An employment contract is a signed agreement between an employer and employee. This agreement outlines the terms of employment, and while it is not used in every employer/employee relationship, it is a useful tool in clarifying many of the issues that may arise in such a relationship. It establishes the rights as well as the responsibilities of each of the parties. A signed employment contract is legally binding for both the employer and the employee. While the contract can provide protection for both parties, it also locks each party into a legally enforceable agreement.

The responsibilities, as well as the duties of the employment position, are detailed in an employment contract. Additionally, the contract should include specific information about compensation and evaluation standards. It might also limit when the employee may leave their position, and when the employer may terminate the employee.

What is Usually Addressed in an Employment Contract, and When is One Necessary?

In addition to what was previously discussed, an employment contract may also include:

  • Terms of employment, such as an employment end date or a contracted period of time;
  • Any salary, wage, and commission specifics;
  • Specifics regarding sick and vacation leave;
  • A description of the employee’s medical benefits;
  • Any information regarding other benefits such as a 401k, or life or disability insurance;
  • Covenants to not compete, in order to avoid putting the employee in direct competition with the employer;
  • Non-disclosure agreements in order to ensure that the employee maintains confidentiality in regards to any proprietary information they obtain while employed;
  • Grounds for termination, such as an agreement that the employee is an at-will employee, or a notice period in which the employee must give their employer upon leaving the job;
  • A method for resolving employment disputes such as mediation or arbitration; or
  • Severance specifics, such as any financial amount or other benefit the employee may be entitled to upon their vacating their position.

An employment contract is not always necessary. Generally, most job hiring is actually conducted through at-will employment agreements. At-will employment agreements do not limit the rights of either party to terminate the arrangement; however, they also do not provide all of the protections that an employment contract provides. An employment contract would likely be utilized in the following circumstances:

  • Costly Training: A fixed term of employment, or a notice of termination requirement, could assist an employer when the employee vacates their position. If finding and training a replacement employee would prove to be especially costly or time consuming, an employment contract can help ease the burden on the employer; or
  • Access to Sensitive Information: The employee might have access to sensitive information, such as confidential information, trade secrets, and client lists. If so, confidentiality clauses, in addition to the aforementioned non-compete agreements, can safeguard the sensitive information being accessed.

What About a Breach of an Employment Contract?

If you have been accused of breaching your employment contract, you have essentially been accused of not adhering to the terms of your contract. Failing to follow various company policies that you agreed to follow when you entered into your employment contract is a common example of this. Generally, you are required by law to fulfill the terms of your employment contract. However, if the terms are vague, violate the law, or the contract is otherwise unfair, the contract may be void.

In order to prove that your employment contract is void, one of the following must have occurred during contract negotiations with your employer:

  • A mistake was made, as in the parties are mutually mistaken about crucial information;
  • Fraud, as in you signed the contract based on false information presented to you;
  • You were under duress, or coerced, into signing the employment contract;
  • Undue influence of one of the parties over the other; or
  • Unconscionability of the contract, meaning the contract itself is so unfair that it voids the agreement.

Your employer has a responsibility to do whatever they can to minimize their own damages, rather than allowing them to get worse and then suing you in order to recover their total loss. Also, your employer is allowed a limited amount of time in which to sue you for breach of contract, after the breach has occurred. Another defense is if you can prove that your employer breached the contract in some way before you did.

Other circumstances which void an employment contract include being employed to perform work tasks you are not licensed to do; at-will employment status; or claiming that you breached your employment contract due to your employer’s failure to comply with the covenant of good faith and fair dealing.

Do I Need an Attorney for Assistance with Employment Contract Issues?

A skilled and knowledgeable employment attorney may be a valuable asset to obtain before signing an employment contract. They can review the contract and ensure it is legally enforceable, as well as ensure that you understand what will be expected under the contract. Additionally, they can help you negotiate the terms of the employment contract that will benefit you, or renegotiate an existing contract if either party wishes to make any changes.

If you have been accused of breaching your employment contract, an employment attorney will help determine any defenses you may have, as well as represent you in court as necessary.