An employee agreement is a type of contract which can be entered into by an employee and an employer. It is often used interchangeably with the term employment contract.

Although the terms can be used interchangeably, employment contract negotiations are typically associated with the hiring state of employment. In addition, hiring contracts are typically signed prior to the employee beginning their job.

An employee agreement, on the other hand, may be formed at any time during the individual’s employment. It may also deal with matters other than hiring terms.

An employment agreement is an understanding or arrangement between an employee and an employer. This type of agreement describes the terms and conditions of an employment relationship.

An employment agreement is also different from an employment contract because an employment contract, if breached, can be enforced by a court. In other words, an employment contract is a legally binding document.

What can be Contained in an Employee Agreement?

An employment agreement may cover many issues, including:

  • An agreement for that the employee will not disclose company trade secrets or solicit fellow employees or former clients for a short period of time after leaving the company;
  • An agreement by the employer to permit the employee to purchase stocks or securities;
  • Provisions regarding how disputes will be legally resolved, such as litigation vs. out-of-court settlements; and
  • Provisions regarding:
    • termination;
    • retirement;
    • transfers; and
    • other long-term matters.

In addition, employee agreements may be made between two or more employees. These agreements may be necessary in cases where employees will be working jointly on a project and may need to outline specific terms in a contract, such as division of profits on a sale.

An employment agreement may contain essential employment elements similar to those in an employment contract. This may include issues such as:

Many employment agreements may also contain additional clauses, which may include:

  • A termination clause which may address what constitutes grounds for termination as well as whether an employee may re-apply for their current position or another position;
  • A non-disclosure clause which requires an employee to not disclose the employer’s trade secrets, intellectual property, such as copyrights, trademarks, and patents, or customer lists, to any other individuals;
  • A non-compete clause which restricts an employee’s right, upon termination, to accept employment with a competing company; and
  • A dispute resolution clause which states how disputes related to employment will be resolved. The clause may require the employer and the employee to attend mediation or arbitration, in lieu of, or prior to, filing a lawsuit.

An employment agreement may be entered into prior to an employee beginning their job or once they have started working. The terms contained in the employment may be re-negotiated.

Does an Employment Agreement Have to be in Writing?

An employment agreement does not necessarily have to be in writing. It can be a verbal or a written agreement.

The advantage of a written employment agreement is that the parties have a written reference in the event a dispute arises. If an employment agreement is verbal, a subsequent dispute may arise as to the contents.

What if an Employment Agreement is Violated?

If an employment agreement is violated, it may be necessary to file a lawsuit or to file a complaint with a government agency, which may include the Equal Employment Opportunity Commission (EEOC). When filing such a claim, the employee should:

  • Keep records of any documents which relate to the violation, which may include:pay stubs;
    • work logs;
    • account statements;
    • copies of the agreement itself; and
    • any other relevant documents.
  • Contact an attorney for assistance with legal research; and
  • Make a written account of the incident or incidents leading to the violation, and of the violation itself.

Remedies which may be available for a breach of an employment agreement may include:

  • Monetary damages for economic losses that were caused by the breach;
  • Reinstatement to the employee’s previous position in cases of wrongful termination; and
  • Changes in company policy, if the violation or violations are widespread.

Because of these issues, an employment agreement should be carefully negotiated and reviewed prior to signing. These agreements may have long term consequences on the individual’s advancement opportunities and may also create various legal restraints on the employee.

What Prevents a Party from Violating an Employment Agreement?

In many states, there are laws which provide that employment agreements are not required to address matters such as:

  • Sick leave;
  • Vacation leave; and
  • Paid time off, or fringe benefits.

These laws provide that if an agreement does not address these issues, the parties are bound by what they agreed to. For example, if an employer agrees that an employee is entitled to a vacation day following four weeks of work, then the employer must provide that vacation day once the employee has worked for four weeks.

Federal and state nondiscrimination laws prohibit discrimination on the grounds of:

  • Race;
  • Religion;
  • Gender;
  • National origin;
  • Disability; and
  • Age.

If an employer discriminates in an employment agreement, an employee may file a complaint with the department of labor and may be entitled to sue the employer in court.

Although an employment agreement is not a contract, the principles of contract law prevent an employer from not paying wages for work performed. If this occurs, an employee may file a lawsuit in court that alleges that the employer was unjustly enriched at the expense of the employee. When determining how much to award the employee, the court will examine, among other things, the rate of pay that was provided in the employment agreement.

How is an Employment Contract Different from an Employment Agreement?

An employment contract may be written or oral. It may also address some of the same terms and conditions as an employment agreement, as noted above. These issues may include:

  • Rate of pay;
  • Job description and duties;
  • Bonuses;
  • Expense reimbursement;
  • Promotions; and
  • Demotions.

The provisions contained in an employment contract, if breached, may be enforced in a court of law. This means that a party may file a lawsuit in order to enforce the rights provided in the contract.

If a party breaches the contract, the other party can sue in court for what they were entitled to pursuant to the contract. For example, if the contract provides that the employee will have a job for one year and the employer terminates the employee in a month, the court may order the employer to pay the employee the pay that was lost due to early termination.

The court, however, will not force the parties to continue a relationship they do not wish to be in. In other words, the court will not require the employer to retain the employee for 11 months.

In a breach of contract claim, the party that is alleging the breach will file a complaint with the court. The other party files an answer to the complaint. The court will then review the evidence from each party and make a decision.

The decision may award the employee monetary damages, back pay, or injunctive relief. Injunctive relief is an order which prevents a party from taking an action, such as attempting to enforce a non-compete clause.

Do I Need a Lawyer for Help With an Employee Agreement?

It is essential to have the help of an employment attorney for assistance with any employment agreement issues you may be facing. An employment agreement may cover a broad range of employment issues.

Your lawyer can review your case, determine if your rights were violated, and represent your interests under the employment agreement. If necessary, your attorney can assist you in filing a lawsuit in order to obtain the appropriate remedy.