What Makes an Employment Contract Binding?

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Employment contracts are legal documents that some employers require their workers to sign before allowing them to begin work. Employment contracts include confidentiality agreements, noncompetition agreements and exclusivity agreements. In each case, the employment contract needs to meet several guidelines to be legally binding for both parties.

Mutual Consent

One of the essential components in any contract is a notice of mutual consent. For an employment contract to be binding, it must state that both parties agree to it as written. Signatures at the end of the document, and initials throughout its riders and clauses, indicate mutual consent. When contracts lack signatures, it's impossible to know if an employee was made aware of the contract terms. Such contracts are impossible to enforce.

No Illegal Terms

Employment contracts that include illegal terms are not binding. This includes terms specifically prohibited by law for employment contracts and more general terms that are impossible for either party to honor without breaking the law. For example, an employment contract that states that an employee will earn a wage that is below the legal minimum wage is not binding because it requires the employer to break labor laws. A contract that requires an employee to perform an illegal service is likewise not binding for either party.

Dates

Employment contracts need dates to specify the period of time they cover. Contracts without end dates may use only the date of signing as an indication of the date on which the contract becomes binding. Others will state a specific time period, from one date to another, throughout which the contract is valid. Contracts can also specify their period of validity for terms such as the duration of employment or until a specific work project is completed.

No Newer Contracts

Finally, an employment contract is only binding until another contract supersedes it. New contracts may specifically reference the older employment contracts they replace, but this is not always the case. Here again, dates are important in determining which contract is binding when multiple contracts are present. Because both parties must agree to the new contract, it's especially important for both employers and workers to fully understand the terms of a binding employment contract before signing.

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