What is an Employment Agreement?

Jul 10, 2021 | Tips on Contracts

Most US states are at-will employment states. What that means is, an employee can quit their job without giving a reason and notice. An employer can also fire an employee at any time with or without cause.

Several factors, however, can protect an employee from being sacked with or without warning or reason. First, an employee cannot be dismissed for unlawful reasons. For example, an employer cannot fire an employee because of their gender, race, or sexual orientation. Second, if an employee belongs to a union, they’re most likely protected by a collective bargaining agreement from unfair termination.

Third, if an employee doesn’t belong to a union, a well-negotiated employment agreement could limit their employer’s right to terminate them and give them certain benefits if they’re fired without cause or warning.

In this post, I would like to focus on what an employment agreement is and what are its benefits.

Do I need an employment agreement?

Before you start a new job or hire a new employee you should enter into an employment agreement. The employment agreement can be oral or written, but as experienced employment contract lawyers we highly recommend the agreement be written because these types of contracts are easier to enforce than oral agreements.

Your employment agreement will be a legally binding document that outlines the responsibilities, rights, rules among other things of both the employer and employee. It will run throughout the employment period.

Some of the key details included in an employment agreement include:

  • Employee responsibilities. This states what the employer expects from the employee. For example, if you are hired as a financial manager part of your responsibility could be ensuring the company maintains a positive cash flow.
  • Employee salary. This will cover the base salary, bonuses, or commissions to be earned on the job.
  • Employee benefits. This will state if an employee is entitled to benefits such as medical and life insurance, paid vacations, club membership, etc.
  • Probation period. During this period an employer can fire the employee at their discretion. The probation period usually lasts 90 days and is used by the employer to assess if an employee is a good fit for the job.
  • Employment duration. The agreement will include the time an employee will work for a given company, and if there is a possibility of a time extension once the period lapses.
  • Performance reviews. This section of the employment agreement outlines when and how an employee will be reviewed.
  • Confidentiality clause. This is included in the employment agreement to ensure employees don’t share any sensitive company information with outsiders.
  • Non-compete clause. This is not always included in an employment agreement. If it is, an employee is prohibited from working for another company in direct competition with their current employer should they choose to leave their current job for a while, for example, one year.
  • Termination clause. This clause details how an employee can quit their job, if an employer has to have a reason to dismiss an employee, employment termination notice period, information and property an employee must return when they leave, etc.

The details that are included in an employment agreement depend on the job position and the company recruiting. For example, an employer may see no reason to include a non-compete clause when hiring a receptionist, but this clause would be necessary if they’re hiring an innovation manager.

Is an employment agreement the same as an employment contract?

Yes, employment agreement and employment contract are the same thing. They both are binding documents between an employee, freelancer, or contractor and an employer detailing the terms of employment.

Other names used to refer to an employment agreement are contract of employment, employee contract, or job contract.

What are the advantages of an employment agreement?

Employment contracts are valuable documents for both the employer and employee. Here are a few reasons why:

  • An employment agreement gives clarity on what is expected of both the employer and employee. For example, when an employee starts a new job it is clear to them what their salary, perks, and responsibilities are.
  • The agreement protects both the employer and the employee. For example, if an employee quits abruptly yet they’re supposed to give a one-month notice, the employer could sue them for breach of contract.
  • If a dispute arises between an employee and employer it is likely the problem could be resolved by going through the employment agreement.
  • Once an employment contract is signed, an employee and employer can work together comfortably for the foreseeable future knowing both their needs have been taken care of.
  • The employment contract can be used as a basis for negotiating new and better contracts between the employer and employee.


Disadvantages of an employment agreement

The key disadvantage of an employment agreement for an employee is that it gives them less flexibility. For example, if you have entered into an agreement with an employer for three years, you can’t wake up and leave even if the job is frustrating or because you got a better job offer. Doing so could land you into legal problems.

An employer may also see the employment agreement like it is cast in stone and may not be open to negotiating terms. That is why before you get into an employment contract as an employee or even as an employer, you should have an experienced contract attorney look at your contract of employment, or help you draft it.

Gallagher Krich, APC: Experienced Employment Agreement Attorneys

Whether you’re just about to hire a new employee or received a new job offer, get in touch with Gallagher Krich, APC for a review, or assistance in the drafting of your employment contract. Our attorneys have over 26 years of experience in contract law and are well versed with employment contracts. So, we can help you come up with a well-crafted and strong employment agreement that will give both the employer and employee peace of mind once they sign the document.

You can get in touch today at (858) 926-5797 to schedule a free consultation with an attorney to ensure you don’t agree to an unfavorable employment agreement.

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