Glossary and Definitions
Employment Agreement (USA)
An Employment Contract is a legal document that outlines the terms of employment between an employer and an employee. If employment is intended to last more than one month, an employee should have a written contract within the first two months of being hired. Of course, it is most common for such a contract to be drafted and signed at the same time as the employment starts. An Employment Contract that is well-written will cover the following topics:
- Names of the Employer and Employee. You should also include contact information such as addresses and postal codes.
- Starting Date of Employment. This is important to keep track of, for reviews, seniority, and/or acquisition of new benefits as employment continues.
- Address of Employment. List the current office location. If it is possible that the office will move locations in the future, it may be worth noting in this section along with what would occur in that circumstance.
- Job Title and Description of Employment Duties. The job title should be the same as the one the employer used when advertising the position. Also, a description of all the expected employment duties should be listed. The employer may wish to include some flexibility here, in case employment duties change as time progresses.
- Salary. Make sure to include the rate of pay, and how and when the employee will receive payment. Make sure to note that the salary is before any applicable taxes or deductions are subtracted.
- Expenses. If the employee will be reimbursed for certain expenses (e.g. car expenses, moving expenses, etc), detail those expenses and make sure that the employee retains receipts or other proof that the expenses were legitimate.
- Hours Worked Each Week. The contract should outline how many hours of work are expected each week, and any restrictions on when these hours should be worked (e.g. should it be from 9-5 every day, or are hours flexible as long as they add up at the end of each week?). It is illegal to ask an employee to work more than 48 hours each week unless the employee also consents to work these extra hours.
- Time Off Work. Ensure that the employee is aware of how much time is permitted off work for vacations and/or sickness. For the case of holidays, the employer should think about whether there are specific time periods the employee cannot take off (e.g. around Christmas for a retail store), and whether unused holiday time carries over into the next calendar year. For the case of illness, the employer needs to determine how much notice is required for a sick day, at what point a doctor's note is required, and whether the employee will receive any pay during times of illness.
- Pension Details. Outline any applicable pensions in this section.
- Probationary Period. In case for some reason the employment arrangement is not working out, a probationary period can allow for termination of the employment contract by either the employer or the employee with a shorter notice period. Probation normally lasts a few weeks to a few months.
- Performance Assessments. If the employer wishes to assess employee skills and performance on a timely basis, it would be a good idea to mention that in the contract.
- Term of Employment. Indicate whether this is a temporary or on-going position. If it is a temporary position, include an estimated end date in the contract.
- Deductions. Outline any circumstances under which deductions from the employee's salary may be made.
- Confidentiality/Restrictive Covenants. Here, the employer can protect its important confidential information by stating things that the employee may not disclose. In addition, the employer can add a non-compete clause to prevent the employee from switching employment to a competing business, or attempting to entice other employees away. This section should mention the possibility of legal action if these terms are broken.
- Grievances. Outline the company's disciplinary policy and grievance procedures.
- Notice for Termination of Contract. This section includes a list of employee misconduct that may justify termination without notice. It also outlines the notice periods for termination of the contract by either the employer or employee. The employer should also outline any circumstances in which an employee will receive severance pay, and the amount of such pay.
- Other Clauses. An Employment Agreement should also contain several other clauses frequently found in contracts, such as severability (if one part of the document does not apply, the rest of the document remains in effect), prior agreements (that the current contract is the full and final agreement between the parties), and a note of which jurisdiction the contract is governed by.