Looking for employment, interviewing with prospective employers, and negotiating an employment offer can itself be a quite exhausting and time-consuming job. Before that job is complete, there’s the inevitable issue of reviewing the employment contract that your new employer has prepared for you. Be cautious. Before accepting employment, have the employment contract reviewed by an experienced, knowledgeable employment attorney. To protect yourself and your rights, having an attorney review your employment contract is the wise move to make.
An employment contract should specify your rights as an employee and protect you against wrongful termination. In most cases and in most states, employment is considered “at will.” In other words, the employer may terminate employment, or the employee may voluntarily leave, at any time – at their will. An employer’s right to fire an employee may be restricted, however, where the employee can show that the employer has entered into an explicit contract to retain the employee for a certain length of time, or where the employee can show that the employer entered into an “implied contract” which specifies that employment will be terminated only for specific disciplinary reasons. Traditional employment contracts – the explicit legal documents signed by both an employer and an employee – are still being used, but in the 21st century, an employment agreement is more likely to be “implied” through verbal statements, through company memos or employee handbooks, or through policies established by the employer during the period of employment.
PURPOSES OF EMPLOYMENT CONTRACTS
For legal purposes, employment contracts are most often used by employees after a potentially wrongful termination to show that the employer’s right to terminate the employee was limited. Many states consider a verbal statement by an employer – something like “you’ll be here as long as you meet the sales quota” – to be a binding contract of employment. However, a verbal contract must have some element of specificity to be enforceable. A statement such as “you’ll have a job here as long as you like” generally will not be considered to be enforceable. Wrongful termination is illegal everywhere in the United States. If you believe that you have been wrongfully terminated by an employer, speak at once with an employment lawyer, and in northern California, speak with an experienced San Francisco employment attorney.
Employment contracts, whether they are explicit or implied, may also provide the terms and conditions of an employee’s healthcare benefits, vacation and sick leave benefits, employee grievance procedures, and employee activity subsequent to the termination of employment. An employment contract may limit the ways in which an employee may use confidential or proprietary employer information after the employment is terminated, or it may explicitly restrict the employee’s right to launch a similar business and compete with the employer.
Non-competition agreements are always hard for employers to enforce, however, and some states have laws that severely limit the power of noncompetition agreements to restrict an ex-employee’s behavior. In general, however, the scope of non-competition agreements – whether it’s a geographic area where no competition is allowed or a duration of time when competition is not allowed – must be no broader than absolutely necessary to protect the original employer’s business. Additionally, while a non-competition agreement may be required by an employer as a condition of employment, if it is imposed on an existing employee subsequent to hiring, the non-competition agreement generally must be compensated by some independent additional consideration such as a raise, a bonus payment, or a higher commission percentage.
TYPICAL EMPLOYMENT CONTRACT PROVISIONS
Contracts of employment come in a wide variety of forms and types. All of the employees at a particular business may be required to sign the same contract, or employees may have substantially different individual contracts with the same employer. At many smaller businesses, the employer and employee often have an informal verbal agreement regarding the kind of work the employee will do, for how long, and at what rate of pay. However, even with their differences, almost all employment contracts have elements in common such as the employee’s starting date, salary or wages, and benefits. Before you sign any employment contract, determine what kind of employment terms are acceptable to you. An employment rights attorney can speak with you about the advantages and disadvantages of each provision in an employment contract, and an attorney may additionally suggest other terms that you should seek to include in the contract. Here is a list of ten typical provisions that are offered in most employment contracts:
In the confidentiality provision of an employment contract, the employee promises not to share any information about the details of the employer’s business or the employer’s exclusive or secret procedures, plans, data, formulas, or machinery. Usually, a confidentiality agreement remains in effect even beyond termination.
In a noncompetition agreement or provision, the employee agrees that for a specified period of time after the employment ends, the employee will not work for a competitor or for any company conducting similar business, and the employee will not start up his or her own company to compete with the employer’s business or to solicit that employer’s clients. Usually a noncompetition clause is restricted to a precise geographic region.
3. THE BEST EFFORT
Although it’s usually simply presumed that an employee intends to work hard when he or she accepts an employment offer, some employers will nevertheless insist on having a “best-effort” clause included in the employment contract. A best-effort clause requires the employee to give the employer his or her best effort on the job and to remain loyal to the employer during the duration of the employment.
4. INVENTION OWNERSHIP
An ownership provision is sometimes required by employers when invention is part of the employee’s job. The employee agrees that whatever he or she invents while employed (or for a specified period of time after the employment) becomes the employer’s property, not the employee’s. Additionally in an ownership provision, employees usually agree to help the employer patent the invention and to keep knowledge of the invention confidential like any other trade secret. In return, an employer may agree to share with employees a percentage of the royalties.
5. NO ADDED COMPENSATION
A “no added compensation” provision establishes that if the employee becomes an elected director or officer of the business, or if the employee serves on a managing committee, no additional compensation will be paid for that work.
6. NO CONTRACTING AUTHORITY
In some cases, this may be called the “agency” provision. It specifies that the employee has no “agency,” that is, no right to enter into a contract or otherwise to obligate the employer unless the employer provides written consent to that effect.
7. EXCLUSIVITY TERMS
In an exclusivity provision, the employee agrees that while employed, he or she will not also work for another employer in the same type of business or a similar type of business. An exclusivity provision may also prevent an employee from becoming a shareholder or a director in a similar business or from voluntarily providing service to a competing company.
8. TERMS OF TERMINATION
Part of almost every employment contract is the “termination” provision. Employers who wish to hire on an at-will basis must avoid phrases or implications that can lead an employee to think that the employment will continue indefinitely. A typical termination provision allows either the employer or the employee to terminate the employment and employment contract for any reason by providing a specified amount of notice, normally two weeks. The provision may also allow the employer to terminate the contract without notice or warning if the contract is violated in any way by the employee. The provision also typically includes the employer’s right to terminate if the employee becomes permanently disabled to the extent that he or she can no longer do the job.
9. THE ARBITRATION CLAUSE
Arbitration clauses are a part of many contracts including employment contracts. In an arbitration clause, the employer and employee agree that if they have a dispute over any aspect of the employment, they will submit that dispute to arbitration rather than go to court. The provision may include specifics about the arbitration, such as whether the arbitration ruling will be final and how the parties will agree on an arbitrator if and when they require one.
10. CHOICE OF STATE LAW
Employment laws are different in every state. California, for example, gives employees more employment rights than any other state. A “choice of law” clause is a stipulation that, if the employer and employee have a disagreement that becomes a lawsuit, the laws of a particular state will apply without regard to where the lawsuit is filed.
OBTAINING LEGAL ASSISTANCE
Your employment benefits are vital. When you leave a job, it’s imperative to protect those benefits. They may include stock options, bonuses, incentive pay, commissions, and/or a pension. When you change jobs, an experienced employment lawyer can review your contract and help you protect your benefits as you make the change. Whether you are entering into a written employment agreement or need to learn more about your rights under an implied employment contract, an experienced employment lawyer can advise you and help you deal with contract breaches, wrongful termination, and the enforcement of your all of your employment rights as stipulated in your employment contract. If you’ve been wrongly terminated, if you need legal help regarding an employment contract, or if you simply want an attorney to review your current contract to determine if it’s fair and legal, don’t wait. Arrange at once to speak with a good employment lawyer, and in northern California, speak with an experienced San Francisco employment attorney.