It’s an open question as to whether or not anyone actually “needs” a written employment contract. The fact of the matter is, whether or not it is in writing, every employee and every employer actually has an employment contract, because implied terms and conditions can be said to exist based on the working history of both, as customs and practices may develop that can be considered contractual entitlements by either party. The problem with this type of arrangement is that there may be disagreements in how the employer and the employee visualize the individual terms and that clash can result in conflicts that can endanger the employment relationship.

Because people see things differently quite often, in cases when the employer wants to clearly set out employment terms and conditions, doing so in writing is advisable, to avoid ambiguity or confusion. However, written employment contracts don’t just benefit the employer; employees also benefit by understanding all of the parameters of their employment. A written employment contract can take a lot of the mystery out of the employment relationship and clarify for both parties exactly what can be done, when and under what circumstances.

Besides laying out exactly what an employee’s duties are and what he or she gets in return, like salary, overtime and benefits, a written employment contract can also spell out some other details, to make them less confusing later on. For example, the employer can spell out very specific performance objectives and possible grounds for termination, and then detail the exact process for termination. They can also lay out the details regarding the ownership of an employee’s work product, or his or her responsibility to protect the company’s trade secrets and client lists, as well as to protect client privacy. It’s also possible to spell out a method for resolving disputes that arise from the agreement.

Employment contracts can be a very useful tool in many circumstances, especially if an employer wants to exercise a little more control over the employee and put themselves in a better position. Some of the terms of a written contract can lock an employee into a specific term of employment, or even give him or her enough notice to replace and properly train a replacement should the employee want to move on. For example, if the traditional two weeks’ notice isn’t sufficient, the contract could specify a notice of at least 60 days, and specify a penalty for not doing so.

All of the above can be great for employers and employees, because it takes a lot of the guesswork out of the employment relationship. Many of these things can’t necessarily be accomplished via a verbal agreement, and verbal agreements are largely unenforceable, in any case, which means they’re really not great for anyone. They can be especially hard on employees, who often need the most protection. There are many reasons why a verbal agreement is almost never sufficient. What if there is a dispute between an employee and a manager about what was said in the past? It will be hard to prove what was or was not said. Also, what if the manager who made all of those verbal promises is transferred or leaves the company, and no one available can confirm the agreement? For that matter, what if you make a verbal agreement with one manager and another denies that occurred, or that what the other manager told you did not comport with company policy or something?

Everyone on both sides of the employment contract should understand that no employment contract works one way; it binds both parties to certain terms and conditions and it can only be changed if both sides agree. A business can’t unilaterally change the agreement without the acquiescence of the employee, even if the business changes and the contract terms no longer fit. For example, if the employer guarantees the employee certain benefits, they can’t just cut off those benefits because revenues are down. Also, the existence of a written employment contract brings with it an obligation on the part of the employer to deal with the employee in good faith and fair dealing, which means that any judge or jury who thinks one party is being unfair to the other may make things difficult for them in a legal conflict.

If you are an employer or employee in need of an employment contract, please be sure to consult with an attorney to make sure it’s done right and reduce the chance of problems arising down the road.

References:

NOLO. Written Employment Contracts: Pros and Cons

Ask The Headhunter. Employment Contracts: Everyone Needs Promise Protection

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