What are the important things to think about when involved in an employment contract?

Entering into a new employment contract, or renewing an existing agreement, can be one of the most important decisions you ever make. In addition to salary figures, there are many things to consider in the employment arena, as many important issues can be in the “fine print”.

What constitutes a contract?

A contract is an agreement between an employee and an employer that specifies some aspect of the terms and conditions of one’s employment. An employment contract may be written or verbal or both, explicit or implied, either through a signed document, written correspondence (including email) or a spoken agreement or years of service. Many employees work under some type of employment agreement, whether or not they realize it. For example, if a new employee signs something as simple as a promise to abide by company policy, or to arbitrate any future disputes, it may constitute an employment agreement with respect to those issues. When an employer makes promises to an employee to induce the employee to take a job, and the employee relies on those promises, it may constitute an employment agreement also. Each situation is different and the facts must be carefully analyzed in detail, including everything written and said among the parties.

Can I negotiate my contract?

It’s not unusual for employers to seek to dictate the terms of a written employment agreement. Typically, only upper-management employees have the option of negotiating their employment contracts. However, employment agreements that are form contracts not subject to negotiation may in some instances be unenforceable if they are deemed contracts of “adhesion” or contain unlawful terms. Arbitration agreements, for example, even if signed by an employee, must meet certain minimum standards of fairness or they are unenforceable or subject to reformation by a court of law (or through negotiation prior to filing of a lawsuit). High level corporate officers and executives, by contrast, often have the opportunity to negotiate key terms in their contracts, relating to compensation including bonus, stock options, commissions, termination (or separation generally from the company), duration and renewal of the agreement, duties and responsibilities, opportunities for promotion and advancement, and so forth.

What constitutes a breach of contract?

If one or more of the terms in a valid employment contract, whether written or verbal or some combination, is violated by either an employee or employer, this is typically called breach of contract. In the case of an employee, it is frequently compensation terms that are at issue, having to do with the payment of bonuses or commissions. It might relate to implied terms, such as a “for cause” provision implied into the agreement of an executive or officer or other employee who has been working with the company for many years and is terminated. Severance and stock option provisions might also be at issue. Companies will sometimes invoke confidentiality provisions or trade secret provisions against the employee without good reason, especially when the company is concerned that the employee may otherwise bring a valid lawsuit.


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