Need a job?

Then you’re probably going to need an employment agreement.

An employment agreement is a written contract between an employee and their employer detailing the employment expectations of both parties – think wages, job duties, benefits, termination procedures, vacation time, non-competition clauses, employer/employee responsibilities, and similar things.

They’re good to have as evidence that there was an agreement at all – a written contract provides reliability and security for both parties.

Specific employment details can be enumerated in the agreement and be referred to at any later point in time in the event of any misunderstanding or dispute.

Companies can protect their trade secrets and employees can guarantee their payment. They can negotiate over the contract for terms they are both comfortable cooperating under.

It’s useful and smart to have something in writing when entering into a business relationship with someone or some company so both parties are legally protected from being screwed over by the other. No one wants to waste their time, energy, money, or resources.

How Do I Know I Need an Employment Agreement?

First, you need to figure out if you’re considered a contractor or an employee under your job.

If you’re an employee, you’re typically on an employer’s payroll getting a steady paycheck from that person or company.

As an employee, your employer will have more of a say over where you do your job, how long you should take, and the overall process of how you get the job done – they get more control over the method of how you do your job and not just over the final results or quality.

Employees also get benefits from their employers.  Employers will cover business operation costs, provide a workspace, necessary resources, and things such as paid vacation days, matching social security, retirement plans, medical, vision, or dental insurance. They’ll also withhold taxes from your paycheck.

Independent contractors, on the other hand, are typically brought in to work with an employer only for a set amount of time to do some specific task the company can’t or didn’t want to compete with in-house employees. For example, contractors could be hired to build a company’s website, construct, or renovate a building.

Contractors have more flexibility with their scheduling and don’t have to worry about answering definitively to a certain company – they can always find other clients because they’re competing in the job market. They get more control.

Contractors often have temporary assignments or irregular work, will have to supply (at least the majority of) the necessary equipment, materials, and tools, can’t get unemployment or workers’ compensation payments, and they don’t get any benefits through the job (like matching social security payments, retirement plans, or medical insurance).

Employees should fill out employment agreements. If you work on a contractual basis rather than in standard employment, then you’ll want to take a look at a contractor agreement instead.

Thankfully, employees don’t have to worry as much as contractors do when calculating taxes because the employer will do that part for them. Employees will get a W-2 from their employers come tax season detailing the wages they’ve earned and the money withheld for social security, Medicaid, retirement, and whatnot. They don’t have to gather all that information separately.

As for the employment agreement, what all should actually be included in it?

Anatomy of an Employment Agreement

Odds are, if you have a job, you already have some form of an employment agreement (usually an at-will agreement), most likely given to you to look over by your employer. If you’re currently on the hunt for a job or you’re in negotiations, here are some things you should be sure are covered in your pending employment agreement (whether you or your employer drew it up) as you move forward:

Compensation

Your payment is one of the most important things to include in an employment agreement, as you’d expect. Be sure the contract lists what dollar amount you will be paid for a certain period of time – hourly, weekly, monthly, yearly, etc.

Also, note any signing bonuses or potential performance bonuses you’ll get for the job. Will the base salary increase for each year of the contract? Is there a possibility of other notable salary adjustments during employment? Make note of these too.

Benefits

The employment agreement should include what benefits your employer offers and which of those benefits you’ll be taking advantage of. Common employer benefits include medical insurance, disability payment, paid time off, vacation, sick days, bereavement leave, matching 401(k) for retirement, pension, and life insurance. They may also offer other benefits specific to the job or company like stock options, cafeteria plans, financial counseling, loan forgiveness arrangements, money for continuing education, daycare, or dog walking services.

On the topic of medical insurance, there are a few more important details to check. Does medical include vision and dental insurance? Is mental health covered? Do you get paid or unpaid maternity leave? How long? How much is the premium you’ll have to pay for the health insurance through your employer? Will your insurance cover your spouse and any dependents?

How much vacation time do you get? Does your vacation time carry over to the next year if you don’t use it? How many vacation days can you use at once?

Is there a probationary period before these benefits kick in? Are any of these benefits taxable?

It’s good to clarify these things in the employment agreement.

Employee Responsibilities

The agreement should detail the work that’s expected from the employee. What were you hired to do? What is your exact job title? What are the duties of your job? Write all this out to prevent future miscommunication.

Where will you be working? What’s your schedule like? Are you full-time or part-time? Can you be relocated at any time, or do you need to consent first? Are there any other organizations, committees, or boards you’ll need to be involved with? Are there any organizations you can’t be involved with?

What are the conditions for earning bonuses? Will there be any performance reviews? Can you be promoted or demoted? How?

The job description can help you out with this part. List out all the things you’re going to be responsible for. At the end, there’s usually a line that says “additional duties as assigned” for a little work flexibility if the employer’s needs change.

Non-Disclosure and Non-Competition Clauses

This is the part of the agreement where the company protects its business and trade secrets.

A non-disclosure agreement (NDA) is about confidentiality. An employer will include one to prevent you from telling others company secrets.

A non-competition clause restricts your ability to work for your company’s direct competition in the same industry after you terminate employment. Employers need to specify set time periods and geographic regions where the former employee can’t compete. It’s not indefinite, and the parameters have to be reasonable.

A non-solicitation clause is similar to a non-competition clause – it prevents a former employee from taking customers or coworkers from their previous company to benefit their new company. It also requires a set period of time and location to be valid.

These restrictions are typically enforceable in all states but California.

Duration and Termination

Most of us are employed with at-will agreements, meaning our employers can fire us whenever they want for any reason as long as it isn’t discrimination and doesn’t break labor laws. Likewise, we can resign at any time.

There’s usually an at-will employment clause included in the contract. You can agree to give 30 days notice or severance payments in the contract as well.

If the employment is not at-will, include the duration of the employment term. Write out the grounds on which the employer can terminate the agreement or employment (if you commit a felony, break contract, don’t do your job, etc.), and if there’s any compensation for early termination.

A formal employment agreement provides more security for both parties, although it requires more negotiation.

Don’t Fear: There are Templates!

Don’t know where to start?

No problem, we’ve included some templates to help you out:

Template 1, Template 2, Template 3

Just be sure to read through the whole template yourself instead of just filling in the blanks and going with it. You want to know what you’re getting yourself into, so don’t blindly trust an online template with words you haven’t at the very least reviewed yourself.

In fact, you ought to get a lawyer to look over your contract (if you’ve used a template or not) just to make sure everything’s solid and in place to protect you and your services (or you and your company, if you’re of the hiring party).

 

Keyword: employment agreement