Table of Contents
Employment contract is a bilateral or two-sided agreement that records the exchange of remuneration and services for a given period of time. In addition, the contract entails the agreement between the employee and the employer that specifies the duties, responsibilities, and the employee’s rights, thus facilitating the effectiveness of the contract. The court recognizes employment contact as a form of agreement or bond for personal services, which expresses social relationships between the employee and employer. The contract agreement can be done in written or oral form when the employee takes the job offer. When the employee starts the job, it means that he or she has agreed with the terms and conditions set by the employer. The contract is necessary for the employer and the working environment because it helps in settling disputes based on the agreed terms and conditions of employment. Therefore, this paper will analyze the employment contract in the working environment.
Nature of Employment Contract
The employment contract contains various conditions and terms where both the employer and employee are bound. Breaching of such conditions and terms will terminate the contract. The condition and terms regard the list of benefits, timing, working place, status designated, restraint of trade, wages, and others. Another important aspect that the contract covers is the settlement of disagreements between the employee and employer. The conditions and terms of employment are always provided before the employee sign the contract, so that he or she may understand the terms before he or she is bounded by them. Then the two parties are allowed to sign the contract after reading the conditions and terms and being sure that they understand them well (Labor Employment Law, 2009). Subsequent notifications or changes to the contract will amount to modifications of the original contract. The changes in the contract will not bid all the parties unless they assent to it. In the normal contract, all the parties have an equal footing during the negotiation process. On the other hand, an employee stands on the receiving side when it comes to employment contract because he or she is at the mercy of the employer. As a result, he or she will not have enough bargaining power for the contract (Panken, 2010).
In most cases, employment contracts are meant to force the employee not to reveal any of the trade secrets and confidential information. Even after terminating the employment contract, he or she is bound to protect trade secrets and any other confidential information. The business information must remain confidential until the time the employer decides to make it public. Therefore, employees have the responsibility of maintaining the confidentiality of business information as indicated in the contract. Moreover, employees have an obligation to ensure that their employer achieves high production through their efficient work (Sella, 2015).
The contract of employment is negotiated between two parties, either a leased employee, an employer and an independent contractor, or an employee and an employer. In a contract, the employee is more focused on other parties because of the employment services offered by the party. The court understands employment as an offered service, including services performed by the employee for wage, in interstate commerce or contract of written, hire or oral. Accordingly, employees require greater protections in their working environment, for example, as an independent contractor. It is critical for the employee to require a contract that states the obligations and rights of both parties. In any business, the most important factor is the ability to control the means of accomplishing the aims and attaining results. The employer will always look for a way of gaining control of his or her business, including the control of employees. The relationship of an employer-employee exists when the employer has complete control, authority, and the right to govern workers (Labor Employment Law, 2009).
Contracts are strictly considered when employees have issues or conflicts with their employer. This means that all the details in the contract are important and must be understood well. For example, when Joan started working in a foreign country, she signed a written contract indicating that she would work for the company for two years. When her contract expired, she rejected the offer of extending her services by signing in another contract. In this case, Joan was unemployed involuntarily because the contract period expired. The employer was not able to modify the original contract with Joan even though they wanted to retain her in the business (Panken, 2010). The fact that the employment contract was expired meant that she was free to go back home or sign in a new contract with the employer. In most cases, employees fail to sign the second contract with the employer if there were many working issues due to, for example, the working environment. This happens when the employer has the power to control employees thanks to the signed contract.
Employment Situations and Contracts of Employment
In most cases, employers do not do written agreement when they employ workers in their companies. This fact reveals that written contracts of employment are generally exceptional rather than a rule. However, it makes good sense in some situations to demand the signature of the employee to confirm his or her agreement with terms and conditions of employment. Human resource professionals need to understand some of the contractual nuances and concepts because they prepare them for handling the relationship between employees and employers. In some instances, written contracts in a paper form that are filed in the offices drawers may not be relevant in a case that deals with the employment relationship (Honeyball, 2006).
