Definition of an Employment Contract

Employment contracts can be verbal or written and may be specific to you or the same for an entire company. A contract can completely negate at-will employment, which makes it a useful tool for enticing new employees. Even without a specific agreement, a Find Law article in Reuters upholds that “the behavior of the employer and the employee can be viewed as an implied employment contract.”


An employment contract is “a legally enforceable agreement, either oral or written … which defines terms and conditions of employment,” according to QFinance. The contract lists the rights, expectations and obligations of both the company and the individual. A contact negates at will employment in many cases, and includes stipulations regarding promotions, rewards and terminations.


You may have a traditional written agreement, but often employment contracts are implied by your actions, through policy, memos or handbooks. Every contract should include the employee’s start date, salary and benefits. The agreement may also include a list of duties, a confidentiality clause, a non-competition agreement, and stipulations for termination and rewards. Talk to an attorney to make sure you understand all the provisions in your contract.


The duties section does not always list exact jobs. Instead, it may refer back to a description listed in the by-laws, handbook or other company literature. Often, phrases like “devote his full time, ability and attention to the business,” according to Ethan A Winning Associates, are used to imply a greater responsibility for the quality of work done. Your duties also list who you report to and your position in the chain of command.


A non-compete clause prevents a company from losing a good employee or supervisor to its competition. Usually, you agree that after you stop working for your current employer, you will wait a certain amount of time before working for any rival or similar company. Non-competition clauses are often limited to a specific geographical area.


A confidentiality agreement keeps the employee from sharing business information with outside sources. Often, the agreement extends after the employment is terminated. Employers use nondisclosure agreements to protect secret processes, data, formulas, plans or machinery used in production along with any other details about how they conduct business.

Stipulations And Termination

Some contracts include a specific employment period with a specified end date, such as 2010 through 2012, and some are more open-ended. In an exclusive employment stipulation, you agree that during the term of your employment you will not work for a similar or competing company. Sometimes this extends to voluntary services, shareholding and director positions as well. Your agreement may contain an at-will stipulation that protects the employer’s right to terminate your employment at-will if no other specifications are listed.


Your salary, payment dates, raise schedule may all be specified in your agreement. If you have no additional compensation clause, you cannot get additional pay for work outside of your contract. For instance, if you become an elected director or company officer you will not get any additional compensation for completing those duties.