Let's take a little closer look at the topic of the basic employment contract.
In general, a contract is an exchange of promises between parties to do or not do something that they agree upon. The parties have wide latitude to set the terms of their agreement as long as they do not include terms that violate the law or public policy. An employment agreement is usually entered into at the beginning of an employment relationship, although it can also be entered after the work actually starts. An employment contract defines the respective rights and obligations of employer and employee, but in simplest terms, the employer agrees to hire the individual in exchange for compensation. The worker agrees to, well, work under conditions that the company sets. An employment contract usually is contained in a formal written contract. Sometimes it can arise from an offer letter or an oral agreement. Enforceable contract obligations can sometimes be found in a personnel policy or employee handbook.
Employment contracts typically cover compensation and benefits issues--salary, commissions, bonus, stock options, retirement plan options, medical insurance benefits, severance benefits--it can be a long list. The company may guarantee a period of employment, ranging from months to years. The contract may contain an agreement that limits the reasons that the company is allowed to fire you.
There's more. Many employment contracts contain "restrictive covenants." These can include non-compete, non-solicitation, and confidentiality provisions that may restrict your ability to take certain jobs or do defined things during or after your employment ends. Because restrictive covenants are very important to your ongoing ability to make a living, and they can arise out of separate contracts or be contained in employment, benefit, or severance agreements, we're giving them their own category.
Things You May Not Know
- Contracts do not have to be in writing to be enforceable in court. Two people having a conversation can create a binding contract simply by agreeing on terms and shaking hands. The courts of New Jersey recognize this principle.
- Contracts can be for a set period of time. If an employer fires you early despite this kind of guarantee, you may have a right to require them to pay you for the remaining time on your contract. Think about the quarterback who is replaced before his contract expires and gets paid for the last three years in spite of the fact that he is no longer on the team. That's the kind of situation we're talking about here.
- Contracts can limit the reasons why the company can fire an employee. You may recall that most employment is "at-will" and can be terminated for any reason or no reason. Some contracts reduce the company's latitude to fire workers for any reason. This is often defined in terms of firing only for "just cause" or "good cause," terms that are essentially identical. Good cause can be defined by the parties as they wish but is usually addressed to serious behavior that is or borders on the criminal, fraud, abandonment of the job, and other kinds of seriously bad behavior.
- Contracts can be implied from things that you would not think are contractual. There are, but rarely, implied contracts that can arise from promises that a company makes in, for instance, an employee handbook. Once upon a time, these were more common, but most companies have gotten very careful about ensuring that their handbooks cannot be used to create an implied contract with their employees. Still, we do see occasional situations where smaller companies or startups blunder into an implied contract situation. It's something to keep in mind, especially if you're thinking of starting up a company and will have employees. You certainly do not want to be in a situation where you start out guns blazing but, to paraphrase Stinger from Top Gun, "your ego is writing checks your business can't cash."
How Are Breaches of Contract Remedied?
What are your rights if your employer breaches a contract? This can vary with the circumstances, but your rights can be protected through negotiation, mediation, or an adversarial process like arbitration or litigation (actually going to court). These are serious situations that you should not attempt to handle on your own unless the amount in dispute is very small. You should know that companies like to force employment disputes out of court and into arbitration. Many employment contracts and other documents may contain arbitration provisions. However, arbitration has been subject to abuse over time, and while it remains a favored way to handle disputes, the courts of New Jersey have been restricting the ability of companies to force arbitration upon unknowing or unwilling employees. Just because HR says that a dispute has to be arbitrated, you don't have to take them at their word. The arbitration provision may be invalid or unenforceable, or the law may have changed since you signed it. Contact an experienced employment lawyer for advice on this.
Learning About Your Employment Contract
"Knowledge is power," according to an old saying. We believe that. It's the reason that we make the information on this website available to you, so you have the information you need to make the very best decision. A big part of the decision-making process is knowing when you need help. Steinberg Law is here to help you when you need it. Common times when you may need help are:
- When accepting a new job and you need to know what you're signing up for,
- During your employment, if problems arise, and
- When your employment ends and especially if you are fired.
We are here to help you with these issues when they arise. Or we can help you to understand your employment situation, and rights and obligations, better.
One final word about timing. Things can happen very quickly in employment law. When you get a job offer you may have anywhere from a couple of days to a couple of weeks to accept it before the company will move on to the next candidate. If you're terminated and offered a separation agreement you will likely have 21 days to consider it. Don't waste time. Reach out for help fast. Don't be that person who goes to a lawyer saying "it's only a four-page agreement, how long could it take?" There may be a lot of bad hidden in those four pages, and an attorney needs time to negotiate a better deal for you. So while you shouldn't rush, be decisive.