Overview: Employment contracts set out the duties of the employee and employer, and provide the employer with the opportunity to clarify the relationship. The specific terms required in an employment agreement vary by state and by type of employment or profession. Although the terms of employment contracts may differ, every written contract of employment should be signed by both the employer and the employee.
Some states recognize implied employment contracts when an employer makes statements or takes certain actions that are inconsistent with an at-will employment relationship - even if they are unintentional. If an implied employment contract is found, an employer may be bound by its terms. Therefore, since employment contract law is state driven, employers should check the laws in which they do business in order to avoid creating an implied employment contract.
Trends: Employers continue to be exposed to claims by at-will employees, who claim that their termination of employment was in violation of an implied employment contract based on language contained in an offer letter or employee handbook, or by verbal statements of job security by the employer. Therefore, if an at-will employment relationship is intended, employers must make clear to the employee that he or she is an at-will employee and disclaim any contractual relationship.
Author: Melissa A. Silver, JD, Legal Editor
Updated to reflect state Supreme Court ruling prohibiting courts from modifying the terms of noncompete agreements.
Updated to reflect employee communications protections in the Workplace Privacy Act, effective July 20, 2016.
Updated to reflect discipline concerns under the Workplace Privacy Act, effective July 20, 2016.
Updated to reflect amendments to equal pay law expanding coverage to employers that employ two or more employees, effective July 20, 2016.
Updated to reflect protected communications under the Defend Trade Secrets Act, effective May 11, 2016, and amendments to various notice-posting penalties.
Updated to include amendments expanding discrimination protections regarding employee wage discussions, effective June 30, 2016, and forthcoming protections regarding reproductive health decisions and family responsibilities.
Updated to reflect unlawful practice of prohibiting employees from discussing wages, effective June 30, 2016 and forthcoming discrimination protections based on family responsibilities and reproduction health decisions, during hiring.
Updated to include requirements regarding post-termination physician covenants not to compete, effective July 1, 2016.
Updated to include notice-posting requirements under amendments to unemployment insurance law, effective July 1, 2016.
Guidance for HR on the use of employment contracts. Support on creating and enforcing legally binding contracts that cover all the vital areas.