An employment agreement is an arrangement or understanding between an employer and employee. The arrangement describes the terms and conditions of the employment relationship. An employment agreement is different from an employment contract. An employment contract is an agreement that, if breached, can be enforced in court, by a judge. This means the contract is a legally binding document.

What are the Contents of an Employment Agreement?

An employment agreement contains essential employment elements. These include rate of pay and frequency of pay. The agreement may also specify the number of hours to be worked. Employment agreements also address benefits of employment. These include, for example, medical insurance, life insurance, sick leave, and paid time off.

Many employment agreements contain additional clauses. These include:

  • A termination clause: This clause may address what constitutes grounds for termination, and whether an employee may re-apply for their current position or another one.
  • A non-disclosure clause: This clause requires an employee to not disclose the employer’s trade secrets, intellectual property (copyrights, trademarks and patents), or customer lists, to anyone.
  • A non-compete clause: This clause restricts an employee’s right, upon termination, to accept employment with a competing business.
  • A dispute resolution clause: This clause states how disputes related to employment will be resolved. The clause can require the employer and the employee to attend mediation or arbitration, in lieu of, or before, litigation.

Employment agreements can be entered into before an employee begins work, or once the employee starts working. The terms of the employment agreement may be re-negotiated.

Does an Employment Agreement Have to be in Writing?

An employment agreement can be verbal or written agreement.The advantage of a written agreement is that the parties have a reference source in the event of a dispute. If the agreement is verbal, subsequent disputes may arise as to its contents.

What Prevents a Party from Violating an Employment Agreement?

Many states have laws providing that employment agreements need not address matters such as sick leave, vacation leave, and paid time off (“fringe benefits”). These laws provide that if the agreement does address these matters, the parties are bound by what they agreed to. If, for example, the agreement states that an employee is entitled to a vacation day after four weeks of work, the employer must provide the vacation day once the employee has worked for four weeks.

Federal and state nondiscrimination laws prohibit discrimination in employment on the grounds of race, religion, gender, national origin, disability, or age. If an employer discriminates in an employment agreement, the employee may file a complaint with the state department of labor, and may be entitled to sue the employer in court.

Although employment agreements are not contracts, principles of contract law prevent an employer from paying no wages for work performed. In this instance, an employee may file a lawsuit in court alleging that the employer has been unjustly enriched at the employee’s expense. The court, when deciding how much money to award the employee, will look at (among other things) the rate of payment provided in the agreement.

How is an Employment Contract Different from an Employment Agreement?

An employment contract may be oral or written. An employment contract may address the same terms and conditions as an employment agreement does. These include rate of pay, job description and duties, bonuses, and expense reimbursement, promotion, and demotion.
The provisions in an employment contract, if breached, can be enforced.

This means that one party may file a lawsuit in court to enforce its rights provided in the contract. When a party breaches the contract, the other party may sue in court for what they were entitled to under the contract. For example, if a contract provides employment for a period of a year, and the employer terminates the employment in a month, the court can order the employer to pay the employee the money the employee “lost.” Courts do not force parties to continue an unwanted relationship. This means the court will not force such an employer to rehire the employee for 11 months..

In a breach of contract claim, the party alleging the breach files a complaint with the court. The other party can file an answer to that complaint. The court then reviews each party’s evidence. The court then makes a decision. The decision may award monetary damages, back pay, or injunctive relief (an order preventing a party from taking an action, such as trying to enforce a non-compete clause).

Do I Need the Help of a Lawyer with an Employment Agreement or Contract?

If you need advice about an employment agreement or contract, you should contact an employment lawyer. An experienced employment lawyer near you can review the facts of your matter and advise you on how to proceed. The lawyer can also represent you at mediation, arbitration, or court proceedings.