4 Types of Employment Contracts

by | May 4, 2016 | U.S. Private and Emerging Business

Bringing aboard new employees? When considering which employment contracts would work best for your business, consider what an employment contract is and how your business can benefit from it? An employment contract is an agreement between employer and employee setting forth the terms of employment. An employment contract may be written, oral, or implied. There are four types of contracts that fit into these three categories. Businesses can offer At-Will Employment Contracts, Written Employment Contracts, Oral Employment Contracts, or Implied Employment Contracts.

4 Employment Contracts

1.At-Will Employment Contracts: This is the most common employment contract in the United States. In this type of contract the employee can quit or be fired at any time for any reason as long as it is not illegal. Illegal reasons would include discrimination such as terminating a person in a protected class or for retaliation. When a new employee is hired he receives a contract from his employer that states his salary, position, duties and hours. The employee signs the contract accepting the terms. It is also signed by the employer. Although, the employee can be terminated at-will, he still has the right to enforce the terms of the contract.

2.Written Employment Contracts: A written contract is a much more detailed contract. It sets out specific obligations for both the employer and the employee. A written contract generally runs for a specific length of time. It normally requires the employee to agree to work for a fixed period of time and for the employer to retain them for the decided on period of time. Specific terms of termination are laid out in a written contract. An Employee cannot be terminated unless they violate the terms of the contract.

3.Oral Employment Contracts: Oral contracts are legal and binding; however, they are much more difficult to prove. An oral contract may be for at-will employment which means that the employer can terminate your employment at any time, or it may be orally agreed that the employee will work for a specific amount of time as long as they are doing what the oral agreement required of them. If the employee is terminated for any reason other than the terms set forth in the oral agreement it would be considered a breach of contract. The basis for enforcing this type of contract would be the reliance of the parties, the surrounding circumstances, and any documentation that shows evidence of the oral agreement.

4.Implied Oral Contracts: These contracts are not formally documented. They can be a combination of both written and oral statements. Most implied oral contract issues do not arise until after the employee has been terminated. An employee may believe that it has been implied that he will not be terminated without good cause. The employer may argue that the employee was an at-will employee. If the employee signed an at-will agreement he will not be permitted to argue that he had an implied agreement. The court will have to determine whether there was an implied oral contract or not. Many factors will be taken into consideration including the length of time that an employee worked for the company and their performance reviews.

When trying to determine the best choice of business contract for your new company it is wise to let a qualified business attorney assist you with the difficult decisions that you are facing. The professionals at Gonzalo Law LLC can answer your legal questions regarding employment contracts and any other questions you may have regarding your business.