Employment Contracts Demystified
Employment agreements are legal contracts that outline the terms of the relationship between an employer and an employee. They are a crucial part of the employee-employer relationship, providing a clear framework that both parties can refer to should any issues arise. In their most basic form, these agreements set out the responsibilities of the employee, the payment and benefits the employee will receive, and the duration of employment.
An employment agreement is typically composed of several sections covering key areas such as duration, compensation, duties, benefits, and termination. Some agreements may also include clauses addressing non-compete obligations, confidentiality requirements, dispute resolution mechanisms, and other special provisions tailored to the employer’s industry or specific needs.
The length of the agreement can vary. If the employment is for an unspecified period, the agreement will generally be open-ended . In such cases, employment can only be terminated by following applicable termination procedures with respect to minimum notice periods and severance entitlements. In certain circumstances, a fixed-term agreement may be terminated early without cause (with or without advance notice) based on the expressed right to do so in the terms of the contract. The fixed-term employment agreement would then contain a provision providing for payment of a fixed amount in lieu of the remainder of the term.
An employment agreement exists for the mutual benefit of both the employer and the employee. For the employer, an agreement can help to prevent misunderstandings about the employee’s obligations, and to ensure that the employer’s interests are protected. For employees, an agreement provides clarity about their role within the organization, their compensation, and their legal rights. A well-written and clearly-drafted agreement, therefore, provides clarity and certainty to the relationship, benefitting both the employer and the employee.
The Critical Elements of an Employment Contract
A downloadable employment agreement will typically contain the following components:
Job Description: The job description forms the basis for the employee’s duties and responsibilities. Often there will be an introductory clause in the employment agreement that states this position is one of employment-at-will.
Compensation: This section of the employment agreement sets forth the amount of compensation that the employee is to receive for their services. These amounts can vary by type of position, type of industry, seniority level, etc. In addition to salary or compensation, it will likely set forth bonuses or incentive programs if any exist.
Benefits: The benefits section of the employment agreement should note the benefits that are being extended to the employee. It is understood that full-time employees receive health benefits but the employment agreement should call out which benefits are being provided such as dental, vision, life insurance, long-term disability, etc.
Confidentiality Clauses: Employers often include confidentiality clauses in their employment agreements. Confidentiality clauses prohibit employees from sharing certain information with third parties or obtaining data or other information without authorization by the employer. This section of the employment agreement will attempt to create a sense of ownership regarding the company’s property. Sometimes a non-disclosure agreement is also provided with the employment agreement to further outline how confidential information can or cannot be shared.
Termination: The termination section of the employment agreement should set forth the conditions by which an employee can be terminated. It would also set forth whether or not the employee would be provided notice of their termination or the approximate time by which notice would be given.
The Advantages of Using a Sample Employment Contract PDF
A downloadable sample employment agreement in PDF format offers several advantages for businesses and employers considering their staffing options. First, a sample employment agreement provides a time-saving starting point for developing a solid compliance document that is specific to each employment relationship. With all of the employment laws and regulations at the local, state, and federal levels, creating a new, enforceable employment agreement from scratch can be time-consuming, confusing and prone to errors. That is why using a high quality employment agreement as a starting point is an efficient first-step in the process.
Second, a sample employment agreement in PDF format will ensure that each employment agreement contains all the terms required by law. For example, it will include all the terms that are required under applicable federal law, such as so-called "at will" language to clarify that the employee’s employment is voluntary and that the employee and the employer may terminate the employment relationship at any time, with or without cause, and with or without advance notice. Additionally, the sample employment agreement will enable employers to ensure that each agreement contains all the terms required under state law, such as the legal stationery requirements. These requirements vary significantly from state to state, but most state employment laws require that an employer provide certain minimum notice requirements to its employees, advising them of certain legal rights in writing.
Third, a downloadable employment agreement will allow for flexibility in customizing the terms of the employment agreement to meet the employer’s needs. Certain employers may require a non-compete clause to restrict employees from competing with the employer during and after employment. Similarly, employers may want to bar former employees from soliciting the employer’s customers for a period of time after leaving employment. Certain employers may also wish to limit an employees’ right to receive accrued but unused vacation time. There are many other examples of certain employer-doctorine that employers may wish to include in an employment agreement in order to protect their business. By downloading an employment agreement in PDF format, employers will be able to simply customize the appropriate sections to meet their business needs, without having to create an agreement from scratch.
