Employers frequently use employment contracts to define the parameters of the employment relationship when recruiting new employees. The contract may specify the parties’ respective rights, duties, and limits. While employees may regard contracts as a security for their rights and expectations, contracts frequently result in the employee’s rights being restricted and the employer’s duties being limited in a number of critical areas.
Recognizing the consequences of a well-drafted employment contract enables employees and employers to define and establish the limits of their working relationships. Employees should always contact an employment lawyer for any questions or concerns they have regarding their employment contract.
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1. Employment Contract Format
Although it is ideal for both parties’ protection, an employment contract does not have to be in writing. Terms can be established by stated or inferred spoken agreement and through the parties’ actions.
Most employment lawyers advise employees against oral contracts because they are harder to prove in case of a dispute. With oral contracts, it’s up to the courts to figure out who is telling the truth, while with a written one, there is clear evidence of what was agreed upon.
Although employment contracts are often written at the outset of the partnership, they are not always permanent. These employment contracts typically change shortly after the employee starts working.
When an employee has been with an employer for an extended period and there have been changes such as organizational restructuring, remuneration increases, promotions, and other factors that have been mutually agreed upon, either expressly or through the parties’ conduct, new and modified terms of a contract can occur.
2. Implied Terms Are Often Included
Certain provisions of an employment contract are implied. This indicates that, even if the parties’ implied term is not expressly written or declared, it is reasonably expected by them. For example, it is implicit in every employment contract that the employer would offer fair notice in the case of a termination. Additionally, it is indicated that an employer may end the partnership without cause.
Another example is that staff will carry out their responsibilities with appropriate care and attention.
These implicit provisions of the employment contract may be amended by using clear, unambiguous written language that is legally sound, provided that the adjustments do not violate statutorily mandated minimum standards.
One area where such amendments are frequently made is termination clauses that try to limit an employee’s common-law right to notice. To be effective, such adjustments must be written plainly and must not violate current employment standards regulations.
3. Things Addressed in an Employment Contract
When creating an employment contract, one of the first things addressed is the job position that is being offered and accepted by the employee. In addition to the job position, the exact terms of employment are laid out in the agreement.
These contracts will also include information on grievance policies, holidays, and sick leave. The contract details the responsibilities of both the employee and the employer, along with what kind of compensation the employee is entitled to. Employment contracts can also address other things, including whether or not there is a probationary period for the employee.
Termination rights are also often addressed in the employment contract. Information on termination includes non-compete clauses, which dictate if an employee can work for a business’s competitors upon being terminated. They also detail how confidential information is handled upon an employee’s termination.
4. Difference Between Employment Contracts and Service Agreements
All employees and employers need to understand that a service agreement is not the same thing as an employment contract. The biggest difference is the service agreement is not used for employees. Instead, it’s for independent contractors and other service providers. The service agreement is a contract that covers a specific project. It is set for a certain length of time. Employment contracts are only used to hire actual employees of the business.
With that being said, it’s also important for employees and employers to understand the difference between an employee and an independent contractor. Employees are considered “employed” workers, while independent contractors are considered “self-employed” people.
Employees and contract workers are treated differently under the law. Their employers often give employees certain rights, but independent contractors, as self-employed individuals, are not guaranteed such rights. It is not always straightforward to determine which group an individual belongs to. In disagreements, courts will establish the proper category based on a variety of considerations.
Some of those considerations courts look at are:
- Where is the job being performed, such as on the business premises or at a different location?
- Are progress reports required?
- Who controls the project?
- Who provides the tools for the job?
- What skills are needed to perform the job?
- Does the hired person have control over when they work and for how long?
- Are insurance or other benefits given to the person hired for the job?
5. Understanding the Probationary Period
A probationary period is a specific time period following the employee’s start date during which any party may cancel the agreement. Termination without notice or compensation is permitted in some jurisdictions. However, wages are still owed to the employee for any hours already worked.
Numerous businesses need employees to satisfactorily complete a probationary period prior to being offered longer-term employment.
6. Is Notice Required Before Terminating Employees?
The objective of notice is to provide an opportunity for the employee to seek alternative employment or for the company to recruit a replacement employee. In most jurisdictions, employers are required by law to provide workers with notice, also known as pay in lieu of notice, prior to terminating employment.
Employers may dismiss an employee without notice in certain instances, provided that there is adequate “cause.” In most countries, if an employee’s employment is terminated for a reason, the employer is not required to offer notice or compensation in lieu of notice. However, the employer is responsible for appropriately communicating the cause for termination at the time of termination. The employer may be required to provide adequate grounds for termination before a court.