Why Would You Need an Employment Contract?
The interviewing process is over, negotiations are done and it is time for the employment offer. Suddenly the employer pulls out a contract. Why the mistrust? Should the employee feel insulted? Actually, an employment contract isn't an indication of mistrust. It is a common negotiating tool that allows both parties to protect their interests and enter into a mutually beneficial relationship.
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Forming a Legal Contract
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A contract, in general, is made to protect a person, class of people or process. The parties to a legal contract are willing, able participants who understand and intend to enter into the agreement. One party will make an offer with consideration (like employment) and the other will respond to the offer with an acceptance--a contract is formed.
Purpose of the Employment Contract
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Millions of individuals are hired by companies without a formal employment contract. Why, then, is a contract sometimes necessary? Some employees are privy to sensitive information that can make or break a company; information like trade secrets and customer lists are dangerous in the hands of the competitor.
On the flip side, an employee is made promises during the hiring process; bonuses and benefits are often part of the process that lures an employee from one company to another. Both parties desire long-term protection and get it in the form of an employment contract.
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Types of Employment Contracts
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Not every employment contract is a 10-page document requiring legal assistance. Contracts are sometimes simple. For example, the employment application often becomes an agreement once hired (depending on the language) and lying on the application may represent a breach and terminate employment. A confidentiality agreement and non-compete agreement are also forms of employment contracts. An employment contract can be a brief statement signed by all employees as a condition of employment or a long, detailed offer to one particular employee.
What to Look for In an Employment Contract
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Lawyers recommend avoiding unilateral employment contracts that strongly benefit one side over another. These types of contracts rarely hold up in court, but having the funds to do battle in court can stifle an employee's options. Employees are advised to look for the mutually beneficial contract. Consider what the company stands to lose, what the employee stands to lose and decide if the contract protects both interests without unfairly favoring one side. In addition, an employment contract should address termination of employment, be personalized for the individual employee, be overseen by a lawyer and address dispute resolution.
Who Should Sign an Employment Contract
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Down to the question at hand---why would you need an employment contract? It stands to reason why a company would desire a contract; an employee can fatally harm a company by walking away with secrets.
An employee may opt for an employment contract to secure more money. Willingness to sign an agreement shows a desire for a long-term relationship and that trust often means more money up front. Employment contracts also secure promises made during the hiring process.
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