All About Employment Contracts
An employment contract is a formal agreement between an employee and an employer that establishes the terms of employment. Understanding the contents of an employment contract can be vital if you are facing termination, being offered a new position or are taking a current job in a new location. The contract typically contains provisions explaining how long you will work for the employer, your compensation as well as benefits and terms for terminating employment. Due to the many possibilities and unforeseen circumstances involved, it’s almost always a good idea to have an attorney review your contract.
From the perspective of the employee, the three main components of the standard employment contract are:
• Duration: The contract will generally specify a start date and an end date. This is sometimes referred to as a term contract. The contract may also include language that describes how either party can terminate the contract. For example , if an employment contract does not expressly state it’s for a particular period of time, then it likely can be terminated with two weeks’ notice.
• Compensation: Compensation refers to the employee’s salary and any other benefits the employee may receive. It’s crucial that the contract include a specific salary, as being misclassified as an independent contractor could deny you overtime wages and other benefits.
• Restrictive Covenant: The restrictive covenant is a common issue included in employment contracts. A restrictive covenant places limits on what employees can do within the scope of their employment, including a non-compete or non-solicitation provision.
How Your Lawyer Contributes to Contract Review
An attorney can assist in contract review by spot in terms that might be unfavorable to you that you might miss. For example, there may be provisions in the contract that have the possibility of making you liable for any problems that could arise while you are working there in a position of trust. For example, if you were an office manager, the employer might put in a term that says that notwithstanding the at-will employment, if you have any misappropriation, fraud or embezzlement that you are liable for any damages or losses that are caused to the company. You may not realize that it is there, but if you sign that, you could be responsible for any liability that is caused.
Additionally, an attorney will obviously review it from a labor law perspective. There may be terms in there that violate the prevailing law or put you in a place where there are some ambiguity that does not comply with current labor law requirements.
Common Mistakes in Employment Contracts
There are many pitfalls, pitfalls that a non-legal person (even a very intelligent and successful person) is not apt to pick up. First of all, the template employment agreements that are often provided online or by companies and others are not template agreement but rather agreements created by non-lawyers that are filled with legal language that are at best ambiguous and at worse interpretently favoring the company. For example, the initial term of the employment contract vs. the renewal term. Many contracts will simply say that the employment will be set for one year and thereafter will renew for consecutive periods of one year. The problem is that the employment agreement likely will not be renewed unless both parties agree. The better language may be to provide that if employer issues no action notice not less than 30 days prior to the end of the initial period, then it will automatically renew for additional one year periods. As an attorney or employment lawyer can advise. Another example is the choice of law provision. I have seen many companies apply non Florida law to Florida employees or non federal contracts to a Florida employee. How does this impact the resolution of a dispute? We can go into more detail once hired to review those agreements. There are many other obvious issues that can arise and the only way to minimize your risk. At least consult with an attorney who can explain them to you before signing the agreement. The problem is once you’ve signed the agreement, it is much more difficult to persuade a judge to let you out of that agreement.
How Your Lawyer Can Help You Before You Sign a Contract
There are many benefits to having an employment contract reviewed by an attorney before signing it. One of those benefits is that an attorney will be able to help you negotiate for better terms. If your compensation consists of salary and benefits, an employment contract attorney will be able to identify if you are getting the best benefits available in the market. For example, if you are receiving health insurance as part of your compensation, an attorney can tell if you are getting the best plan for your money and whether your employer/HR department is fully complying with the federal and state laws.
An experienced employment contract attorney will also be able to take advantage of relationship with the HR departments at various companies that will allow the attorney to obtain information regarding market rates for compensation so that the employee knows if they are receiving fair compensation under their contract.
An employment contract attorney also may be able to draft a non-compete agreement that is not overly broad and won’t prevent you from pursuing your career in the future.
In addition, an attorney will likely be able to identify any potential pitfalls that may lead to a future dispute. For example, sometimes an employment contract will be poorly worded and leave open possibilities for extended or reduced notice periods; this can lead to future conflicts between the employee and employer over when the employee becomes bound by a non-solicitation or non-competition agreement. Not to mention that a poorly drafted non-compete agreement increases the likelihood that it will be subject to challenge and, therefore, that you can be asked to leave your employment pending resolution of that dispute.
