An employment contract, in general, defines the terms of employment. It also sets out an employee’s responsibilities to his/her employer, such as work duties and company policies. At the same time, the contract sets out the employer’s duties to the employee, including wages and benefits. Termination of the contract, and under what circumstances, is routinely included.
Many employment contracts state whether or not an employee is “at-will.” If an employee is employed “at-will,” his/her employer has the right to fire them for any reason, and the employee can leave at any time. And if not employed “at will,” the contract will state when the employment contract will end.
Advantages of an Employment Contract
Employee contracts can often offer greater job security for employees. The terms of the employment contract may restrict the right of an employer to terminate an employee. The employee’s compensation will most certainly be stated in the contract, which the employer can only adjust by renegotiating the contract.
The terms can also explicitly specify the employee’s benefits, such as holiday and sick leave.
Finally, some employment contracts have provisions for filing complaints or disputes with the company. Employees will more effectively hold employers responsible for wrongful actions or other unfavorable work conditions if there are clearly defined contractual guidelines in place.
Benefits to the Employer
Since the contract’s terms will restrict the employee’s right to quit, an employment contract can make it easier to retain a good employee because it often includes employee benefits such as a pension, profit-sharing, 401(k), and stock options. Mutual expectations for conduct and performance provide predictability to the employment relationship.
Employers can implement restrictive covenant provisions, such as non-compete, trade secret, and confidentiality which protect an employer’s intellectual and competitive information.
Disadvantages of an Employment Contract
Employers can restrict an employee’s right to leave, but an employee is unlikely to agree unless the employer limits the grounds for termination. This occasionally makes it difficult to fire a non-performing employee, particularly if the contract guarantees jobs for a set period of time.
An employer is bound by the terms of the employment contract and can only change them by renegotiating with the employee. Renegotiation is a two-way street, however, and employers who desire some things will likely have to give up others.
Role of a Lawyer
Parties negotiating an employment contract will benefit significantly from the assistance of an employment lawyer. A lawyer can clarify the benefits and drawbacks of having an employment contract.
A lawyer may assist you in negotiating work terms and conditions that better protect your interests. An employment lawyer will know how to use effective negotiation techniques and methods to ensure that you get the contract you want. Finally, all parties should hire their own lawyers to ensure that the employment contract terms are fair and just.