1. All About Employment Contracts
2. Who Needs an Employment Contract?
3. What Is a Probationary Period?
4. Employment Contract Clauses

An employment contract form is a document employers and employees use to outline each other's rights, obligations, and responsibilities during a set work period. Employment contract forms can also be called employment agreements, contracts of employment, or job contracts.

All About Employment Contracts

An employment contract is a legal document which establishes the responsibilities and rights of two parties, specifically an employer and employee. It may include information related to:

  • The job description and duties
  • Compensation
  • Vacation time
  • Probationary periods
  • Termination procedures
  • Confidentiality duties
  • Additional information relevant to the employee or employer

Clauses included in the employment contract must be legal, reasonable, and fair to both parties involved in order to be considered enforceable in court. The contract is typically drawn up when a new employee is hired because it serves as a set of guidelines for the individual's future employment term.

Employment contracts give each party a certain level of protection. Contract terms can even limit the extent to which either person can terminate employment. Having an employment contract in place is different than “at-will” employment where either the employee or employer can terminate the position at any time or for any reason.

In some instances, an employer may require a new hire to sign an at-will agreement, but this type of agreement is generally just a clause of the employee handbook or offer letter, not an actual contract. By contrast, an employment contract is a written, legally binding agreement.

Who Needs an Employment Contract?

Employment contract forms are most utilized by human resource managers, recruitment officers, and other employers preparing to hire a new employee.

The majority of the time, employment contracts are used when hiring:

  • High-level management employees
  • Freelancers
  • Short-term contract employees.

For example, an employment contract may outline an employee's full- or part-time status. A full-time employee is someone who meets requirements for full-time hours with no predetermined employment end date. A permanent part-timer is an employee who doesn't work full-time but also has no predetermined employment end date.

For employees who have a prearranged end date to their employment, the contract will automatically expire on that end date. In this case, no notice is necessary from either party to end the employment.

What Is a Probationary Period?

Many employers require new hires to satisfactorily complete a probationary period. This term is generally three months or more and is used to determine if the employee will be a good fit for the company. During the probationary period, the employer can gauge whether the individual has the necessary skills to perform their duties and work for the company long term.

During the probationary period, the employer may choose to terminate the employee's position without notice, severance pay, or cause. Employees who satisfactorily complete the probationary period and decide to continue the job will qualify for permanent employment, health care, and any other benefits the employer offers.

Employment Contract Clauses

There are certain clauses contained in a standard employment contract:

  • Non-compete
  • Non-solicitation
  • Confidentiality

These clauses help protect the employer from circumstances in which an employer may cause the company to lose trade secrets, business, or other employees.

A non-compete clause prevents an employee from working with one of the company's competitors during or after the employment term. Most non-compete clauses last a certain amount of time after an employee leaves the company. They may include other requirements to be enforced, such as being limited to a certain geographic region. Non-compete clauses are beneficial to employers because they prevent employees from stealing your clients after they stop working for you.

Non-solicitation clauses prevent an employee from encouraging customers or other employees to move to another company or provider. This clause must also meet certain requirements and can only last for a predetermined amount of time after the employment ends.

Confidentiality clauses prevent employees from giving away confidential work information, including trade secrets. For example, a confidentiality clause keeps a former employee from revealing company secrets to anyone else without the permission of the company. Unlike the other clauses, a confidentiality clause can last indefinitely, meaning that the employee or former employee can never reveal company secrets. Some clauses, however, expire within a few years after the employment contract ends.
