An employee contract, often known as an employment contract, is a required document for organizations across a wide range of industries. They assist employees in understanding the standards they must fulfill while working for the organization and assist employers in reducing employment liability concerns. There are a few things you need to understand before you write an employment contract. and as an employee, you need to understand how an employment contract lawyer can help when the need arises. We’ll explain these and more in this article, including a template of what an employment contract looks like.
What Is An Employee Contract?
Employee contracts, also known as employment agreements, contracts of employment, employment contracts, and job contracts, are written legal papers that explain the employee’s and his or her employer’s binding obligations. This document outlines both parties’ rights, responsibilities, and obligations. It is often utilized for recruiting high-level managers, freelancers, and short-term contract employees, and it covers both W-2 and 1099 contract employees.
They are sometimes formal written documents that both sides sign. An employee contract is frequently indicated by verbal remarks or acts, employee handbooks, or regulations implemented while the employee is working for the firm. In certain areas, just stating, “You’ll stay here as long as you sell beyond budget,” constitutes a legally binding employee contract.
Employment contracts are most commonly used to demonstrate that the employer’s authority to fire an employee is limited.
What Does an Employee Contract Contain?
Employee contracts fluctuate depending on whether the employee works in the public or private sector. It usually includes:
- Duration of employment
- Responsibilities of employees
- Perks like a 401K plan or health insurance
- Policies on sick days and vacation
- Termination Reasons
- Agreements not to compete
- Nondisclosure contracts
- Ownership contracts
- Assignment provisions (patents claimed by the employee during his or her employment belong to the company)
- Ways of resolving disputes
- Commissions
- Bonuses
- Profit distribution
- Options on stock
The contract also specifies whether the employee would be paid on a W-2 or a 1099 basis.
What Shouldn’t Be in an Employee Contract?
While the job duration can be included in the contract, this is not suggested because it may limit your ability to terminate the employee even in an employment-at-will state. When you include a time range in a contract, you create an implicit contract. Even if the employee is terminated, you will be required to pay him or her for the entire tenure.
You might not wish to provide any grounds for termination. Even in an employment-at-will state, this can limit your rights. If you are sued for wrongful termination, the court may take this to suggest that an employee can only be fired for good reason, such as behavioral problems.
Compensation and Benefits
An employee contract should include provisions for pay. This will determine how much they are paid and whether it is weekly, bimonthly, or monthly. Bonus amounts should be mentioned, as well as the conditions under which they are obtained. If there are any health insurance benefits, they should also be included. Paid time off, whether for sick leave, vacation, or the death of a family member, should also be specified. All other benefits, such as life insurance or a 401K, should be mentioned as well.
Employee Contract Benefits
One of the most significant benefits of employee contracts is the opportunity to retain your best staff. You might, for example, limit the reasons someone can leave the company.
Another benefit is the option to compel your staff to retain your trade secrets themselves. A confidentiality agreement, as well as a non-compete agreement, would cover this.
An employee contract can provide you with more control over how your employees perform their duties. If you specify clear requirements, you may find it easier to reprimand or fire an employee who fails to achieve those standards.
Employee Contract Drawbacks
A good employee may be widely sought after by organizations offering a variety of employee contracts, so you must provide the finest deal possible. Note that an employee contract applies to you as well – you have specific obligations. If the employee is not doing well or your company’s requirements change, you may need to renegotiate the contract.
Another disadvantage is that you are obliged to a “covenant of good faith and fair dealing” after you sign the contract. That means you must operate honestly and fairly with the employee. If you breach this covenant, you have not only broken the contract, but you have also behaved in bad faith and violated your legal duties, which may result in additional legal penalties.
How Do You Write An Employee Contract?
A few components are shared by all employment contracts. Follow these steps to write a good employee contract.
#1. Include your job title
Give your employment contract a title. This could be anything like an “employment agreement” or “employment contract with [business name]”.
#2. Identify the party
Determine who is involved in the employment contract. This should be followed by providing basic information about both parties as well as the name of the company where the employment will be held.
