Employment Contracts 101: Signed, Sealed, Delivered... I’m Yours!
Congratulations! You’ve received a job offer and plan to accept employment at the company of your dreams – OR maybe you are an employer who, after reading through dozens of applications and conducting tiresome interviews, finally found the right person to do the job. Whatever the case, you have come to that final stage in the hiring process: making the employer-employee relationship official. One way to do this is by signing an employment contract.
EMPLOYMENT CONTRACTS: WHAT IS IT?
An employment contract creates a contractual relationship between the company (employer) and the worker (employee) – it legally binds them to carry out certain responsibilities. Not only that, both the company and the worker can refer to the contract to understand their respective expectations and rights in the relationship. There are two different types of employment contracts: an “at will” or “for cause” agreement. If the company or worker can end the relationship at any time for any reason, so as long as there’s no discrimination, then there is an “at will” agreement. If the relationship can only end for specific reasons laid out in the agreement then there is a “for cause” agreement. In Massachusetts, and most other states, an agreement will be considered an “at will” agreement unless the contract specifically describes otherwise. In either case, a well drafted employment contract is a great tool for all involved.
The rights and duties are spelled out through the contract’s terms and conditions – elements of the agreement that provide a detailed description of various things such as how the worker will be paid, duration of employment, any benefits (health, insurance, etc.), confidentiality statements, general duties, and more depending on the relationship. While such a contract can be created through spoken communication or inferred from the conduct between the employer/employee, normally an employment contract will be in writing if the relationship is complex. Having the agreement in writing will limit any confusion as to what each party - the worker and the company - expects to get out of the employer-employee relationship.
COMPLICATED? WHEN IN DOUBT, WRITE IT OUT
Sometimes a formal, written employment contract is not necessary. From the worker’s standpoint, the worker will want a detailed description of their duties to clearly define their role in the company and how they are going to be compensated. If the agreement is in writing, the worker can refer back to it to understand the scope of the worker’s employment. The worker may be faced with a decision that would require the worker to act outside the scope of the worker’s authority. In some cases, the employment contract may obligate the worker to certain duties even after the worker leaves the company (such as preventing him/her from working with competitors of the company). The worker should be aware of the legal or tax consequences of being misclassified as an independent contractor, rather than an employee of a company (for example, in Philadelphia UBER drivers were considered independent contractors, not employees, and thus not entitled to overtime wage benefits). To avoid this misunderstanding, a written agreement will use specific language to properly convey the activities of the worker as an employee – and not an independent contractor.
From the company’s standpoint, there are many reasons to put the agreement in writing. First, it is important to note that some employer-employee situations will require the employment contract to be written down. However, if that is not the case, there are other factors that may influence this decision. For example, most companies invest a lot of time and resources into training their professional workers. The company may be caught off guard if the worker decides to leave unexpectedly, forcing the company to hire a last-minute, untrained replacement worker. Terms laid out in the employment contract can set guidelines as to how the worker should notify the company when the worker wants to quit. Also, how would you feel if a former worker stole your company’s assets (e.g. client lists, business plans, equipment) and used them at his/her new position with your competitor? Clearly defined, written terms can discuss what happens if a former or current worker does such a thing. Experts in the field, like Attorney Christina A. Simpson, Esq., will help you determine whether a written employment contract is necessary for your situation.
Whether you are the company or the worker, you are going to want to actually read that long –possibly tedious – legal document to understand your role in this relationship… and watch out for any red flags.
A company’s search to find top talent can be a real challenge. Similarly, an individual’s hunt for a company to work for can feel like throwing applications into an endless black hole. So when the right employer finds the right individual for the job, it can be a win for both sides when expectations are met. The use of an employment contract can help maintain and achieve these expectations but be sure to read the document carefully before signing the dotted line.
Have questions? For expert advice on specific issues related to your employment contract, including spotting the red flags and protecting your rights or legal assistance in drafting an enforceable agreement, please reach out to Attorney Christina A. Simpson, Esq. here.
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