Employment contract overview

Employment contracts are important to both parties, as it sets clear guidelines and expectations. Most employment contracts are written to favor the employer, so it is important for the employee to ensure they understand what they are agreeing to. In many cases, they will request changes and some negotiations will take place. Getting a lawyer involved before you sign the agreement is a good idea and can save larger expenses and hassles down the road. This post is for employees, to help you understand more about the contract and why legal help is a good idea.

A job offer is exciting, especially if you have been searching for a while. Between the excitement about the new job and the stress from being unemployed, it can feel like just signing the agreement and keeping things simple is the way to go. However, keeping things simple now can complicate things down the road if you happen to encounter an issue. If your rights are properly protected, or if terms you agree to prevent you from taking action down the road, in the event of a problem, you could lose money that is rightfully yours. While employment and labor laws do protect you, it can become costly to fight for those rights.

Let’s take a step back and explore some of the key details employees need to know.

What is an employment contract?

An employment contract is an agreement, in writing, between an employer and an employee. It lays out the terms and conditions of employment. It is advisable for every employee to have a contract in place.

Tip: As employee, you have more leverage to request changes and negotiate things before you are hired, so don’t assume you can take care of the contract down the road. Get it done at the start.

What is included in an employment contract?

A typical contract contains details like the start and potentially end dates of employment, compensation, duties, and any other expectations of the employer and the employee.

If you aren’t familiar with employment law, getting a lawyer to review and handle negotiations related to changes is well worth every penny, to save you money down the road.

You will want to carefully review the following sections:

Job description: A job description that is clear and concise will protect you from “scope creep” where more and more work is piled on you down the road. Without all of the details spelled out so they clearly outline your duties, an employer will have more room to say you aren’t properly executing your duties.

Compensation: This may be the most important section for an employee.  The compensation plan will often include more than just the timing of payments and salary. It could include your bonus structure. In some cases, it may include commissions or profit-sharing. Getting the details of any commissions, bonuses or profit-sharing is important. It is essential that you understand what performance metrics will be used to determine compensation in those areas.

Restrictions: Your employee may try to protect themselves by restricting you from working with competition or communicating with customers or other employees for purposes of getting them to come work with you at another company (this is called solicitation). There will also likely be confidentiality and nondisclosure causes you will have to agree to. If your contract does include any of these restrictions, be sure to your lawyer reviews the legality of them.

Term: If there is a term on the contract and it is not open-ended employment, it is crucial that you understand the specifics of the term and any grounds for termination.  You should also define any details related to extending the contract.

There is no set etiquette for suggesting changes to a proposed employment contract. Doing so, and whether you’re successful, could depend on the level of the position, the relationship between you and the employer, and the stage of the process in which you find yourself. Though it may be uncomfortable, it’s important to have these potentially difficult conversations before signing anything. Once you have signed the document, it will become even more of a challenge to secure any changes.

Problems Employees Face In The Contract Review Phase

Since the employee doesn’t know the employer well yet and the job is exciting and important to the employee (in most cases), the employee may be hesitant to negotiate the agreement for fear of appearing difficult.

In many cases, especially in more senior positions, it is very common for a lawyer to negotiate on the employee’s behalf. Even if it is not the norm, you do need to proceed in the way that is best for you.

In case of a dispute down the road, you may want to include guidelines for dispute resolution. You may want to consider arbitration in the event if a dispute.

There are so many variables in each job situation and employment contract. If you are uncertain about any aspect of the agreement, retaining a lawyer is your best bet. It’s rare that someone regrets retaining a lawyer.

If you do decide to handle the contract review and negotiations by yourself, read each section carefully and look for areas that limit or restrict you and areas that make you uncomfortable. Also look for areas that are inconsistent with any verbal conversations you had with your potential employer. Once you sign the contract, it is likely that you won’t be able to argue on the basis of a pre-agreement conversation.

CEO Law offers a flat rate service for review of your employment agreement. We make it easy to access a subject matter expert who will review your contract with 1 day turnaround, at a flat and affordable rate.

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