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What Is A Contract of Employment

A contract of employment is an agreement between an employer and employee that outlines the terms and conditions of employment, including job duties, compensation, and termination protocols. It is important for clarifying roles, protecting company information, and providing job security. There are various types of employment contracts, including at-will, written, oral, and implied oral contracts, each serving different purposes depending on the employment situation.

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18 views9 pages

What Is A Contract of Employment

A contract of employment is an agreement between an employer and employee that outlines the terms and conditions of employment, including job duties, compensation, and termination protocols. It is important for clarifying roles, protecting company information, and providing job security. There are various types of employment contracts, including at-will, written, oral, and implied oral contracts, each serving different purposes depending on the employment situation.

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emmanuella.etop-essien
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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GEC517 MODULE ONE

What Is a Contract of Employment?

A contract of employment (or employment contract) is an agreement or term


of hire that is extended from an employer to an employee to set the terms and
conditions of their employment. While usually a written document, these
agreements can also be verbal. The terms of the employment contract may
include the following:

 Commencement date
 Job title and description
 Duration of employment
 Employee compensation and benefits
 Employer’s rules, regulations, policies, and practices
 Confidentiality agreement
 Non-compete clause
 Dispute resolvement
 Termination of Employment
 Any other general provisions

Why Is an Employment
Contract Important?
A well-written employment contract can be beneficial for both an employer
and employee. It will:

 Clarify job duties.


 Spell out the rights of each party.
 Give the employee better job security.
 Protect company information, like special techniques and trade secrets.

When Should You Ask for an


Employment Contract?
Many jobs will not require a candidate to sign an employment contract before
employment. The presence of a contract usually means there are unusual
circumstances involved in the employment, such as:

 When an employee would be difficult to replace due to their experience.


 When an employee knows confidential information.
 When you don’t want an employee to start working for a competitor.

How Do You Write Up a


Contract of Employment?
Employment contracts should cover all aspects of an employee-employer
relationship. After determining the position, you are hiring for and the needs
you have to meet for the company, an employment contract should include
the following sections.
Job Description
Usually brief, this job description will give the job title the employee is being
hired for and a description of their duties. This provides an opportunity for both
the employee and employer to clarify and negotiate on responsibilities.

Salary/Wage
Determine whether the employee will be salaried or on an hourly wage. You’ll
also want to establish the frequency of when they will be paid.

The Relationship between Parties


There are three kinds of employee-employer relationships that can be made in
an employment contract.

 At-Will Employment. Either party can end the employment relationship


with or without notice at any time and for any reason.
 Binding Authority. The employee cannot bind the employer to contracts or
commitments without their written consent.
 No Exclusivity. The agreement made in the contract is not exclusive,
meaning the employee and employer are free to enter into similar
agreements.

Duration of Employment
The starting day and time should be on the contract, as well as the type of
employment (permanent, contract full-time, part-time, etc.). The location of
employment should also be listed, as well as a contingency for an emergency
arising and the employee being unable to work from that location.

If there is an end date to the employment, that should be shown in the


contract, as well as any opportunities for extension.

Benefits
All benefits including vacation days, holidays, and insurance plans should be
outlined in the contract. If there is an opportunity for advancement and salary
raises, that should also be made clear.

Grounds for Early Termination


Even if a contract includes a fixed term of employment, the employee can still
be terminated at the will of the employer or terminate the employment
themselves. In this section, the financial consequences for early termination
should be discussed, including any qualification for severance pay. There are
five types of termination that involve different protocols.

Resignation

If an employee resigns, they usually agree to receive their salary through the
last day they worked. They could also be entitled to a guaranteed bonus or
commissions that would come after their end date.

“Good Reason” Resignation


In the case that an employer is not able to pay an employee’s compensation
or there is a change in corporate structure, employees may be subject to
“good reason” termination. Most of the time, this form of resignation means
the employer will have to give some form of compensation to the employee.

Termination “For Cause”

“For cause” termination occurs when an employer ends the contract


prematurely due to actions performed by the employee. These causes should
be outlined in the contract and could include circumstances like intentional
misconduct, breach of contract, job abandonment, or a felony charge. The
employee will usually only get their salary through the day they were
terminated and receive no further compensation.

Termination “Without Cause”

If an employer terminates the employee for a reason that’s not included in the
“for cause” section, it’s considered termination “without cause.” As with
termination “for cause,” this type will result in receiving their wages up to the
day of their termination.

Death and Disability

If the employee dies or becomes disabled while employed, the employer will
outline what compensation will fall to the employee’s estate.

Confidentiality
Many contracts will outline what can and can’t be said about the company’s
practices as a way to protect trade secrets, business information, and
intellectual property.
Dispute Resolution
In the event of a contract dispute, the contract will outline how the two parties
can come to an agreement. This will explain the arbitration process and how
an attorney will be paid.

Who Needs an Employment


Contract?
Any employer, human resource manager, and recruitment officer should use
an employment contract with new hires, recruits, and current employees who
are changing job positions. An employment contract clarifies the expectations
of and gives legal protection to both parties.

There are a few specific instances where employment contracts (and their
negotiated terms) are especially important:

 Senior positions where the contracts are generally reviewed and negotiated
by an employer-side attorney and an employee-side attorney.
 Union-represented employees for both public sector unions (teachers’
unions, etc.) and the private sector unions (manufacturing, etc.).

Does an Employment Contract


Need to Be in Writing?
Generally an employment contract should be in writing, but there are other
various types of employment contracts. For an employer, a written contract
creates organization and structure in the hiring process and working
environment. For employees, a written contract provides a sense of stability
and security.

There are some disadvantages to a written contract. For either party, it may
limit flexibility, affect negotiations, and implies a promise of honesty and
fairness that may or may not actually be present.

Types of Employment
Contracts
Types of employment contracts refer to the different contract arrangements an
employer can establish when hiring an employee. There are four main types
of employment contracts employers use when hiring and setting the terms of
employment with a new employee:

1. At-Will Employment Contracts


2. Written Employment Contracts
3. Oral Employment Contracts
4. Implied Oral Contracts

The type of employment contract an employer chooses depends on what


works best for the employer and their employment situation.

At-Will Employment Contracts


 Most common type of employment contract in the U.S.
 At-will contracts mean employees can be fired or quit at any time, without
notice.
 Employers cannot fire employees for protected reasons such as protected
classes, discrimination, or retaliation.
 At-will employment does not prevent employees from enforcing the terms of
their contract.

Written Employment Contracts


 More detailed than at-will contracts.
 Details specific employee and employer obligations
 Written employment contracts generally run for a specified time decided
upon by the employer.
 Written employment contracts outline the terms of termination, and
employees cannot be terminated unless they violate their employment
contract terms.

Oral Employment Contracts


 Employment can either be at-will or based on specified terms.
 These contracts are legally binding but present difficulties if there is a
breach of contract as they are difficult to prove.
 If the contract is breached, the oral employment contract is enforced based
on any available documentation, surrounding circumstances, evidence of
the agreement, and the reliance of the employee and employer.

Implied Oral Contracts


 These contracts have no formal documentation and can combine both oral
and written statements.
 Even if an employee believes they were not an at-will employee because of
an implied oral contract if they have signed an at-will agreement they are
under the conditions of an at-will employee.
 When considering implied oral contracts, courts take into consideration
employee performance within the company and how long the employee
worked for the company in question.

The type of employment contract you need depends on the type of work you
need from any employee and how you want to structure your employee
contracts. Make sure you take the necessary steps to hire employees and
understand the implications of each type of employment contract.

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