Law on Employment Contracts
An employment contract is a special type of contract that is generally governed by basic contract law with only a few nuances. Essentially, an employment contract is signed between an employee and an employer. The contract details the work to be performed by the employee, the duties to which the employee is responsible, and the compensation and duties owed to the employee by the employer. So long as no defenses to the contract exist, the contract will generally be upheld in a court of law. Usually, unless the contract states otherwise, an employment contract requires the employer to have "cause" to fire an employee. In other words, an employment contract generally does not exist between "at-will" employees and employers.
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Mutual Assent
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Employment contracts should have the basic provisions that other contracts have. There should be some section evidencing that the parties both agree to the contract; a term called "mutual assent." This can be a simple statement saying to effect: "Now therefore, the parties hereby agree." This statement binds the parties to the contract and, absent other evidence to the contrary, indicates the parties read and understood the terms and agree to follow them.
Contract Cannot Contradict Labor Laws
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Despite a finding that mutual assent exists, you cannot contract away the rights bestowed by labor laws in an employment contract. For instance,under the Fair Labor Standards Act, all employees who work overtime are entitled to be compensated for that overtime work. An employment contract cannot waive those rights. There cannot be a provision that states "Employee agrees that no overtime pay will be owed if the Employee works overtime." Such a provision would not be upheld in court.
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Non-Compete Covenants
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Many employment contracts contain covenants not to compete with the employer should the employee leave the business. These will generally be upheld if the provision is reasonable. What is reasonable depends on the type of business and the type of employment. The non-compete agreement must be specific as to the duration and the types of activities that are prohibited. A non-compete agreement that is too overbearing, such as requiring the employee to not compete for a duration of over five years, will likely not be upheld.
Contract Defenses Apply
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Employment contracts are subject to the same defenses that are available under the law of other contracts. Therefore, an employment contract will be void if the person entering the contract did not have the capacity to enter the contract (such as if the person was under age or otherwise did not understand what they were signing). Other defenses include unconscionability, a term that means that the contract as written is void as against public policy. Forcing someone to work for free, for example, would be unconscionable.
General Contract Principles Apply
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Basically an employment contract is simply a type of contract. A contract is simply a legally enforceable promise for which the law provides a remedy. So long as no defenses exist and the parties mutually agreed to the contract, it will be enforceable in court. Therefore, if a party breaches a duty in the contract, the other party is entitled to sue and recover damages that arise from that breach.
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