In an employment relationship, the court is able to determine who is reliable to the other party based on various evidences without depending on written documents. For example, in most states. the applicant or employee is allowed to sue the employer when an “implied contract” is made between the two parties. On the other hand, the contract of employment is considered to be “at will” when the written contract is not signed. This kind of rule has evolved in the judicial system through centuries. The rule of “at will” indicates that when the two parties in an employment relationship agrees or sign a contract without defining duration, any party can terminate the contract. The termination of the employment contract at any given time is allowed with any legal reason (Sella, 2015).
What an Employment Contract Does
Written contracts typically fire the employee or limit his or her ability to discipline them in the future. Based on these reasons, most lawyers do not recommend written contracts. On the other hand, due to the important role technical specialists and to-level executives’ plays, their employment contracts are more attractive. Their contracts have various benefits such as severance packages, stock options, and many others, which are meant to attract them to the company. High-level contracts cost employers a lot of time and money. As a result of the high cost, employers normally engages lawyers in drafting the contract that accounts pros and cons and even specific objectives of the investment. In addition, the contract clearly describes the responsibilities and duties of the employee and the expectations of the employer in relation to the salary offered. Further, the contract addresses other aspects of the employment relationship like grounds for termination, job duration, limitations depending on the employee’s ability, and protection of client lists and secrets. Moreover, various benefits such as disability leave, vacation leave, health insurance, and many other are defined in the employment contract. Finally, the ownership of employee’s work product and method of solving any dispute that arises is also indicated in the contract (Labor Employment Law, 2009). For example, the situation where the employee invents gadgets and write books for the employer must be included in the contract. Generally, the contract is meant to create understanding between the employees and the employer. This understanding helps in enhancing the working environment for the company or the business.
Contracts of employment are important for the employee at will because it documents the rights of employers when they want to fire their employees. This is possible if the contract details the terms of employment and grounds for employment termination. For instance, the contract may indicate two or more years for a given employment. For those employees who are employed at will, most employers demand that they write an agreement to indicate so. The written document normally allows them to quit the job due to any reason as long as it is legal (Levine, 2002). For example, employees may be asked by the employer to sign an agreement for at-will, handbook acknowledgement, or an offer letter. However, the above documents do not limit the rights of the employer to fire employees. Instead, the written document affirms the general rights of employer to fire at will.
Advantages of Employment Contracts
Employment contracts play a critical role in controlling the chances or the ability of the employee to leave the business. It always time consuming and costly to train an employee for a certain position or prepare him or her for the responsibility in the business. In a situation where the employee has been trained, the employer tends to ensure that he or she signs a written contract for a specific term. This kind of employment contracts is helpful to the business because it prevents employees from quitting until an agreed period ends. For example, the business may write an employment contract that will require the employee to give a notice of 90 days or even two years before quitting the job. Therefore, the contract in this case is helpful to the employer because it spares the business the cost of training and recruiting other employees for the same position. On the other hand, the employee is forced or required to keep working for the business until the time agreed in the contract is over. In a situation where the employee breaks the contract agreement by quitting earlier, he or she will be fined an amount relatively equivalent for training another employee (Sella, 2015). Therefore, the contract in this case is an advantage on the side of the employer.
On the other hand, contracts of employment make sense when employees are benefiting through learning, being exposed to sensitive and confidential information concerning the business. According to the contract, the employer can include clauses that maintain confidentiality by preventing employees from using information for personal gain or disclosing it. Similarly, the contract protects employers by restricting the employee from competing against the employer after quitting the job. In most cases, the contract of employment encourages highly skilled employees to work for the business instead of competing (Levine, 2002). This is achievable when employers sweeten their deals by giving beneficial terms and promising job security to employees and indicate the agreement in a written form.
Employers manage to get great control of their employees through the written employment contract. For example, when the contract specifies the performance standards for the employee, the employer can terminate his or her contract when he or she fails to meet the standards. Similarly, the employer can also terminate employment if the contract of employment allows it. In most cases, the employment contract works to the advantage of the employer because he or she is the one who drafts the contract document (Barney, 2007).
