Simple Employment Contracts: Everything You Need to Know
Simple employment contracts are agreements used by employers to outline clearly the obligations, responsibilities, and rights of employees.3 min read
What are Simple Employment Contracts?
Simple employment contracts are agreements used by employers to outline clearly the obligations, responsibilities, and rights of employees as they pertain to the work period. These contracts show that an employee is being brought on to perform specified work for the employer and the employer is agreeing to provide compensation, training, and resources to the employee. Such contracts may include details on compensation, job description, probationary periods, confidentiality, vacations, and termination. As signed written agreements, employment contracts are enforceable by law.
Elements of Most Simple Employment Contracts
Most simple employment contracts will contain the following six sections, which it is good to become familiar with. These sections are:
- Terms of Employment. This sets out the rights of the employer and employee as far as employment is concerned. Most states allow employment to be considered “at will,” which means that the employer can terminate the employee as they see fit, so long as discrimination is not a factor. However, if an explicit or implied contract was broken, then the employer may be in violation of the employment contract. Furthermore, some states recognize an employer’s verbal statement as contractually binding, although such a statement must be specific and not violate the statute of frauds.
- Employee Responsibilities. A contract should clearly state the responsibilities and expectations for an employee, thereby to avoid miscommunication. Most contracts will contain phrasing similar to “additional duties as assigned,” which leaves the employer free to add responsibilities as the need arises. If there is a significant change in the job description, a new contract may need to be signed.
- Compensation and Benefits. Here should be included what payment and other benefits will be provided to the employee for their work, as well as the schedule and amount for such payment and benefits. Compensation should be listed in the dollar amount. Any potential bonuses should include what conditions need to be met to activate them. Any health benefits, paid time off, or other benefits should also be specifically detailed.
- Confidentiality, Non-Solicitation, and Non-Compete Clauses. These will often be included in contracts and are meant to protect employers from loss of employees, business, or trade secrets. Confidentiality clauses ensure that trade secrets and other valuable company information is kept private, non-solicitation clauses prevent employees from encouraging customers or other employees from moving to another employer, and non-compete clauses bar employees from being employed by direct competitors during their employment or for a period after it. Any such clauses must be considered both fair and legal to be enforceable by law.
- Dispute Resolution. A work contract will usually include details regarding litigation, should it arise, such as who will cover the cost of legal proceedings and where such proceedings will occur. What state law applies to the contract should also be stated, although it is usually the law of the state that the business is located in.
- Signatures. Both parties must sign and date the document for it to be valid in court. Both parties should also keep a copy of the document for their records.
When are Simple Employment Contracts Needed?
Although contracts are recommended for any employer-employee relationship, as they increase clarity and lessen the likelihood of legal disputes, some specific situations where a contract is advisable include:
- If the employee will be in upper-level management and have access to confidential information. In such a case, a contract with a confidentiality clause will be important for protecting the trade secrets of the employer.
- If the employee is highly valued and their departure without advance notice would be costly. Some employees occupy key roles within a company that are essential to the smooth running of the operation. Having a clause that requires advance notice will allow an employer time to find a replacement.
- If the employee requires certain benefits in writing. Some potential employees may be highly desirable, such as media talents, website designers, and sales managers, and as such they will be in a position to negotiate for non-standard perks, like more vacation, a company car, or guaranteed severance pay.
- If the employee is a freelancer or contractor and the parameters of the job need to be clearly set out. This could include job duties, deliverables, and the date of completion, as well as a confidentiality clause, if necessary.
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