employment contract usually contains important details about an employee’s position and compensation. These include the benefits they will receive, how much they will be paid, and a description of what their specific job entails.

Some other items that are typically addressed in a basic employment contract include:

  • Job title: Most employment contracts will usually state the employee’s job title and provide a general outline of their job duties.
  • Time period: Almost all employment contracts provide a time frame for how long the employee is expected to work for that employer. This is especially true when it comes to independent contract or freelance workers. Some examples of time periods include the employee’s start and end date (i.e., term of employment), the length of time to complete a particular assignment, and/or the employee’s regular work schedule (e.g., 9am to 5pm).
  • Payment: An employment contract may specify the type of salary that the employee has (e.g., salary, hourly wages, paid on commission, etc.). This section may also mention yearly bonuses, how often the employee may receive a raise, and how they will be paid (e.g., by direct deposit, in cash, with a physical check, etc.).
  • Benefits and/or perks: Employment contracts also usually address the kinds of benefits and/or perks that an employee may get, as well as how long they will need to wait until they can collect their benefits. For instance, many new employees will not be allowed to enroll in health insurance or dental plans through their employer until after 90 days.
  • Vacation and sick days: An employer may decide to incorporate its company policies into the employment contract, so that an employee is aware of the rules for taking days off for vacations, holidays, ordinary illnesses, or if it is more serious, for medical or disability leave.
  • Confidentiality clause: Many contracts also have confidentiality provisions, which are sometimes signed separately as a document known as a non-disclosure agreement (“NDA”). These clauses are used to ensure that the employee does not leak any proprietary or classified information to the employer’s competitors.
  • Alternative dispute resolution methods: An employment contract may lay out the way in which the parties must go about resolving employment disputes. In lieu of court, the contract may state that all parties must solve their issues through a method of alternative dispute resolution, such as arbitration or mediation.
  • Termination: The contract may define what types of acts may constitute grounds for termination and the procedures employed to terminate an employee (e.g., three strikes, immediate firing, etc.).
  • Severance: An employment contract might also include details about severance packages. For instance, it may list the financial amount or other benefits that an employee may be entitled to if they are forced to vacate or are discharged from the position. Severance pay is essentially compensation for when an employer terminates an employment contract earlier than its agreed upon expiration date.
  • Covenant not to compete: Although there are many types of clauses that may be included in an employment contract, one of the most common ones is a covenant not to compete. Such clauses prevent the employee from competing against their employer for a certain period of time.
    • An employee should be warned, however, that non-compete covenants are generally void in California state. Thus, it may be in an employee’s best interest to consult a local employment lawyer before signing an employment contract to ensure that all of its provisions are valid and legally enforceable.

In addition, it should be noted that while the above list does incorporate many of the terms found in the majority of employment contracts, it is neither exhaustive nor exclusive. In fact, the employer and employee may insert any terms that they wish into their contract, so long as they are not illegal, fraudulent, or against public policy.

When is an Employment Contract Necessary Under California Employment Laws?

According to California’s Labor Code, the majority of California employees are considered “at-will” employees. An employee who is hired under an “at-will” status may be fired for any reason or no reason at all, with or without notice. Thus, unless an employer terminates an employee for a reason that is deemed to be illegal under California employment laws, many standard employment contract issues do not apply to employees in this state.

However, this does not mean that a California employer and employee cannot form a contractual relationship. The parties may still create an employment contract if they so wish. Such contracts can be useful to ensure that an employee is paid the amount that was agreed upon when they were initially hired, will receive certain benefits, and an employee can even try to negotiate for a fixed term of employment.

On the other hand, there are three exceptions to an at-will status employee in California. Therefore, a California worker may require an employment contract if they are part of a unionized workforce (e.g., a collective bargaining agreement), hold an executive-level role in a company, or work in the public sector.

How is a Breach of an Employment Contract Treated in California?

As briefly mentioned in the above section, most California employees are considered at-will employees. Thus, many breach of employment contract issues generally do not apply to California workers. However, there are some instances in which an employee may be able to sue a California employer for breach of an employment contract.

One way such a dispute may arise is if the parties had entered into an employment contract with specific provisions and the employer ignored or refused to satisfy their end of the agreement. An example is where the employer promised the employee vacation days and health insurance benefits, but never provided either of them and the employee relied on those benefits as part of the reason they accepted the job offer.

Though it might be difficult, a California worker may also be able to sue their employer if they have an implied contract with them. This can happen when an employer fails to follow their termination and/or disciplinary policies, or if there is an assumption that an employer will not fire the employee without good cause.

Additionally, while it may be possible to sue an employer for breach of an oral contract as well, these are the most difficult types of breaches to prove because it is essentially the employer’s word against the employee’s word, with no further proof. Therefore, most California employment cases will focus on wrongful termination or employment discrimination, rather than breach of contract issues.

Do I Need a California Employment Attorney for Assistance?

As discussed above, the terms of an employment contract will become binding once the parties to the contract have signed. Thus, before you enter into an employment contract with a new or an existing employer, it is strongly recommended that you contact a California employment attorney for further legal advice.

An experienced employment attorney can review your contract to make sure that its contents are valid and fair, and if not, can negotiate for better terms on your behalf. Alternatively, if you have already signed the contract, your attorney can help you to renegotiate or amend its original terms.

In addition, if you are being sued or if you wish to sue your employer for breaching an employment contract, an attorney will be able to assist you with your case and can provide representation in court on the matter should it be necessary.