The Basics of the Employment Agreement
An employment agreement is a written, binding contract between an employer and a prospective or current employee. When properly drafted, an employment agreement can be an effective tool for protecting a company’s financial and intellectual resources. Most organizations require an employment contract as a condition of employment when the position is highly influential, involves sensitive trade secrets or client list information, or requires a significant amount of “front-end” cost such as extensive or specialized training.
Your company may also choose to use a separation or severance agreement at the end of the employment relationship, or enter into an employment agreement that deals with a specific subject such as arbitration or noncompetition. An employment agreement is legally binding on the employer, so it is always advisable to have your company’s employment agreements drafted and reviewed by counsel.
Basic Requirements of an Employment Agreement
In order for an employment agreement to be enforceable in a court of law, certain basic requirements must be met. There must be an offer, acceptance of the offer, and adequate consideration. In the case of employment agreements, the offer and acceptance are relatively straightforward: The employer offers the employee a job under certain terms and conditions and, after negotiations, the offer is accepted.
“Adequate consideration” means that there is a “bargained-for exchange” between the parties to the employment agreement. This requirement is usually satisfied when the employee agrees to provide services to the employer, and the employer agrees to pay the employee for the services.
Essentials for Every Employment Contract
Here are some of the elements every employment agreement must include:
- Identification of the parties to the contract
- An offer and acceptance clause
- A statement of consideration
- The term of the employment agreement
- The signatures of all parties to the contract
- A statement that the written document is the entire agreement between the parties on the subject matter therein
- A statement that the performance of the contract by the employee will not violate or conflict in any way with any other agreement to which the employee is bound
- A provision setting forth the state law under which the agreement will be interpreted
- A severability clause providing that if any part of the agreement is held to be invalid, illegal, or unenforceable, the remaining provisions of the agreement will be enforced