Customizing Your Sample Employment Contract
Personalizing a sample employment agreement PDF to fit specific organizational or role needs may involve modifying aspects such as names, roles, jurisdictions, compensation elements, benefits, and responsibilities. Ensure that the personalized template is in compliance with local labor and employment laws, adjusting terminology for clarity and comprehensibility, and making certain that there are no gaps in sections such as confidentiality, termination, and dispute resolution . Be cautious with any substitutions you make in the standard text, as even minor changes can impact the scope of this important contract between an employer and employee. This should be considered a living document, and one that may be updated as employment law evolves. While personalizations to a sample employment agreement PDF may be necessary, keep key employment characteristics intact and collaborate with a trusted legal professional to enact contract modifications that will stand up to scrutiny in a court.
Common Mistakes to Avoid with Employment Contracts
Even the most experienced employers can encounter issues when drafting an employment agreement. Here are some of the most frequent pitfalls and how to rectify or prevent them:
Lacks a Clear Definition of Employment Terms
One of the primary functions of an employment agreement is to spell out the role the employee has within the company along with their responsibilities. If an employer does not define the position clearly enough, the agreement may be misinterpreted and be deemed as void.
Ambiguous Terminology
Using confusing phrases or terminologies that are unique to the business can cause unnecessary complications and cost to both the company and the employee. Overly complicated wording in employment agreements may later give rise to litigation to re-establish the intended meanings.
Excessive Restrictions
While all employment contracts carry certain restrictions with them, employers should never go overboard with non-compete clauses or non-solicitation agreements. It’s important to limit these restrictions to those strictly necessary to protect the interests of the company while still giving the employee a fair chance at obtaining future employment.
Failure to Address Remote Work
More people are working from home and changing jobs more often. Many employment contracts do not address what happens when a position requires more or less than required. For example, an employee may be working less hours than initially thought, so they renegotiate their salary. Conversely, they may be working more than expected hours, or more remotely, so they want a new hire notification requirement where they can provide notice of their intention to switch to freelance status or engage outside help.
No Annual Reviews
Employment agreements should be treated as a living document, open to annual review every year. On the anniversary date of signing the agreement, both parties should meet to discuss any relevant changes in terms and sign off on them. This exercise can avoid misunderstandings over the life of an employment agreement.
Where to Find Trusted Samples of Employment Contracts
Employers often seek ways to streamline their HR processes, and having access to readily available employment agreement samples can be a significant asset. The challenge, however, is not merely finding a variety of samples but ensuring those samples are legally sound. Fortunately, there are several trustworthy sources on the internet that employers can use for this task.
One of the most common places to start looking for employment contract samples is online legal libraries. Websites such as Rocket Lawyer and LawDepot offer templates for various employment agreements, and they frequently update their libraries to include current laws and regulations. Many of these websites allow users to customize their downloaded agreements to meet specific business needs, which is a great asset.
Another option is to visit the websites of law firms that specialize in labor and employment law. Many of them provide downloadable templates as part of their client services, and they strive to ensure their forms comply with the latest changes in the law.
Local or state bar associations frequently provide forms. State-based bar associations often have resources available to the public to assist with employment agreements. Employers can search for templates in their state on these bar association websites.
Some governmental agencies , like the U.S. Department of Labor and equivalent state departments, also provide employment contract templates. These government-sourced templates can be particularly useful for businesses that must adhere to industry-specific regulations which vary from state to state.
Another option includes professional organizations or chambers of commerce, which sometimes offer sample employment contracts. This can be an excellent place to begin when looking for a more niche or industry-specific employment contract template.
While there are a number of sources for employment agreement templates, it is crucial for employers not to merely download a free sample and use it without any modifications. Most employment contracts will require personalization to address specific business needs or legal requirements. Moreover, employment laws and regulations vary by state. It is always recommended to consult a qualified attorney for guidance on creating customized employment agreements that are enforceable and comply with local and state laws.