Employment Contracts From an Employee Perspective: What to Look Out For (with Templates)

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Date Created: 10 Aug 2020
Last Update: 29 Sep 2020

What is an Employment Contract? Why is it important?

 

Whether you have just received a job offer for a new job or if you are a tenured employee, an employment contract is one of the most important documents you will have to sign. An employment contract is a legally binding document that dictates what you are entitled to as an employee as well as what your obligations are towards the company. It binds both you and your employer with the terms and conditions stated in the contract and an updated contract should be issued shall there be any changes of terms.

 

Having an employment contract is vital for maintaining a clear and transparent employment relationship as it clearly lays out your employers’ expectations and the rights entitled by you. Although employers do not have legal obligations in issuing an employment contract in some jurisdiction, it is common and general practice to have a signed employment contract provided by the employer.  The employment contract is to be used as the legal basis for determination should the parties be caught in employment disputes in the future. 

 

As such, it is of vital importance for the employee to read the employment contract thoroughly before singing. However, it is common for some employees not to read their employment contracts as they are seen as a given and cannot be changed. This will inevitably lead to knowledge gaps in regards to the entitled rights and benefits of the employees. Another factor is the complexity in wordings and terms used in drafting employment contracts where some employees might not be competent enough to understand.  Furthermore, as the contract is between yourself in the capacity of an employee and a company, you may feel as if there is a power imbalance and that you may not want to raise any issues prior to the signing the employment contract.

 

This article will answer some commonly asked questions about employment contracts and give you advice on what to look out for, so read on!

 

1        What is commonly included in an employment contract?

 

Employment contracts generally set out the relationship between the employer and the employee. As such, it contains clauses such as:

  • Details about your position, duties, and obligations;
  • Employment period;
  • Working hours;
  • Wages and remuneration package;
  • Details about leave you are entitled to;
  • Details about probational period;
  • Confidentiality agreement; and
  • Restrictive covenants.

Often employers tend to use complex and professional terms while drafting employment contracts and you might not fully understand the context of the contract. You should raise any questions directly with the Human Resource department of your employer and ensure that you are comfortable before signing. You may consider seeking legal advice if your employment contract is of a sufficient value and you feel there is a serious power imbalance between you and your employer.

Another option is for you to compare your contract with the terms of the employment contract templates provided by DocPro as a reference:

 

Employee’s Status

Share Options

Favor

Link to Template

Junior Employee

With Share Options

Employee

https://docpro.com/doc281/employment-agreement-junior-employee-with-share-options-employee

Company

https://docpro.com/doc282/employment-agreement-junior-employee-with-share-options-company

Neutral

https://docpro.com/doc280/employment-agreement-junior-employee-with-share-options-neutral

Without Share Options

Employee

https://docpro.com/doc284/employment-agreement-junior-employee-without-share-options-employee

Company

https://docpro.com/doc283/employment-agreement-junior-employee-without-share-options-company

Neutral

https://docpro.com/doc285/employment-agreement-junior-employee-without-share-options-neutral

Senior Employee

With Share Options

Employee

https://docpro.com/doc275/employment-agreement-senior-employee-with-share-options-employee

Company

https://docpro.com/doc276/employment-agreement-senior-employee-with-share-options-company

Neutral

https://docpro.com/doc274/employment-agreement-senior-employee-with-share-options-neutral-2

Without Share Options

Employee

https://docpro.com/doc278/employment-agreement-senior-employee-without-share-options-employee

Company

https://docpro.com/doc277/employment-agreement-senior-employee-without-share-options-company

Neutral

https://docpro.com/doc279/employment-agreement-senior-employee-without-share-options-neutral

Director

N/A

https://docpro.com/doc1510/directors-service-agreement-employment

Junior/ Mid-Level Employee

https://docpro.com/doc1088/employment-agreement-for-junior-mid-level-staff-simple-form-employer-favoured

Unpaid Intern

https://docpro.com/doc1560/internship-agreement-hourly-unpaid-contractor

Paid Intern

https://docpro.com/doc1559/internship-agreement-salary-employee

Foreign Domestic Worker

https://docpro.com/doc577/foreign-domestic-worker-employment-agreement-employer

 

 

 

2        What types of employment contracts are there?

 

Depending on your jurisdiction, there are different types of employment contracts. Generally, different employees have different employment contracts. The primary difference between the employment contracts is the enclosed terms which reflect the relationship between the two parties. Essentially, depending on your position, the nature of your employment, and the benefits you have, you will have a different contract.

So, do not be surprised if your full-time employment contract differs from your part-time employment contract. You should make sure the type of your contract is clearly stipulated in your employment contract so as to receive full protection from employment laws and to get the benefits you are entitled to.

