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Understanding Your Employment Contract

By
James Parker
/
July 3, 2022
Last reviewed by
Boruch Burnham, Esq.
/
March 16, 2023

When an applicant is offered a job, they may have to fill out a number of forms. Some of these forms are for establishing payroll, direct deposit instructions, tax information, or other necessary paperwork for starting work at a new job. Employees may also generally need to sign an employment contract.

An employment contract is a legally binding document that spells out all the job details, including the job's official title and the duties and responsibilities expected of the employee. In this guide, AAL will offer some insights into some of the critical information, terms, and clauses of an employment contract.

1. Position

One of the first things that employment contracts will include is the title of the position being filled and a description of the duties it entails. Jobs can be permanent, temporary, part-time, or full-time. If the employment contract states that the position is “at-will,” then the employer is indicating that employment with the company can be terminated without advance notice for virtually any reason. If the employment is not at will, then the employee will be given terms governing the conditions under which the employment relationship may be terminated for cause.

In addition to describing the nature of the employment, the employment contract may also contain an exclusivity clause, which generally prohibits the employee from contracting with another employer to provide similar services while still employed by their current employer.

2. Expectations and responsibilities

The expectations and responsibilities of the employment contract will include several clauses requiring compliance with the employer’s policies and procedures for employee conduct and overall performance expectations specific to the particular position. 

Confidentiality agreements, communication standards, or non-compete agreements are often also included in this section. A confidentiality agreement, also known as a non-disclosure agreement, prohibits employees from disclosing information their employer has designated as confidential. Breach of this agreement may result in adverse consequences, including termination and legal action.

Communication standards and security protocols can vary depending on the nature of an employee’s work and may include restrictions on the use of personal computers or mobile devices or may describe the rules of employee activity on social media platforms, email, or other areas of interpersonal interactions with clients and within the workplace.

Non-compete agreements may also be included to restrict the employee from working for another company or transacting business in the same industry and geographic locations as their employer for a set period.

3. Length of the agreement

Employment contracts will often have clauses addressing the employee’s work schedule, including the days and hours that an employee is expected to work in a given workweek and any holidays or company days off.

Another clause will cover the duration of employment. In some cases, an employment contract will state that the term of employment is ongoing with no set end point, while other contracts may contain a specific period with options to extend or renew the contract.

4. Compensation

Employment contracts will also address employee compensation. It is important to note that employers are required to comply with federal and state laws regarding minimum wage and overtime compensation, regardless if they are included in the contract or if the contract provides for lower rates than those required by law.

5. Benefits

The benefits section of an employment contract details the various forms of compensation and benefits for employees in addition to the base wage. These could include contributions to cafeteria plans, IRAs, 401(k) retirement plans, or health insurance premiums. Additional benefits can include paid time off, sick days, or ESOPs. Health insurance benefits can also provide the option to cover family members in those benefit plans. However, some employers, such as governmental employers or those with a certain threshold number of employees, must provide some of these benefits to the extent required by state or law.

6. Termination

The termination provisions of an employment contract will describe the reasons for which an employee can be fired, although most employment contracts in the U.S. are at-will, meaning that an employee can be terminated without cause. 

In general, employment contracts end with the employee’s resignation or termination. Resignations can be classified as voluntary or involuntary. In general, when workers voluntarily resign, they will only be compensated for wages until the last day they work unless otherwise agreed upon by the employer and employee. However, they may be entitled to bonuses or commissions that were conditioned on future events that end up happening after the employment relationship ended. For example, if an employee’s contract provides that they will get 15% commissions from all orders placed by any new clients they sign on for two years from the date they sign up the client, then even if they are terminated within three months of signing the new client, they can still be entitled to those commissions for orders placed throughout the two-year period. 

An involuntary resignation (also referred to as “constructive dismissal”) occurs when an employee is placed in a position where they feel they have no choice but to resign, such as being subjected to untenable working conditions, a reduction in pay or benefits, or a significant adverse change in job responsibilities. Unfortunately, in order to avoid having to pay severance or risk being sued for terminating someone for a discriminatory reason, unscrupulous employers will often try to force employees to resign by demoting them, reducing their pay without cause, or generally creating such an unpleasant work environment that the employer feels compelled to quit. If the resigning employee can prove an involuntary dismissal, they may pursue a claim against their former employer to get any severance or other benefits they would have been entitled to if they were terminated, and also penalties in some cases. 

Terminations may be classified either as for cause or without cause. For-cause termination clauses describe the actions or behaviors that can lead to an employee losing their job, such as employee misconduct, repeated absences, or criminal convictions. Employees that are terminated for cause will often not be entitled to severance pay. Termination clauses may also include contingencies in the event that an employee dies or becomes disabled while employed at the company.

7. Breach of contract

If you believe your employment contract has been breached, you may be able to pursue legal remedies to seek justice for the losses you have suffered, including compensation for unpaid wages, restoration of your position, any severance you were denied, and even penalties in some cases.

A skilled attorney with extensive experience in employment law can zealously advocate on your behalf in order to get you the best possible outcome for your case. Using their legal expertise, trial tactics, and expert witnesses, your attorney will be able to gather evidence of your mistreatment and present that information in the most compelling way for your case.

Through AAL, you can find a number of dedicated attorneys with years of experience practicing Employment Law attorneys who can help you seek the justice that you deserve.

 

 

*Disclaimer: Attorney At Law does not represent all lawyers in all states. There may be differences of opinion. It’s always advisable to consult with an attorney when in a legal situation.

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