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What Should Be Included In A Contract Of Employment – A new job offer is an incredibly exciting event. Whether this new opportunity allows you to leave your current job or to stop the stressful and tedious process of job hunting, you are probably ready and willing to sign on the dotted line and start When either a hiring manager or HR representative sends an employment contract to sign, it can be tempting to sign on the dotted line without a second thought. But without doing your due diligence, you could be signing away substantial rights that extend beyond your time with the company.
Before you sign your name, let’s take a closer look at employment contracts and the provisions they may include.
What Should Be Included In A Contract Of Employment
An employment contract is a legal document between the employer and the employee that defines the rights and responsibilities of each party. Each party signs the document voluntarily and deliberately, which makes it legally binding on both sides.
What Should A Contract Of Employment Include?
A contract involves two parties agreeing to provide something of value to each other. In this case, the employer agrees to pay the employee in exchange for specific work-related tasks. But the agreement does not become an actual contract until one side formally makes an offer and that offer is accepted. The employer prepares the agreement, usually based on a model employment contract, and the employee agrees to the terms as a condition of his or her employment.
There is no standard employment contract. The terms and provisions vary widely based on the nature of the company’s business, the company’s internal policies, and the position offered. For example, an employment contract for a high-level executive is likely to be much more extensive than an agreement for an entry-level position.
Despite the many variations, some fundamental provisions typically appear in most employment contracts. Here are some of the more standard clauses you can expect to find in an employment contract.
The terms of employment generally refer to the length of time of employment you accept. For many positions, the term of employment is indefinite, but other short-term positions often state clear start and end dates.
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The only way to know if you are fulfilling your duties as an employee is to know precisely what those duties entail. Typical employee responsibilities include the primary location and hours of employment, a description of the services or work the employee will provide or perform, to whom the employee reports within the structure of the management, and any applicable requirements to maintain the employee’s professional license(s).
Depending on your position, the list of responsibilities in your employment contract may vary in specificity but should be clear enough to know whether you are meeting them or not. One of the quickest ways to screw up a new job is to misinterpret what management expects from you. Just as importantly, you need to know which tasks fall outside your area of responsibility so you don’t get stuck with work outside the scope of your position.
In many jobs, especially in fields like sales, companies set clear performance goals that they expect employees to meet. In addition to the minimum indispensable requirements, you may also be expected to achieve other specific objectives. For example, your primary job responsibility may be to perform certain tasks, but you may also be expected to bring new customers into the business as well. Or you may be expected to participate in charity or community service projects carried out by the company, with the idea being that positive public relations are integral to the overall success of the company.
Whether your company measures your expectations and requirements in dollars and cents or other tangible specifications, you need to know precisely what results your employer expects from you from the start. For example, if you are brought in to improve a specific area within the company, your division may still lose money in the short term, regardless of how well it performs. But if you come up with new ideas that will eventually right the ship, you can exceed expectations even though the balance sheet says otherwise. If you fail to establish these parameters as part of your employment contract, it can make it difficult for you to justify a raise or promotion—or simply keep your job.
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Your benefits package is often just as important, if not more important, than your salary. A standard benefits package for a full-time employee likely includes health insurance contributions, life insurance, disability and a retirement plan. Some companies also offer stock options and profit sharing as part of their benefits package.
Understanding the extent of your benefits as an employee is critical. For example, if the health insurance plan has an annual deductible, this is money you pay out of pocket each year. Are dental and vision cover included? What are the copays for doctor visits? What limits are there for out-of-network care? These are essential questions that will impact you and your family if you choose from one of your company’s health plans, so you need to know the answers in advance.
Although it may not seem important at first, not all days off are created equal. Companies structure their employee absence policies differently. Some give their employees a set number of sick days, personal days, and vacation time per year, while others give employees a block of days of unspecified paid time off (also known as PTO ) per year.
If you are one of those people who rarely miss work, you need to find out if unused days off accrue and accrue for use in the future. Some companies allow you to roll over a specific number of days per year, some allow you to roll over days every quarter, and some don’t let you roll over any days. Alternatively, some companies will pay you for unused days. Make sure you nail down the specifics about the time off before you start.
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Let’s face it, not every work relationship ends with cake in the break room and a gold watch. If a conflict arises between you and your employer, a dispute resolution clause dictates the procedure by which that conflict will be dealt with.
There are three possible options for dispute resolution. For minor issues or conflicts within lower levels of management, the company may have an internal policy to address and resolve them, at least as a first preliminary step. For more serious disputes, the company will either utilize an arbitration process to keep the matter out of court or designate a specific jurisdiction where all legal claims must be filed and litigated.
It should also be noted that signing away your rights to certain legal actions against the company to an arbitration clause can be a legal gray area. For example, the right to file a sexual harassment claim against your employer may be limited by an arbitration clause. The benefit to employers is that claims are resolved confidentially, protecting the company from negative publicity. Arbitration also avoids the possibility of a grand jury verdict against the employer that could result from litigation.
Also known as an NDA, a non-disclosure agreement restricts the employee from disclosing sensitive or valuable information about the company. Common examples of such information include business data, customer lists, internal processes and procedures, and trade secrets.
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Non-disclosure agreements can vary in length. If there is a finite time limit listed in the employment contract, the provision is likely to be enforceable. But if the contract is silent about the duration of the NDA, then it is assumed to be indefinite, which is a formal way of saying that it can last forever. Courts tend to uphold non-disclosure agreements as long as the terms are reasonable and clearly understood by the parties from the outset. This potential for long-term consequences makes it crucial to scrutinize the language carefully to ensure it does not limit your ability to find other work in the same field.
Formally known as a covenant not to compete, a non-compete clause is contract language that restricts the employee from competing against his or her former company. The idea is to prevent an employee from learning the processes and trade secrets of his employer, taking the company’s client list, and then opening his own business across the street.
Just like non-disclosure agreements, non-competition clauses are generally enforceable as long as they are reasonable. While it may be reasonable to restrict a former employee from opening a competing business within 5 miles of the employer, it would be much more difficult to restrict that employee from opening their own business within 5,000 miles. An effective non-competition clause should also be limited to direct competition. If you work at an auto repair shop and leave to open an ice cream shop a kilometer down the road, your former employer will probably have a hard time making the argument that your ice cream shop is in direct competition with -his shop, regardless of whether you had a non-compete clause or not.
The concept of an ownership agreement is simple: Everything you produce while working for the company belongs to the company. If you work on an assembly line, there’s nothing to think about—the company has whatever product is ready to roll off the line.
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