An employment contract is an agreement between employer and employee which spells out the terms of employment. A contract is not used in every employer-employee situation, but it can clarify many items at issue in such a relationship.
The contract, once signed, is binding upon both employer and employee. As with any contract, there are both advantages and disadvantages. A written contract can provide protection for both parties, but it also locks each party into an explicit agreement.
What Kinds of Items are Usually Addressed in an Employment Contract?
An employment contract will address a number of items, to include:
- Term of Employment: While some contracts do not include an employment end date, others are for a contracted period of time, or specific to a project.
- Salary: Any salary, wage, and also commissions should be agreed upon.
- Sick and Vacation Leave
- Health/Medical Benefits: This section should describe the employee’s medical benefits, and possibly allude to other literature that describes the medical plan comprehensively.
- Other benefits, such as 401k information, or life or disability insurance: There will likely be separate literature on this type of insurance, as well, but the contract will state the benefits of this type that employer is providing to employee.
- Any Covenants Not to Compete: In some cases, an employee will agree not to compete for a certain amount of time, in the same employment field and in a certain geographical area, because this would put the employee in direct competition with the employer.
- Any Non-Disclosure Agreement: Under this item, the employee agrees to keep information they gained while working for their employer confidential, following their separation from employment with that employer.
- Grounds for Termination: States have their own laws regarding whether employment is at-will or not, meaning that an employer may fire an employee at any time and for any reason without notice.
- However, an employment contract will usually be more specific about the grounds for termination. It may simply require that an employee agree that they are “at-will.” A contract may also set out a notice period which the employee must give their employer upon quitting.
- Method for Resolving Employment Disputes: Typical methods are mediation or arbitration, which must be pursued before either party is free to pursue the matter in court.
- Severance: This item describes any financial amount or other benefit the employee may be entitled to upon their separation from employment. It may also describe whether the nature of the separation, be it a resignation, firing or otherwise, impacts the benefit being paid to the employee.
Do I Need an Attorney for My Employment Contract Issue?
If you will be signing an employment contract, and are concerned about gaining the best possible terms for yourself, you may consult an attorney for assistance.