An employment contract is a foundational document for the employer-employee relationship. While most US employment is 'at-will,' written employment contracts provide clarity, protect both parties, and reduce the risk of disputes. Understanding what an employment contract should include helps employers draft better agreements and helps employees understand what they're agreeing to.
What Should an Employment Contract Include?
Basic Employment Terms
Every employment contract should include the job title and description, start date, work location and remote work policy, full-time or part-time status, work schedule and hours.
Compensation and Benefits
Clearly specify salary or hourly rate, pay frequency, overtime eligibility, bonus or commission structure (if any), equity or stock options (if any), health insurance and other benefits, vacation and paid time off policy, and any other compensation elements.
At-Will vs. Contract Employment
Most US employment is at-will, meaning either party can end the relationship at any time for any legal reason. An employment contract can modify this by specifying a term of employment or requiring cause for termination. Clearly state whether employment is at-will.
Confidentiality and IP Assignment
For most professional roles, employment contracts include provisions protecting the employer's confidential information and assigning intellectual property created during employment to the employer. Review these provisions carefully — they can affect what you can do after leaving a job.
Non-Compete and Non-Solicitation Clauses
Non-compete clauses restrict employees from working for competitors after leaving. These are highly controversial and heavily regulated. California, North Dakota, Minnesota, and Oklahoma effectively ban them. Other states allow them if reasonable in scope, duration, and geography. Non-solicitation clauses (preventing poaching of clients or colleagues) are more broadly enforceable.
✓ Key Takeaways
- Include compensation, duties, schedule, and at-will status clearly
- Non-compete clauses are banned or heavily restricted in several states
- IP assignment clauses can affect rights to work created on the job
- Have an attorney review employment contracts before signing
Frequently Asked Questions
If an employer requires a signed contract as a condition of employment, you must sign or decline the offer. Always read the contract carefully and negotiate any terms that concern you before signing.
Generally, both parties must agree to modify a contract. However, at-will terms may give employers more flexibility to change policies and compensation in some circumstances.
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