Employment Contract Legal Overview

An employment contract is an agreement between an employer and an employee that explains the employment relationship. Contract terms will vary from person to person and employer to employer. A contract may regulate only one aspect of the employment relationship (e.g., when the employee is entitled to pay increases, under what circumstances the employer can fire the employee) or it may cover the entire employment relationship.

Among other things, contracts can set wages, set length of employment, specify when an employer can fire you, and provide for fringe benefits. Contracts can benefit you by clarifying your employment rights. If your employer violates a contract term, you can enforce the contract in court.

Beneficial contract terms
The contract term most beneficial to employees is one that requires an employer to have just or good cause to fire an employee. This means that an employer can't fire you without a good reason. This requirement is commonly found in collective bargaining agreements, but occasionally other employers will also provide this benefit.

Binding contract terms
Contracts can also bind employees. Employers often require employees to sign contracts that limit what employees can do during and after employment. Usually these contracts relate to whether an employee can work for a competing company after leaving a particular employer or what information an employee can disclose about company business. Contracts also commonly spell out what rights employees have in the work they create.

Contract terms can also regulate how employment disputes are solved. Some contracts require that employees submit disputes to arbitration rather than to court.

Contracts cannot waive your rights
The one thing a contract cannot do is waive your rights under federal or state law. For example, if your employer is required to pay you overtime, you can't sign a contract waiving the right to overtime. Even if you have a contract, your employer are still subject to most laws regulating wages, prohibiting discrimination and sexual harassment, requiring accommodations of disabilities, imposing safety standards, providing medical and family leave time and benefits to employees who are injured on the job, and requiring payment of unemployment compensation.

In addition, having a contract does not mean your employer can never fire or discipline you. Rather, it means that the employer may be limited in what he or she can do--and when. If you violate the contract's terms, the employer can take an action against you.