Most companies require at least some of their employees to sign an employment agreement or contract. These documents are typically required for executive, administrative and professional employees, especially if they control or have access to private and sensitive information.
While contracts are often not deemed necessary or required for specific roles within a company, they are crucial documents that protect the worker and employer when done correctly. Employment contracts differ depending upon the company, industry and other factors. Let’s examine essential elements usually included.
Components of an employment agreement
Whether you are a startup or have been in business for years, employment contracts can be challenging as labor laws frequently change. That’s why it’s advisable to consult an experienced attorney when drafting these documents. In most cases, contracts include these basic items:
- Job details: This information was likely in the job posting and includes the title, description and department. This section should also outline requirements, such as experience, skill level or education.
- Classification: State whether the position is for a full-time employee or contractor, which determines tax and benefit considerations. This issue has become complex in California, especially in light of Assembly Bill 5, which limits which workers can be classified as contractors.
- Pay and benefits: State whether compensation is salaried or an hourly wage. Other things to include are health benefits, 401k or other retirement plans, bonuses, raises and other incentives, such as stock options and signing bonuses.
- PTO accrual: While personal time off may be listed in the previous category, this section should detail how employees accrue vacations, sick days and other PTO options.
- Contract period: Most contracts should have a start date and end date, although some exceptions exist. The document should also lay out whether the person will work a full-time or part-time schedule or if opportunities are available only on an “as-needed” basis.
- Confidentiality: Every business has information it needs to protect. The contract should outline what employees can and can’t say about the company, especially on social media. For workers with knowledge of sensitive data or procedures, the employer should consider clauses limiting their ability to share confidential information if they go to work for a competitor, even when the contract is no longer in effect.
- Termination: The document should clearly state what either party must do to end the employment relationship prior to the end date. The best case is that employees and employers mutually agree to part ways, but this doesn’t happen in many cases. The contract might also outline severance packages plus any restrictions the employee must follow after leaving the company.
Drafting clear and precise contracts is essential
Employment contracts can be extremely complicated, and employees may violate provisions regardless of whether they understand the contract they signed. The best way to prevent this is to write clear and comprehensive agreements with the help of a lawyer who is knowledgeable about California’s employment laws.