Disadvantages of Employment Contracts
Contracts of employment have never been a one-way street. They generally bind both the employee and the employer, thus limiting flexibility. The contract becomes a challenge or a problem when the employer often changes the terms and conditions of employment to be able to meet his or her business objectives. This kind of employers does not often consider the rights and welfare of their employees. Unfortunately, the contract does not allow these sudden changes because it demands renegotiation where the employee may disagree with the employer’s proposal. Therefore, the employer will be forced to stick to the agreed terms and condition until the specified period is over (Obdyke, 2007). This limits the employer from making changes in the working environment without consulting employees.
The contract limits employers from terminating employment of those employees who are not performing to their expectations. For example, the employer cannot end a three-year employment contract within seven months just because he or she does not need the services from him or her anymore. The business will be forced to wait for three years or negotiate with the employee to resolve the issue. Therefore, the employment contract in this situation is a disadvantage to the employer because he or she cannot breach the contract. Likewise, if the contract indicates that the employer should provide health benefits, he or she will continue providing them to the end of the contract. Those employers who intend to save costs by terminating health and other benefits cannot do it because they are limited by the contract. The only way they can do it is through the consent of the employee, but the process is time and money consuming (Barney, 2007). Therefore, the business will continue providing as per the contract because they are bound by it.
Apart from the employer, the employee may also breach the contract when he or she refuses to perform the duties they agreed upon with the employer (Heathfield, 2008). In some cases, the employee may be added new or more responsibilities or duties when he or she advances in skills either through learning or experience. For example, Annie who used to work in ABC firm as a typist has now advanced her skills and even acquired more. During the night, she used to attend a school, learning stenography (Levine, 2002). When the employer realized that she has acquired stenographic skills, he made a new agreement with her of handling dictations. This was the new and second agreement that was incorporated into the old contract. Therefore, Annie agreed to the new condition of employment in exchange for an addition to her salary. In a situation where Annie refuses to perform her duties of handling dictations, she will be breaching the contract law, thus she may be regarded as reliable.
Another disadvantage on the side of the employer is that a special obligation to handle affairs and deal fairly with the employee is introduced. The legal term refers to this as “the covenant of fair dealing and good faith.” (Obdyke, 2007). In a case where the jury or judge has found out that the employer treats the employee unfairly, he or she will be legally responsible for violating the employment contract. The contract reveals that the employer is required to always act in good faith because he or she is bound by the contract. Similarly, it harms the business when the human resource department does not act responsibly according to the employment contract relationship.
Understanding the Contract Clauses
The employee is required to read the employment contract and understand it before signing it. They are required to pay close attention to every clause in the contract and if they are not comfortable with a certain clause, they should request an adjustment or removal of the clause. It is necessary and important for the employee to stick to what he or she believes is right for him or her at this stage rather than ignoring it. All the verbal negotiations should also be written to indicate the agreement between the two parties (Labor Employment Law, 2009). Once the contract is signed without any changes, it means the employee will be bound by the contract with all the clauses. Moreover, employees need to understand what they should expect or receive from the job in terms of benefits, salary, and other factors. Benefits entails a lot of things such as healthcare, retirement, parking space, subsidized childcare, access to a gym, sick days, and many others. Any request or discussion that has been agreed by the two parties should always be included in the contract because it helps in avoiding confrontations and even solving conflicts (Heathfield, 2008).
Always consider whether the contract mentions raises or performance bonuses. For example, in a case where the contract goes for five years, it means that the employee will be employed for the similar rates during the whole employment. Therefore, employees need to get clear conditions for performance bonuses and raises included in their contracts (Levine, 2002). Also, the contract must indicate whether severance will be received by employees in a situation where their employment contract is terminated before the set date. Similarly, the contract should be clear whether they will be penalized if they quit the job before their contract ends. Finally, the contract needs to provide the strategies for solving issues between the two parties (Sella, 2015). The contract of employment is an agreement that is meant to facilitate a good employer-employee relationship. Moreover, the written document of the contract needs to support both parties (the employer and employee). Both parties, especially the employee, should read the contract properly and understand it before signing it. This helps in creating a contract that is comprehensive and helpful to both parties.