Employment Agreements: Importance Of, Common Types, Reasons For Drafting

Contracts come as one of the most important documents that govern every day life. Among other things, contracts can bind two individuals who want to get married, two or more individuals who agree to buy and sell property, or two individuals who want to initiate a working relationship. This article will discuss employment contracts or agreements and their importance. Want to learn more? Read on.

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What is a Contract?

In order to understand employment agreements, one must first understand what contracts are. According to legal precedent, a contract is defined as, “is an agreement by which one person obligates himself to another to give, to do. or permit, or not to do. something expressed or implied by such agreement.” It is important to note that not abiding by the terms of the contract might have legal repercussions.

What is an Employment Agreement and why are they Important?

Once one has gained a basic understanding as to what a contract is, one can then understand what an employment agreement is and why they are important. An employment contract or agreement is a document that outlines the rights and responsibilities between two parties; these two parties are oftentimes referred to as “Employer” and “Employee”.

Employment contracts outline the duration of the employment; remedies in event of a breach of the contract; non-compete provisions; responsibilities of the employer and employee; terms of compensation; mediation provisions; governing laws and jurisdiction; attorney’s fees; federal tax requirements; willful termination option; notice requirements; and benefits.

Why are these provisions important? A valid employment agreement provides both the employer and employee protection in the event that a breach of the contract occurs. This is best illustrated through an example. Imagine a scenario in which an employer and employee verbally agreed to a certain amount of compensation per hour. If no agreement is signed and binding, then the employer has the ability to change the terms of the verbal agreement without any proof to the contrary. Without a binding agreement, the employer may change terms of the employment relationship at any time with no legal remedy to the employee.

What is the difference between Employment Agreements and a Non-Compete?

While most employers require employees to sign employment agreements, some companies will have the employee sign a “Non-Compete” statement. A non-compete will outline the responsibilities of the employee before and after the term of employment. For example, an employer doing business in construction might have the employee to sign a non-compete agreement stating that the employee may not compete with the employer in the area of construction for up to a year after employment.

Essentially, non-compete statements will protect employers from competition and existing competitors. Many employment agreements will include a non-compete clause. However, it is important to note that non-compete statements are not contracts on their own.

What Should one do Prior to Signing an Employment Agreement?

It is monumentally important to review, and ideally, have an attorney review an employment agreement prior to signing the document. It is important to understand the terms of the agreement and the laws of the state which govern the contract prior to signing.