Full-time employees and tenured employees are likely to have more benefits conferred to them, including healthcare and dental. Some benefits may also be legally required for full-time employees, such as paid sick leave and maternity leave.

 

For interns and part-time employees, they would have fewer benefits offered to them than full-time and tenured employees. This is mainly because part-time employees do not work a certain number of hours in order to qualify for such benefits. As for interns, as the nature of their employment is mainly to gain working experience, the main benefit is the working experience itself. Some internships are paid and some are unpaid - if the internship is unpaid, you may have a clause in your contract which waives your right to receiving remuneration. Depending on your jurisdiction, you may also be asked to sign a declaration in front of a notary, officially waiving your right to remuneration.

 

 

3        Are you an Employee or an Independent Contractor?

 

Contract workers have a significantly different contract from that of other employees. This is because contract workers are not employees per se. With contract workers, the primary goal of the contract is to complete a certain task in order to receive payment - once the task has been completed, the employment is also concluded. As such, they are not entitled to any benefits, leave, retirement fund, notice period or other legal protections. Furthermore, contract workers are not considered employees of the company as they normally work for a short period of time in order to perform ancillary tasks.

For some functions (such as sales) that are commission-based, it is common for the employers to hire even full-time staff as “independent contractors”. In any case, some employers do not wish to give their staff the status of “employees” because (i) they want to cheat their workers from benefits; or (ii) they do not have internal headcounts to hire employees. Thus it is of fundamental importance to determine what your employment status is under the contract, and raise any queries with Human Resources if required.

 

 

4        Whether an Oral Employment Contract is Valid?

 

It is possible for you and your employer to form a contract and agree to its term verbally before commencing your employment – this is also known as an oral employment contract. Although your employer and you might have talked through some details about terms and conditions about your anticipated position, none of these information has been documented into a formal agreement and been signed by either of the parties.

In most jurisdictions, verbal contracts are valid if evidence can be shown that a contract was formed and all the essential elements for the formation of a contract if evidenced. The essential elements for a valid contract are: offer, acceptance, consideration, certainty, capacity, legality, parties’ legal intention.

 

Although you can enter into can be oral, it doesn’t mean you should. While some oral contracts are valid, written employment contracts are highly preferred because oral contracts can be hard to prove when disputes arise. Having everything in writing will better guarantee your rights as an employee. After you make the oral contract and agree to it, you should ask for a copy of the contract in writing.

 

Aside from the contracts themselves, it is also possible to orally agree on terms that are not written in the contract. However, like the oral contract, it is advisable that after you orally agree on the terms, that it is written down in order to ensure that what was agreed upon is properly documented.

 

 

5        What are non-disclosure agreements, non-compete agreements, and non-solicitation agreements?

 

Your employer might require you to sign a separate non-disclosure agreement (NDA) or a non-compete agreement in addition to your employment contract, where more often than not are they incorporated as clauses in your employment contract. They are also known as restrictive clauses as they restrict your rights.

It might seem counter-intuitive to sign documents containing such restrictive covenants that restrict your right, they are essential to certain businesses with confidential information to protect. Businesses generally have confidential information, trade secret or clients informaiton which employers wish to (or are required under law to) protect with the best of their endeavours. By signing such agreements or employment contracts with these clauses being incorporated, you will be restricted from exposing confidential information of the company during your period of employment and/or when working for a competitor after you left the company. Your employer can thus entrust you with the information required to perform your duties. 

 

What are the common types of such restrictive clauses?

 

Non-compete agreements are usually introduced when you work in a relatively competitive industry such as education or sales. These agreements prevent you from seeking employment from the company’s competitors or for business with similar nature with the company you are working for a certain period of time after your contract is terminated. This is to protect the company from losing business and to prevent you from taking the company’s business elsewhere. 

 

Non-solicitation agreements are introduced when you work with a large client base. These agreements restrict you from soliciting or contacting clients of your company for a certain period of time after your employment is concluded. Like the above agreements, these protect the company’s economic interests.

 

Non-poaching clauses are introduced to prevent you from poaching your formers colleagues for a period of time after you have terminated employment contract with the company. This is usually included to protect the stability of the workforce and human resources of a company.

 

General confidentiality clauses prevent you from disclosing confidential information, proprietary information, and trade secrets such as operational details, clients list to external parties.

 

Are restrictive clauses legally binding on me?

 

Restrictive clauses are generally binding on you once you have signed any documents containing them. However, they might be unenforceable in the legal sense if they are drafted too wide and being too harsh. Hence it is of most importance for you to read your employment contract or any similar documents and make sure you understand each and every term before signing. If you believe the restrictive clauses are unreasonable, you might wish to clarify with your employer or seek legal advice to verify your stance.

