Drafting a Future-Proof Employment Contract (US)

Note: Links to our free templates are at the bottom of this long guide.
Also note: This is not legal advice

Introduction

Having an employment contract that is legally compliant and comprehensive is essential for employers who are hiring new staff. A written agreement between employer and employee provides both parties with legal protection, as well as outlining their respective rights, responsibilities and expectations. Crucial aspects such as the roles, duration of work, compensation and benefits should all be clearly stated in the contract.

When drafting an employment contract it is important to consider both parties’ interests; the language should be easy to understand but must also reflect the terms of agreement accurately. For this reason it’s vital to have a qualified lawyer review the document before it’s signed - failure to do so can lead to major legal issues in future.

At Genie AI, we understand how important these contracts are for businesses - that’s why we provide free templates which enable employers to draft high quality documents without expensive lawyer fees. Our open source library uses millions of datapoints which teach our AI what a market-standard employment contract looks like, while our template library allows customising documents with ease – all without any obligation or commitment from you!
So if you’re looking for support in drawing up a legally compliant employment agreement this guide has everything you need – read on below for our step-by-step guidance and learn more about how you can access our template library today!

Definitions

At-will agreements - An agreement between an employer and employee where either party can end the agreement at any time without reason.
Fixed-term agreements - An agreement between an employer and employee with a predetermined end date that can be renewed when the term expires.
Collective bargaining agreements - An agreement between a union and an employer that outlines the terms of employment for an entire group of employees.
Non-compete clauses - A clause in an employment contract that restricts an employee from working for a competing business for a certain amount of time.
Confidentiality clauses - A clause in an employment contract that requires an employee to keep confidential information private.
Termination clauses - A clause in an employment contract that outlines the conditions and process for terminating the agreement.
Mediation - A process in which a neutral third party facilitates a discussion between the parties in order to reach an agreement.
Arbitration - A process in which a neutral third party hears arguments from both sides and makes a binding decision.
Litigation - A process in which a court hears arguments from both sides and makes a binding decision.
Severance package - A compensation package provided to a employee when their employment is terminated.

Contents

1. Overview of Employment Contract Law
2. Definition of an Employment Contract
3. Types of Employment Contracts
4. Elements of an Employment Contract
5. Required Elements
6. Optional Elements
7. Key Terms to Include in an Employment Contract
8. Duration of Employment
9. Terms of Payment
10. Conditions of Termination
11. Non-Compete and Confidentiality Agreements
12. Tips for Drafting an Effective Employment Contract
13. Research Relevant Laws
14. Consider Your Desired Outcome
15. Define the Scope of the Employment Contract
16. Include Relevant Details
17. Have the Contract Reviewed by an Attorney
18. Protecting the Employer’s Interests in an Employment Contract
19. Protecting Intellectual Property
20. Defining the Employer’s Right to Terminate
21. Determining the Employer’s Liability
22. Outlining the Employer’s Right to Monitor
23. Protecting the Employee’s Interests in an Employment Contract
24. Securing Payment
25. Establishing Benefits
26. Establishing the Employee’s Right to Terminate
27. Ensuring Job Security
28. Common Misunderstandings and Pitfalls in Employment Contracts
29. Unclear Terms
30. Failure to Address Changes in the Employment Relationship
31. Violations of Employment Laws
32. Key Takeaways for Drafting Employment Contracts
33. Research Relevant Laws
34. Define the Scope of the Employment Contract
35. Include Relevant Details
36. Have the Contract Reviewed by an Attorney
37. Outline the Employer’s and Employee’s Rights
38. Address Changes in the Employment Relationship
39. Understand the Potential Pitfalls
40. Enforcing an Employment Contract
41. Mediation
42. Arbitration
43. Litigation
44. Terminating an Employment Contract
45. Terminating with Notice
46. Terminating Without Notice
47. Severance Package Considerations

Get started

Overview of Employment Contract Law

• Understand the basics of employment contract law in the US, including at-will employment, collective bargaining agreements, and employee handbooks
• Review state and federal laws that relate to employment contracts, including those that cover wages and hours, leaves of absence, disability, and discrimination
• Be aware of the differences between contracts for executive, managerial, and professional employees, as well as those for hourly and salaried staff
• Learn the basics of contract formation, including offer, acceptance, consideration, and mutual assent
• Review the elements of an enforceable contract, including terms, conditions, and remedies

Checklist item:

• Have you reviewed the basics of employment contract law in the US, including at-will employment, collective bargaining agreements, and employee handbooks?
• Have you reviewed state and federal laws that relate to employment contracts, including those that cover wages and hours, leaves of absence, disability, and discrimination?
• Do you understand the differences between contracts for executive, managerial, and professional employees, as well as those for hourly and salaried staff?
• Have you learned the basics of contract formation, including offer, acceptance, consideration, and mutual assent?
• Have you reviewed the elements of an enforceable contract, including terms, conditions, and remedies?

