Define Contract of Employment

Employment contract

Neither state nor federal law provides employees with the right to keep their job. In fact, the law actually provides that an employer may fire an employee at any time and for any reason, except for a few discriminatory reasons such as race, gender, religion, age and disability. So, if you want a guaranteed job, you need to negotiate an employment contract with your employer. Without an employment contract you are simply an employee who can be fired at the will of your employer.

Function

The purpose of an employment contract is most often to provide a guaranteed term of employment. The employment contract fills in a gap left by state and federal law. Most employment contracts provide that an employer may not fire the employee within the first one to five years of employment. This protects the employer by keeping that job filled by capable hands during the contract term.

Types

Employment contracts vary according to the type of job, type of employer and the relative negotiating power of the employee. There are no specific legal requirements regarding employment contracts, so the details are simply a product of negotiation. Most often, employment contracts include terms that govern compensation, benefits, term of employment, procedure for termination and a guaranteed employment term. Most employment contracts also include non-compete clauses which prevent the employee from starting or working for a competing company.

Consideration

An employment contract is not enforceable unless both the employer and the employee provide some "consideration" for the contract. Consideration is a legal term that means something of value bargained for. Consideration is typically not a problem since the employer receives the value of the employee's services, and the employee receives the right to compensation. Importantly, consideration also exists when a current employee signs an employment contract because the consideration is the employee's right to keep the job. So, both new and existing employees can sign valid employment contracts.

Geography

State law controls the enforcement and interpretation of employment contracts. This means the law can vary depending on what state you live in, though in general most state courts apply the same general contract laws to the enforcement and interpretation of employment contracts. The state law in the state in which you sign the contract will be the defining guideline, unless you sign the contract in one state but then perform all your work in the other state, in which case the law for the state in which you perform all the work will probably apply.

Identification

An employment contract will typically be a written, signed agreement between the employer and the employee. An employment contract may exist even in the absence of a written agreement, however. An employment contract might be based on a verbal promise or on an implied agreement based on a mutual, but unstated, understanding between the employer and employee.

References

• Nolo: Written Employment Contract Pros and Cons
• "Your Rights in the Workplace"; Barbara Kate Repa; 2007