 

Regarding the validity and enforceability of different clauses, they are determined on a case-by-case basis as employment rights vary from jurisdiction-to-jurisdiction.

  • Non-compete clause precludes you from working for a competitor for a period of time after employement. Its validity varies by jurisdiction. You should make sure the agreement is clear as to the period in which you should not work, the location and industry in which the agreement is valid, and how you will be compensated for adhering to the agreement.
  • Non-solicitation clause precludes you from soliciting customers or employees of the company after employment. Its validity and status are similar to that of a non-compete clause. Thus, similarly, you should ensure that if you sign one, that it is clearly written and not overly-broad and thus severely restricting your rights. In addition, general confidentiality agreements are generally ruled as unenforceable if confidential information is restricted to be disclosed for a period of more than 12 months after employees’ termination.

Before seeking formal legal advice, you may wish to refer to DocPro’s employement agreement templates containing such restrictive clauses as references:

  • For an agreement drafted in favor of the employer, please refer to:

https://docpro.com/doc1342/non-compete-and-non-solicitation-agreement-for-employment-one-way-unilateral-employer

  • For an agreement drafted in favor of the employee, please refer to:

https://docpro.com/doc1344/non-compete-and-non-solicitation-agreement-for-employment-one-way-unilateral-employee-1

  • For an agreement drafted neutrally, please refer to:

https://docpro.com/doc1341/non-compete-and-non-solicitation-agreement-for-employment-one-way-unilateral-neutral

 

 

 

6        What is a Notice Period?

 

The notice period is the time period between (1) the time when you submit your termination notice, or (2) you were notified to be dismissed and the actual end of your last working day. It starts when you submit a formal resignation letter indicating the intention to terminate the employment relationship, or when you were given a notice of termination of employment in any form.

 

It is essential for you to read the termination clause in your employment contract and take note of all relevant details such as the required length of the notice period, they designated way to give notice, benefits, and entitlements during your notice period, etc. In addition, some contracts will allow for payment in lieu of notice, meaning that instead of handing in your resignation notice a certain time before your resignation, you may forgo pay for the final period of your work. All such procedures and details about the notice period would be binding on you once you have signed the contract.  

 

We also have some resignation letters templates for your reference:

 

Reasons of Resignation/ Condition

Link

New Opportunity

https://docpro.com/doc1452/resignation-letter-to-employer-new-opportunity

Personal Reasons

https://docpro.com/doc738/resignation-letter-to-employer-personal-reasons

Retirement

https://docpro.com/doc741/resignation-letter-to-employer-retirement

Neutral

https://docpro.com/doc735/resignation-letter-to-employer-neutral

Leaving on good terms

https://docpro.com/doc736/resignation-letter-to-employer-leaving-on-good-terms

Lack of Opportunity

https://docpro.com/doc737/resignation-letter-to-employer-lack-of-opportunity

 

7        What is Garden Leave and why is it important?

 

If you are working in a competitive industry where you come across confidential information on a daily basis, or if you are a senior employee with access to key clients or trade secrets of the company, you might notice a term named “Garden Leave Clause” being incorporated in your employment contract.

 

Garden Leave clauses require are invoked when employees are asked to stop performing their job duties and are restricted from the company’s office premises while their employment contract continues. It is usually enforced after an employee has issued his/her notice of resignation and such employees would be entitled to all standard pay and entitlements as usual even they are being put on garden leave. However, being put on Garden Leave is different from going on a vacation – you still have to standby should your employer has any tasks for you to complete or matters to handover. Nevertheless, employees are rarely given any actual job duties in a practical sense.

 

This is commonly done by employers to protect their business interests from any potential conduct by former employees. An employee might harm a company’s business and reputation in many ways, for example, taking away information and clients list from the company, deliberately perform in an unpleasant way while executing their duties, or even sabotage the company with deliberate security breach. Hence, companies tend to put employees on Garden Leave during their notice period to keep them away from the industry and reduce risks of any potential business damages.

 

It is important for you to check whether there is a Garden Leave clause being incorporated in the employment contract before you sign as an employee cannot put you on Garden Leave in the absence of such clause. Otherwise, your employer has to obtain your prior consent before requesting you to go on a Garden Leave.

 

Conclusion

 

All-in-all, employment contracts may seem like complicated documents, but they can be simple to understand and navigate after doing ample research. Be sure to go through the contract with your employer term by term, clarifying any misunderstandings and confusing terms. Also, make sure that any terms you verbally agreed upon are added into the contract in order to ensure your rights are protected!

 

 

Please note that this is a guide on the general position of minority shareholder rights under common law. This does not constitute legal advice. As each jurisdiction may be different, you may want to speak to your local lawyer.

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