Understanding Your Employment Contract

By James Parker
July 3, 2022

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, tax information, or other necessary paperwork for beginning work at a new job. Employees may also need to sign an employment contract.

An employment contract is a legally binding document that describes any and all terms of employment at the employee’s company. This includes formal descriptions of the position, as well as what is expected of the employee in that position. In this guide, AAL will offer some insights into some of the important information contained within an employment contract. 

1. Position

One of the first things that many employment contracts will mention is the position within the company that is being filled. This may include an official name for the position as well as what kind of position it is. 

Positions can be permanent, temporary, contractually part-time, or full-time. If the employment contract states that the position is “at-will,” then the employer is stating 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 around when and how the employment relationship may end.

In addition to the description of the nature of the employment, the employment contract will also state how exclusive the employment is. If an employment is exclusive, then the employee may not enter into other employment contracts while they’re under contract with the current employer.

2.  Expectations and requirements

The expectations and requirements section of an employment contract includes a number of agreements pertaining to company security as well as descriptions of employee conduct as well as some possible performance standards. This section of an employment contract is where confidentiality agreements, communication standards, or noncompetition agreements may be found. 

A confidentiality agreement, also known sometimes as a non-disclosure agreement, requires an employee to not disclose information that the company has decided is confidential. Breach of this agreement may result in consequences including termination and legal action.

Communication standards can vary depending on the nature of an employee’s work. It may include information about cell phone policies or may describe the rules of employee activity on social media platforms, email, or other areas of person to person interactions.

A noncompetition agreement may also be included. Noncompetition agreements restrict the employee from working for another company in the same sector for a certain period in certain regions. 

3.  Length of the agreement

Employment contracts will have two major sections devoted to time. One section will define the schedule of the employee. This will include the days and hours that an employee is expected to work in a given workweek as well as any holidays or company days off that are observed. 

The other section relating to time covers 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 define minimum durations with the option to extend.

4. Compensation

The compensation section of the employment contract includes discussions of any compensation that an employee may receive. This can include information about salary, hourly wages, or commissions. 

Not only will the employment contract discuss the minimum wage the employee will earn per hour. As a supplement or alternative, there may be a salary or commission fee enumerated in the contract. In addition to itemizing the base wages earned, the contract may also specify how the company handles raises, bonuses, or overtime compensation.

5.  Benefits

The benefits section of an employment contract explains the various non-monetary compensation options that are available to employees. These could range from offering a cafeteria plan of coverage options or simple health insurance policies. Additional benefits offered can include paid time off, sick days, or retirement benefits such as 401(k)s, IRAs, or ESOPs.

In addition to showing what plans are on offer, benefits sections can include conditions such as enrollment periods, restrictions, or options to include family members in those benefit plans.

6.  Termination

The termination provisions of an employment contract demonstrate how the contract may be terminated. Even under a fixed term of employment, there may be provisions for terminating the contract. In general, employers can either terminate the contract through resignation or termination.

Resignation can be sorted into two groups: general resignation and good reason resignation. In general, resignation clauses will allow employees to receive their wages until the last day that they work and may be entitled to bonuses or commissions that trigger after the end date of the work. Good reason resignation occurs when an employer cannot pay or a change in corporate structure requires the employee to resign. Under good reason resignation, the employer will often still compensate the employee in some way.

Termination is similarly branched into two categories: for cause and without cause. For cause termination clauses will describe the actions or behaviors that can lead to an employee losing their job. These causes can include policy violations, employee misconduct, repeated absences, or criminal charges. When an employee is terminated for cause, then they will often not be compensated beyond the day that they are terminated.

A termination without cause functions largely the same as termination with cause. The only difference is that the employer does not need to give any reason for the termination. 

Termination sections may also include contingencies in the event that an employee dies or is disabled while employed at the company. 

7.  Breach of contract

If you have suffered a breach of your employment contract, you may be able to file a lawsuit in order to seek justice for the losses that you have suffered. By demonstrating the clauses of your contract that were violated by your employer, you can negotiate unpaid wages, restoration of your position, or the severance you were denied. The best way to prevail in your lawsuit is with an Employment Law attorney. 

An experienced Employment Law attorney 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 Employment Law attorney will be able to gather evidence of your mistreatment and present that information in the most compelling way for your case.

AAL has a number of experienced and dedicated 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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