What is an Employment Contract?
An employment contract is a written document between an employer and an employee in which the employer promises to pay the salary and benefits to the employee in exchange for the employee’s promise to provide the company with work, and the employee promises not to work for anyone else while employed with the employer.
The terms of the employment contract may include the following:
- Commencement date
- Job title and description
- Duration of employment
- Employee compensation and benefits
- Employer’s rules, regulations, policies, and practices
- Confidentiality agreement
- Non-compete clause
- Dispute resolvement
- Termination of Employment
- Any other general provisions
Some common examples of employment contracts include salaried, hourly, and hourly-plus-commission positions.
How Do You Write Up a Contract of Employment?
A contract of employment is a written agreement between an employer and an employee that sets out the employee’s rights and responsibilities and the employer’s rights and responsibilities.
A contract of employment must be in writing and signed by both parties. Both the employer and the employee must have the capacity to enter into a contract. A contract of employment cannot be made by an employee under the age of 18, unless he or she is a university student.
Every contract of employment must have an end date, which is usually the date on which the contract ends. The end date may be specified in the contract of employment or it may be specified in the employment contract.
Types of Employment Contracts
Types of employment contracts refer to the different contract arrangements an employer can establish when hiring an employee. There are four main types of employment contracts employers use when hiring and setting the terms of employment with a new employee:
- At-Will Employment Contracts
- Written Employment Contracts
- Oral Employment Contracts
- Implied Oral Contracts
The type of employment contract an employer chooses depends on what works best for the employer and their employment situation.
At-Will Employment Contracts
- Most common type of employment contract in the U.S.
- At-will contracts mean employees can be fired or quit at any time, without notice.
- Employers cannot fire employees for protected reasons such as protected classes, discrimination, or retaliation.
- At-will employment does not prevent employees from enforcing the terms of their contract.
Written Employment Contracts
- More detailed than at-will contracts.
- Details specific employee and employer obligations
- Written employment contracts generally run for a specified time decided upon by the employer.
- Written employment contracts outline the terms of termination, and employees cannot be terminated unless they violate their employment contract terms.
Oral Employment Contracts
- Employment can either be at-will or based on specified terms.
- These contracts are legally binding but present difficulties if there is a breach of contract as they are difficult to prove.
- If the contract is breached, the oral employment contract is enforced based on any available documentation, surrounding circumstances, evidence of the agreement, and the reliance of the employee and employer.
Implied Oral Contracts
- These contracts have no formal documentation and can combine both oral and written statements.
- Even if an employee believes they were not an at-will employee because of an implied oral contract if they have signed an at-will agreement they are under the conditions of an at-will employee.
- When considering implied oral contracts, courts take into consideration employee performance within the company and how long the employee worked for the company in question.
The type of employment contract you need depends on the type of work you need from any employee and how you want to structure your employee contracts. Make sure you take the necessary steps to hire employees and understand the implications of each type of employment contract.
Employment contracts are necessary in order to protect the rights of both the employer and the employee. By having a contract, both parties know what is expected of them and what their rights are. This can help to prevent misunderstandings and disputes down the road.