Not all employees have employment contracts. And of those who do, only about 16% read them in their entirety before signing them, according to one study. That percentage is unfortunately low, as employment contracts are one of the key regulators of employer/employee relationships, and their terms can have significant repercussions for both parties involved. When faced with an employment contract, it is essential for employees to scrutinize them carefully to ensure that they understand their full scope, ideally with help from a Richmond employment contract attorney.
The Purposes of Employment Contracts
Employment contracts are a valuable tool for both employers and employees, and they can be used to accomplish a wide variety of objectives. Some of those objectives include:
- Changing default rules: Employment contracts can change certain default rules of employment law. For example, absent an employment contract, most employees are assumed to be “at will,” meaning that they can be terminated (or quit) at any time and for any reason or no reason. An employment contract can change that default rule by specifying a set term of employment or establishing that the employee may be terminated only for cause.
- Defining expectations: A written employment contract is the best way to govern the relationship between employer and employee, setting expectations for both parties so that they are always on the same page
- Encouraging negotiation: Employees who are parties to employment contracts typically negotiate one or more of their terms, which may result in a happier and more engaged employee
- Conflict resolution: If a conflict between employer and employee arises, in many cases it can be resolved by looking back at the terms of the contract. If the contract is silent on a particular dispute, it may outline certain procedures for resolving said conflict.
- Recruiting top-tier talent: Employers may use lucrative employment contracts to “sweeten the pot” for high-level executive talent who may have multiple offers
It’s not all pros for employment contracts, however, as they often have significant drawbacks. For example, employment contracts often limit the flexibility of the employer/employee relationships, potentially preventing the employee from talking about different types of work. And an employment contract that has a specified term can often trap an employee in a job that didn’t turn out the way he or she thought it would. While it is possible to get out of an employment contract legally, you should not attempt to do so without speaking to a Richmond employment contract attorney.
Key Employment Contract Provisions
Every employment contract is different, but almost all employment contracts include similar provisions.
An employment contract is not necessary to compel employers to pay legal wages to their employees, but it can nonetheless set the terms of payment for a particular employee. The most common compensation arrangements are salaries and hourly wages, but compensation packages may also include bonus pay, commissions, and incentive options. Generally, the compensation offered should be commensurate with the skills and responsibilities of the job.
Most companies offer benefits to their employees, such as health and vision insurance, life insurance, retirement plans, counseling services, childcare, profit-sharing, stock options, and tuition reimbursement, among others. However, not every employee necessarily gets the same benefits, nor are every employee’s benefits of the same value. An employment contract can establish up front what the employee’s benefits will be and how much they will be worth.
The term of an employee’s employment can be either indefinite (i.e., as long as they continue to perform satisfactorily) or fixed (i.e., for three years, subject to renewal).
Most employment contracts will specify the grounds and circumstances under which the employee’s employment may be terminated. For example, if the employee is not “at will,” the contract may specify that they may only be fired for cause and define what “cause” means for that employee. It may also specify that the employer and employee must give each other a certain amount of notice before terminating employment.
Also known as a non-disclosure provision, a confidentiality term in an employment contract is used to protect sensitive information the employee may come into contact with in the course of their employment. This term usually will define which information it pertains to and prohibit the employee from disclosing that information to third parties.
Non-competition clauses prohibit employees from seeking employment with a competitor or starting a competing business after they leave the employer’s employment. As restraints on trade, they are among the most controversial issues in employment law. While non-compete agreements are valid and enforceable in Virginia (except for low-wage employees), courts interpret them narrowly and will refuse to enforce them if their terms are not reasonable in geographic scope, function, and duration. For more information about the enforceability of non-compete agreements in Virginia, please contact a Richmond employment contract attorney.
Non-solicitation clauses prohibit the employee from attempting to poach business from the employer, including current employees, contractors, and clients. Like non-competition clauses, they must be narrowly tailored to serve the employer’s business interests and must be unduly burdensome on the employee’s right to work.
Work For Hire
Many employees create intellectual property (IP) during the course of their employment, such as patentable inventions or trademark-eligible advertising slogans. Work-for-hire clauses typically state that the employee will assign their rights to the IP they create to their employer.
Choice of Law and Forum
A choice of law provision establishes which state’s laws will govern the employment contract and any agreements that arise under it, as well as in which judicial forum lawsuits against either party must be filed.
Alternative Dispute Resolution
In addition to the choice of law and forum clauses, many employment contracts also provide for alternative dispute resolution in lieu of or in addition to litigation, such as arbitration.
Get Advice From a Richmond Employment Contract Attorney
If you have been presented with an employment contract, you should avoid signing it until you have had it reviewed by an experienced attorney. To get started, please contact a Richmond employment contract attorney at Pierce / McCoy by calling 757-304-6655 or using our online contact form.