Introduction: What Is In An Employment Agreement?
An employment contract is an agreement between an employer and an employee outlining the terms and conditions of employment. Understanding what components are usually included in a standard employment contract is crucial for employers thinking about drafting one.
This blog post will discuss some of the essential clauses you would expect to see in a modern employment contract drafted by competent counsel, including some specific terms for the post-covid era. Unmistakable clauses obviously expected to be included in an employment contract, like salary and job title, will not be discussed here. Lastly, this below list is not exhaustive.
1. Termination clause:
A termination clause specifies the conditions under which the employer or employee can end the employment relationship. This clause outlines the required notice period, grounds for termination with cause, and any other pay or benefits owed to the employee upon termination.
2. Resignation clause:
The resignation clause defines employees' responsibilities when they leave the company voluntarily. This typically includes the required notice period and any restrictions on working for a competitor after resignation.
3. Probation clause:
A probation clause outlines a trial period during which the employer can assess the employee's performance and suitability for the role. During the probationary period, the employment relationship can be terminated with little or no notice.
4. Covid era clauses:
In response to the pandemic, employment contracts may now include Covid-specific provisions. These can address health and safety protocols, vaccination requirements, remote work arrangements, and potential pandemic-related disruptions to the workplace, such as furloughs or temporary layoffs. These clauses aim to protect both the employer and the employee in the event of future disruptions.
5. Restrictive covenants:
Restrictive covenants protect the employer's interests by limiting the employee's actions after the employment relationship ends. Common restrictive covenants include non-solicitation and non-disclosure agreements. Non-competes should be avoided as they are generally unlawful now.
6. Background check consent:
This clause grants the employer permission to conduct a background check on the prospective employee. Background checks may include verifying education, work history, criminal records and more.
7. Bonus plan:
A bonus plan clause outlines the terms and conditions of any performance-based or discretionary bonuses that may be awarded to the employee. This may include calculation, eligibility criteria, performance metrics, and payment schedules.
A severability clause ensures that if a court finds any part of the employment contract unenforceable or invalid, the remaining provisions will still be in effect.
8. Protection of Intellectual Property, Confidentiality & Non-Disclosure clause:
Among other things, these clauses safeguard the employer's proprietary information and intellectual property, clarifies who owns what is produced in the working relationship, and requires the employee to maintain confidentiality during and after the employment relationship.
9. Entire agreement clause:
The entire agreement clause confirms that the employment contract represents the complete understanding between the employer and employee, superseding any oral or written or implied prior negotiations, agreements, or discussions
10. Remote and hybrid work clause with recall rights:
This clause outlines the terms and conditions for remote or hybrid work arrangements, including the employee's responsibilities, communication expectations, and any provided equipment. Additionally, it may include the employer's right to recall the employee to on-site work if needed, specifying the notice period and any conditions that trigger the recall.
11. Temporary, contract, seasonal, or permanent employment options:
This contract section clarifies the nature of the employment relationship, whether it is temporary, contract-based, seasonal, or permanent (indefinite). This distinction is essential for determining job security, benefits eligibility, and especially termination conditions.
12. Part-time and full-time options:
The employment contract should specify whether the position is part-time or full-time and define the expected weekly work commitment and requirements of a worker's attention and energy.
An employment contract is a vital document for businesses that protects them from unneeded liability. By including and understanding some of the above-mentioned clauses, employers can better protect themselves from damages and other liabilities. However, there are countless other clauses one might want to include in their employment contract. This blog post should just be a starting point for your business. When drafting an employment contract, think about the unique requirements of your company and the position your contracting for, and analyze if there is anything you want to ensure is written down "in stone" in case there is ever a disagreement. If so, consider including that in your contract.
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