A written employment contract, is a legally-binding document which describes the terms of the employee-employer relationship and is signed by both parties. Although generally viewed as the exception to the rule, a written employment contract can be a useful tool to protect both the employer and the employee in a variety of circumstances.
What is Included in an Employment Contract?
A variety of details are contained in a written employment contract, generally including but not limited to, the following:
- Information about the scope of work agreed upon.
- Information about compensation for the employee, including benefits, health insurance, vacation, sick days, and disability leave.
- Predetermined timeframe of employment.
- Grounds for termination.
- A non-compete clause.
- Non-disclosure agreement, concerning trade secrets and clientele.
- Information concerning who owns work products generated during the course of employment.
- Methods for dispute resolution about employment contract issues.
- Any other obligations taken on behalf of the employer or the employee.
What is an At-Will Agreement?
In most cases a written employment contract exists to legally protect an employee and clearly delineate the reasons for which they may be terminated. This means that if an employee is terminated prior to the agreed upon term set out in the written employment contract, or for reasons other than those expressly included in the contract, they may then possess legal standing for a lawsuit or some form of compensation. An at-will agreement stands as the alternative to this protection, essentially stating that the employee will work at the will of the employer, and is subject to termination for any reason, just so long as that reason is not illegal in state, local, or federal guidelines.
Pro’s and Con’s of Employment Contracts
Drafting and requiring employees to sign an employment contract before beginning work has a number of advantages and disadvantages, both for the new employee and the employer. Below we’ve laid out a few pro’s and con’s of requiring employees to sign a written employment contract.
Written employment contracts are very useful at protecting both the employee and the employer from any ambiguity about the nature of their relationship. These documents safeguard businesses from employees leaving abruptly, especially in cases where the employee may be learning classified or confidential information about the business, or will be difficult to replace with another qualified person. Most written employment contracts lay out specific terms for when an employee may terminate their relationship with the company, and what the penalties will be if they disregard these terms. Additionally, the inclusion of a non-compete clause safeguards an employer from the poaching of employees by other similar companies or competitors.
One major drawback of signing a written employment contract is that it limits the flexibility and fluidity of the employer/employee relationship. Should the need or the nature of your business change over time, you cannot make alterations to a written employment contract without renegotiating the contract with the employee in question. This may limit your business’ adaptability in a volatile marketplace, and may hinder your ability to do business. Another drawback to a written employment contract is that it bears with it the legal obligation to act in “good faith” with the employee. This means that all dealings with the contract must be carried out in a manner that a judge and jury would find reasonable and responsible. If good faith is lost, you and your company could face serious legal culpability.
Contact The Brown Firm PLLC for More Information
If you are a business owner looking for help deciding what to include and what language to use in your business’ written employment contracts, The Brown Firm PLLC is here to help. We have years of experience helping all types of businesses draft legal documents that sufficiently and responsibly protect both them and their employees. For more information and a free consultation contact us by phone or send us a message online today.