#3. Include the terms and conditions
You should include the position’s basic terms and circumstances, which are frequently outlined by federal, state, and municipal governments. This includes items like vacation compensation, severance money, and working hours. You should also discuss corporate policies about vacation days, sick days, benefits, dress codes, and so on.
#4. Explain your job duties
To avoid surprises on either end, your employment contract should explicitly outline the job’s duties and obligations. For example, if you’re looking for a barista, you could specify that the job requires client engagement, customer service, coffee-making, cleaning coffee stations, managing internet orders, and so on.
#5. Give the compensation information
In your contract, you should clearly and directly specify the pay paid for the job. You should give information on how the employee will be compensated (hourly/weekly/salary or commission). You should also clarify how overtime will be calculated based on the employee’s exemption or non-exemption status. Additional specifics might include holiday pay, paid time off, payment mechanism, bonuses, and so on.
#6. Explain the contract terms
Consider including additional agreement conditions in your contract. Non-solicitation, privacy, probationary, failsafe, and non-compete terms are all common in employment contracts. The non-solicitation provision prohibits employees from recruiting clients or leaving the organization. The privacy clause establishes privacy standards for employer-issued equipment and email. A probationary provision gives the employer the power to fire an employee without cause after a specified length of time. The failsafe clause ensures that the employer will not provide anything less than minimum wage. Employees are prohibited from competing with their employers for a set period of time under the non-compete clause.
#7. Contact an attorney
It is recommended that you consult an employment lawyer who is knowledgeable about local, state, and national employment laws, rights, and standards before sending out your employment contract to ensure that it fulfills defined requirements.
#8. Provide your employee with the contract
You should send your employee your employment contract. The employee will then read and negotiate or sign the agreement, making it legally binding.
Employment Contract Template
Here’s an employment contract template that you may use to draft your own:
This employment contract is entered into between [Business Name] and [Employee Name] of [City, State] on [day] in the year [year]. This document is a contract of employment between these parties and is regulated by the laws of [state or district].
THE PARTIES AGREE TO THE FOLLOWING TERMS AND CONDITIONS IN CONNECTION WITH THIS EMPLOYMENT CONTRACT:
1. Workplace
The employee undertakes to perform the obligations and tasks outlined in this contract and in their job description. In addition, the employee commits to following all corporate regulations and procedures.
2. Placement
It is the responsibility of [position] to carry out all important job functions and obligations. [Company Name] may add additional duties within the scope of the employee’s employment as needed.
3. Reimbursement
Before relevant taxes, the employee will be paid [dollar amount] [per hour/per year].
4. Advantages
The employer provides the following benefits [list any other benefits]. These benefits are available [immediately/after the probationary term].
5. Paid vacation
After the probationary term, [Employee name] is given the following vacation time: [length of vacation time], [length of sick time], and [bereavement time].
6. Discontinuation
With adequate written notice, either party may end our working partnership for any reason.
Who Is An Employee Contract Lawyer?
An employee contract lawyer is a legal advisor who assists clients with the creation, review, or negotiation of an employment contract. When you accept a new job, you may be required to sign an employment contract. Although it is not always essential, many businesses require the agreements.
Employment contracts often include provisions for sick leave, benefits, and salary. Businesses might utilize employment contracts to incorporate tempting employment terms in order to attract new employees. To ensure loyalty and longevity, they are also common in high-paying job titles such as Senior Directors and CEOs.
If you need to sign an employment contract, it is always a good idea to consult with an employment contract lawyer. The details of these agreements can be complicated, and if you don’t receive the correct advice, you could end up stuck in a position you don’t want.
What Is the Role of an Employee Contract Lawyer?
Employment contract lawyers can assist you if you receive a job offer letter that requires you to sign an employment agreement. Because these contracts bind you to agreements involving critical aspects of your job, such as your income and perks, seeking assistance is always a good idea and will likely result in a good return on your investment.
Here are some instances of employment contract provisions and how employment lawyers might assist:
#1. Remuneration
Maybe the most significant aspect of an employment contract is information about your pay. This section of the agreement specifies how and when you will be paid.
