Creating Employee Contracts

An employment contract is a written agreement between an employer and employee which sets forth the terms of the employment relationship and the respective rights and responsibilities of the employer and employee. An employer may require full-time and part-time employees as well as independent contractors to sign employee contracts. An employment contract may be enforced in a court of law.

Provisions In Employment Contracts

Employment contract samples are available online. These employment contract samples should be carefully revised so that any issues specific to your business are addressed.

Every workers contract should include a detailed description of the job for which the employee is being hired. Additionally, the employment contract should specify the salary the employee will be paid. The worker's contract should also detail the benefits package and any other perks which you have agreed to provide to the employee. The employment contract should also specify the employee's status, i.e., whether he is a contract employee, also known as an independent contractor, or a regular employee.

Other provisions which you may choose to include in the employment contract include:

  • Duration of the job;
  • Grounds for termination and entitlement to severance pay;
  • Provisions addressing penalties for early termination of the contract;
  • Limitations or prohibition on the employee's right to compete with your business once his employment with you ends;
  • Provisions protecting your trade secrets and client lists;
  • Provisions pertaining to your ownership of the employee's work product; and
  • A dispute resolution process.

Advantages of Employment Contracts

Many states are at-will employment states. This means that an employee can quit at any time and employer may fire an employee at anytime and for any legal reason.

An employment contract is advantageous for you as an employer because it gives you control over the terms of employment, including a degree of security and certainty in the knowledge that the employee will remain in your employ for the term of the contract or risk exposure to the penalties for early contract termination.

A contract for employees also affords you more control over an employee's work product. This can be especially important if the employee will play a role in creating or will have access to confidential information or trade secrets.

Disadvantages of Employment Contracts

Employment contracts have certain disadvantages, too. An employment contract works against you because it limits your flexibility. It your business needs change, you will have to renegotiate the contract with your employee.

Moreover, employment contracts place additional legal obligations on the employer. One such obligation is a duty to treat the contract employee fairly. This is known as the “duty of good faith and fair dealing”. If you are ever sued by a contract employee and found to have breached this duty, you may be liable to the employee for monetary damages.

Getting Legal Help

It's best to consult with a business or employment law attorney before drafting a contract for employees. An attorney can explain how employment contracts work in your state and advise you as to all the requirements necessary to make an employee contract legal. He will also ensure that your contract does not violate any federal labor and employment laws.

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