What Are Common Problems with Employment Contracts?

David ManesFeatured

Contracts are a foundation for employment, whether you’re a freelancer or an employee. Anything can breakdown though. Contracts are no different. When you are staring at an employment contract, you should be aware of the potential problems with the wording.

Sure, you could do this on your own, but a lawyer is trained to understand the tricky language of contracts. Improve the chances of not dealing with a bad contract by having a lawyer analyze your employment contract.

What Are Common Problems with Employment Contracts?

Before we move into the common problems with employment contracts, it’s important to have a brief understanding of contract types. This will help you understand the problems that can crop up.

Quick Overview of Contract Types

Three main types of contracts exist: written, oral, and implied. While written is the easiest to uphold, an oral or implied contract can also be considered legally binding. When you suspect that your contract has been broken, your first step should be to evaluate what your contract, whether written or oral, promised to provide.

Written Contracts

A written document binds two parties together, exchanging services for a certain amount of money. Written agreements can be used for independent contractors as well as at-will employment. High-level employees may have a written contract that lays out criteria, obligating them to remain with the company for a certain period of time, and that contract may also specify the only reasons allowed for termination.

Oral Contracts

An agreement that occurs verbally without being written down is an oral contract. A verbal agreement is legally binding. When an employer calls a job applicant and offers the job with a start date and the applicant accepts, this is considered an oral contract. Naturally, an oral contract is more difficult to prove in court, but it is considered legally binding.

Implied Contracts

The trickiest of agreements is a combination of written and oral contracts as well as the employer’s pattern of behavior. An implied contract is usually called upon after an employee has been fired. The employee tries to prove that an implied contract existed, which makes the termination a breach of contract.

Facts to Consider

  • Job security assurances
  • Employer policies
  • An employee’s tenure

What Elements are a Part of an Employment Contract?

Contracts detail a number of important elements for employment. Most of the time, a contract outlines the employee position, the salary, and other such aspects. While most employees may just sign an employment contract, employees do have the ability to negotiate items in their contract.

Contract Elements

  • Job duration
  • Employee tasks
  • Termination grounds
  • Employee benefits
  • Anti-compete clause
  • Trade secret protections
  • Company ownership of employee’s work
  • Dispute resolving methods

What’s a Written At-Will Agreement?

In some cases, an employer has a new employee sign a written at-will employment contract. Basically, this document usually further affirms the employer’s right to terminate an employee at any time. This contract can be a signed offer letter, handbook acknowledgment, or an at-will employment contract.

Problems with Employment Contracts

While employment contracts try to handle and resolve all possible issues before they occur, sometimes that’s just not possible. Contracts lay out the structure for handling different situations. A contract limits the employee and the employer.

No Contract

That might sound obvious, but it can certainly cause employment troubles. Small businesses may hire employees without outlining employment. Without these basic terms, a lot of confusion can occur.

Out of Date

Since employment law is constantly changing, employers need to ensure that employment contracts are updated appropriately. An out of date contract will do nothing to protect the employment relationship. If paperwork fails to keep up with current law, the contract could cause more harm than good.

Irrelevant

Contracts that are borrowed from another business and recreated for a different business often include irrelevant requirements. For one business, it may be appropriate to include a non-compete clause. But in another business, that clause would not make sense and might be unreasonable to include.

Unclear Wording

Vague wording heightens misunderstandings within a contract. While the contract might have outlined a bunch of different ways to handle all sorts of employment issues, unclear wording can carry a different meaning for each reader. Contracts should be written clearly so no extra interpretations occur.

Long-winded

Too many words can have the same effect as irrelevant information or unclear wording. Sometimes five words can do the job of one hundred. Of course, some think that by having lots of words they are more likely to be more protected. That’s not necessarily the case.

Inconsistency

Employers have different types of employees who may or may not have identical terms and conditions for their roles in the company. While some clauses will make sense, others will not. Contracts should be consistent between similarly situated employees.

Future Changes

A contract binds employer to employee and the other way around. If the employer wants to make a business change, the employer needs to be aware so as not to breach the contract. Any changes will need to be renegotiated, and an employee is within their rights to not agree.

Duty of Good Faith

When an employment contract is in place, both employee and employer are considered to be in a “covenant of good faith and fair dealing.” This means that when either party fails a specific obligation to the other, they may be considered responsible for violating the contract and breaching the duty to act in good faith.

Employment contracts provide many protections for employers and employees alike while also having a slew of their own problems. Employment contract problems can be difficult to decipher. If you believe that your employment agreement has been violated, speak with an employment lawyer to determine your legal options.

Chat with an employment attorney: (412) 626-5626 or lawyer@lawkm.com.