In most employment contract agreements, two types of compensation are most common: hourly pay and salary pay.
Hourly pay, as the name implies, is paid by the hour at a defined rate determined at the time of hire. Salaried pay means that you will be paid a fixed, predetermined amount for any work completed during a pay period.
This section of the contract may also include details on how much raises are, how they are computed, and how they are communicated. If you want to get regular raises, this section of the contract must provide the information.
If you anticipate receiving overtime or holiday pay, give that information as well.
Employment contract lawyers can assist you in understanding how the pay clauses in your contract affect you. They can also help you negotiate better pay and other aspects of your contract’s compensation.
#2. Sick Leave and Vacation
Vacation and sick leave are critical components of employment that define how well your professional and personal lives are balanced. You’re more likely to have the energy you need in your personal life if you push for a healthy work/life balance.
Sick time ensures that you have enough hours each year to cover the time you are unable to come to work due to illness.
Vacation time ensures that when you need time to recuperate, you do not lose your salary because you are absent from work. Time off is just as important as time on the clock and has a significant impact on job productivity and satisfaction.
If your employment contract does not include provisions for vacation or sick leave, an employment lawyer can help you push for them to be included. If the number of hours offered is insufficient, they can also negotiate more hours per year for you.
#3. Benefits
The best workplaces care about and want to take care of their employees. Benefits are a fantastic way for employers to ensure that their employees are in good health.
Some of the advantages that may be included in an employment contract are as follows:
- Health coverage
- Dental advantages
- Eye protection
- More time off
- Leave for family reasons
- Disability compensation
- Compensation for workers
- Payments on student loans
- Tuition assistance
Contract lawyers ensure that the conditions governing these areas are legal and beneficial to their clients. If necessary, they can also negotiate improved conditions in these areas.
#4. Requirements Following Termination
Employers may have expectations of former employees indicated in the employment agreement when employment is terminated. These post-termination requirements are legally obligatory, thus failure to comply could result in serious legal consequences.
A severance agreement states that if your employment is terminated, you may be entitled to a lump-sum payment. If an employer chooses to fire an employee, this is designed to shield them from being sued for wrongful termination.
If this type of language is contained in your contract, you will be unable to sue if you believe you were wrongfully terminated. Employers, on the other hand, will usually reimburse you in cash.
A non-compete agreement states that you will not be able to work for another company in the same industry as your prior one for a specified period of time.
These provisions are intended to keep businesses from losing good staff to competitors. It also ensures that prior employees do not share their knowledge with competitors.
What is The Difference Between An Employment Agreement And An Employee Contract?
The main difference between an employment agreement and a contract is that a contract is legally enforceable, but an agreement is not always enforceable.
What Are The 4 Types Of Contracts?
The 4 main types of contracts are employment contracts, sales contracts, lease contracts, and business contracts.
What Are The 4 Types Of Employment Contracts?
The 4 types of employment contracts are:
- Full-time employment contracts.
- Part-time employment contracts.
- Fixed-term contracts.
- Casual contracts.
What Are The 7 Requirements of A Contract?
The 7 requirements of a contract are offer, acceptance, consideration, intention to create legal relations, authority and capacity, and certainty
In Conclusion,
Employment contracts are commonplace in practically every industry. As an employer, the employment contract allows you to properly convey your expectations to prospective employees. It also offers you with legal protection and a document to refer to if an employee files a claim against your company.
Contracts help employees define the nature of their job and provide a point of reference for the terms of that employment. They can also turn to the contract for help if they believe their task has gone above and beyond what was originally agreed upon.
Related Articles
- HOW TO CALL OUT OF WORK: Requesting for Leave of Absence
- PAID TIME OFF POLICY: Best Practices and Examples
- CONTRACT EMPLOYMENT: Definition, Guide, Merits and Demerits
- PTO POLICY: A Step-by-Step Guide for Creating a PTO
- UNLIMITED VACATION: Definition, Policy and How It Works
- Paid Maternity Leave: Meaning And How To Get One
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