Selecting an Attorney to Review Your Contract
When selecting the right attorney to have review an employment contract, it is important to take into account a number of factors, in addition to the attorney’s rates and fees. One needs to consider the type, level and quality of the attorney’s experience. For example, sometimes there are attorneys who advertise that they will handle your employment contract for free or at a very low rate. However, usually these attorneys are either inexperienced or have some other motive—e.g., to get your business elsewhere. When you contract with an attorney to review your employment contract, you usually will not be back for several years, so most reputable attorneys will not handle those matters for little or no money .
Moreover, an attorney’s expertise in employment law is very important, especially when the contract is complex or unusual. Attorneys who frequently practice in employment law will be more familiar with the issues that may arise in any given contract and will be able to tailor any revisions to your individual employees. Customer reviews and testimonials also can be revealing and can point you in the right direction, especially if you have particular needs that are relevant, e.g. specifying the need for confidentiality or limiting the ability of the employer to terminate employment.
What to Expect at Your Lawyer’s Appointment
Before preparing for your appointment with an attorney, I strongly recommend that you take the time to do the following:
Bring a copy of your employment contract. If you are being hired somewhere new, be sure to ask for an electronic copy so that you can easily email it to your attorney prior to your appointment. Highlight or otherwise denote any provisions that are unacceptable or troubling to you.
Bring a copy of your employer’s employee handbook, if applicable. Many employers will not have an employee handbook. If you have one from your current employer, this will help your lawyer assess any potential differences in enforceability and will help determine the level of diligence in creating the new contract.
Please bring a list of questions you would like answered. Your attorney will do their best to answer all questions, but cannot always be kept from going down a rabbit hole as you and your attorney discuss complex points.
Bring businesses cards for references, if applicable, as your employment contract may specify that you are being introduced to potential clients. Be certain to obtain permission from your references in advance to allow him/her to be contacted by your new employer.
If your contract is an offer letter, it may be in layman’s terms. Even if it is, however, it is still a legal document that can affect your rights and benefits. If you have any questions about its terms, or its potential effect on your current or future employment, bring them to an attorney’s attention at the outset of the appointment so that issues can be addressed on a priority basis.
Frequently Asked Questions on Reviewing Employment Contracts
Isn’t it enough to just read the contract?
It’s not enough to read the contract; you should also understand what it says. Otherwise, you might be taken by surprise at a time when it is too late to change anything. Consider whether or not you know enough about your rights to recognize whether an employment contract, as written, contains enforceable promises that benefit your employment situation and future.
Why can’t I just talk with someone at the company to get questions answered about the contract?
In practice, employers may employ human resources staff members to answer general questions about contracts or employment policies, but they are not licensed to give legal advice or information. Even if they want to help you, their role is to look out for the company’s interests, not yours. In any case, it can be hard to ask your questions in a way that ensures you will get answers you can trust — and may be discouraged from asking questions that disrupt the employment process. You need and deserve your own source of information and advice, so you can make appropriate decisions about the content of your employment contract and whether or not to sign it .
Why can’t I just download a form from the Internet for my purpose?
Employment contracts are complex agreements with overlap in language and ideas between the various parts of the contracts. Enforcing the terms of these contracts can be complicated, and are often subject to a battle of interpretation between the employer and employee for what the contract terms really mean. In most situations, the words used in an employment contract to discuss topics related to salary, responsibilities and terminations are not the same as general words in context. It is important to have the experience to know how the words of an employment contract will be interpreted at a point in time in the future. Sometimes there are very specific word choices used in employment contracts that will change in meaning based on how the contract is read as a whole. This cannot be done by someone who just fills in the blanks of a form agreement.
What if it is too late?
The best time to reach out to an attorney for a review is when you first receive a contract. However, you are entitled to seek legal counsel or advice anytime you are in doubt about your rights in connection with an employment matter.
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