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What is an Employment Agreement?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 03 December 2016
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Also known as an employee contract, the employment agreement is the covenant established between an employee and an employer. The content of the document normally covers all relevant aspects of the terms of employment, including the date of hire, general responsibilities of the employee and the commitments of the employer to the new hire. While the exact content of an employment agreement will vary from one situation to another, there are few essentials found in almost every contract of this type.

Three key areas addressed in most contracts for employment are the duties of the employee, the terms of employment extended by the employer, and the initial compensation for services rendered. These three basics are often addressed during the job interview and then formalized in the agreement once an offer of employment is extended to the applicant. Together, they form the foundation of what is expected of the employee in general, the type of salary, wages, or commissions that are associated with the employment, and also any starting and ending dates that may apply to the employment term.

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Along with addressing these three basics, it is not unusual for an employment agreement to also spell out any circumstances that could lead to termination. Most companies have specific provisions that apply to a failure to discharge duties competently, an inability to work due to extended illness or disability, and even a clause specifying how the agreement will terminate in the event of the employee’s death. In some cases, the inclusion of guidelines for termination is necessary from a legal point of view. Many governments require that specifics of this nature be in the employment contracts of any business operating with the government’s jurisdiction.

It is also not unusual for an employment agreement to include a non-compete clause or section. Essentially, this section protects the employer from proprietary information being utilized by a former employee to the detriment of the employer. Often, the non-compete clause will include examples of what is meant by proprietary information, such as client lists, formulas for products developed and sold by the employer, and any type of inside information that would give a competitor an unfair advantage in the marketplace. In some cases, this clause also will forbid the former employee from working for a direct competitor for a specified period of time, although this portion of the clause if often extremely difficult to enforce, especially in jurisdictions that are defined as “right to work” communities.

At its best, the employment agreement seeks to provide a clear understanding of the responsibilities of both the employee and employer for the duration of their working relationship. However, not all agreements are drafted to reflect this type of balance. When conducting a job search, it is often a good idea to learn as much about the hiring practice of a prospective employer in advance, including the usual terms included in a contract of this type.

Choosing to apply for employment must always be seen as the establishment of a mutually beneficial working relationship. Ideally, the job hunt does not end until the employee finds an employer who is willing to commit as much to the relationship as the employer. Unless dire circumstances make it necessary to settle for less, it is a good idea to avoid employers who insist on agreements that provide the employee with little recourse and continue the career search until a relationship with a more suitable employer is established.

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