Once all the items on the checklist have been completed, you can move on to the next step - ### Definition of an Employment Contract.

Definition of an Employment Contract

• Understand that an employment contract is a legally binding document between an employer and an employee
• Familiarize yourself with the different components of an employment contract, such as the job title and duties, duration, salary, and benefits
• Research the applicable laws in your state regarding employment contracts, such as minimum wage laws
• Draft a document that outlines the job title and duties, the duration of the employment, the salary and benefits, and any other conditions of employment
• Consult with a lawyer to ensure that the contract is legally sound

You can check this off your list and move on to the next step when you have drafted a document that outlines the job title and duties, the duration of the employment, the salary and benefits, and any other conditions of employment.

Types of Employment Contracts

• Understand the differences in at-will employment, fixed-term contracts, and indefinite contracts
• Consider the benefits and drawbacks of each type, and decide on the type that best suits the needs of the employer and employee
• Ensure the contract is clear and unambiguous in designating the type of contract being offered
• Check off this step when the type of employment contract has been determined and specified in the contract.

Elements of an Employment Contract

• Understand the components of an employment contract:
• The parties involved
• The job description/responsibilities
• Compensation/benefits
• The duration of the employment
• Termination of the contract
• Confidentiality
• Establish the terms of the contract and make sure they are clear and concise.
• Make sure the contract is compliant with relevant laws and regulations.
• Have both parties sign and date the contract.

Check off this step when both parties have signed and dated the employment contract.

Required Elements

• Read through the state and federal laws that apply to the contract
• Determine the type of employment relationship, such as full-time, part-time, or independent contractor
• Include information on the job title and any reporting relationships
• Detail the rate of pay and the payment frequency
• Specify the number of hours expected to be worked
• Define any benefits that may be provided
• Set the start date and duration of the contract
• Specify any grounds for termination
• Include a non-disclosure agreement
• Include a non-compete clause
• Include a choice of law clause
• Provide signature lines for both parties
• Have the contract reviewed by an attorney

Once you have completed these steps, you can move on to the next step: ### Optional Elements.

Optional Elements

• Consider including a non-compete clause or non-disclosure agreement: A non-compete clause is a legally binding agreement whereby the employee agrees not to compete with the employer for a certain period of time after the employment ends. A non-disclosure agreement is a legally binding agreement whereby the employee agrees not to disclose confidential information.
• Consider including a severance clause: This clause outlines the conditions under which the employer must pay severance to the employee upon termination.
• Consider including an arbitration clause: This clause outlines the process and procedure for resolving disputes through arbitration rather than through litigation.

You can check this step off your list when you have decided which optional elements to include in your employment contract.

Key Terms to Include in an Employment Contract

• Identify the parties to the contract, including the employee’s name and title
• Set out the employee’s duties and responsibilities
• Describe the employee’s salary and payment terms
• Include the conditions of any benefits or bonuses
• Specify the location of the job
• Set out the terms of vacation and sick leave
• Establish any limits or restrictions on the employee’s employment
• Define the duration of the employment contract
• Include a non-compete clause
• Set out the termination provisions

When you have included all the required terms, you can check this step off your list and move on to the next step.

Duration of Employment

• Specify the duration of the employment relationship either by a date (e.g. “this agreement will remain in effect until December 31, 2021”) or through a “at-will” clause (e.g. “this agreement will remain in effect until terminated by either party”).
• If the employee is being hired on a fixed-term contract, you should include the duration, renewal requirements, and any termination conditions.
• Consider including a clause that allows you to extend the duration of the contract, or to renew it, if desired.
• Once you have determined the duration of the employment contract and included it in the document, you can check this off your list and move on to the next step: Terms of Payment.

Terms of Payment

• Set out details of salary, including frequency of payment, salary increases, and any bonuses or other forms of compensation
• Establish when and how payments will be made, and whether the employee is eligible for overtime
• Outline any deductions, such as taxes, health insurance and other forms of insurance
• Note any additional payments that may be due, such as travel and accommodation allowances
• Specify the currency in which the employee will be paid

Checklist for completing this step:

• Salary, frequency, increases, and bonuses are outlined
• Payment details are established
• Deductions are noted
• Additional payments are specified
• Currency for payment is noted

Conditions of Termination

• Identify and define the conditions under which either party may terminate the contract
• Outline the conditions of departure including notice period, payment of wages or salary, and other relevant details
• Specify any additional obligations that the employee may be required to fulfill upon termination
• Include the information in the contract and review it with the employee
• Check that the employee understands the conditions of termination
• Sign and date the contracts to make them legally binding
• You can check this step off your list and move on to the next when both parties have signed and dated the contract.

Non-Compete and Confidentiality Agreements

• Decide whether to include non-compete and confidentiality agreements in the employment contract.
• Ensure that non-compete and confidentiality agreements are limited in scope and duration, and that they are reasonable and necessary to protect legitimate business interests.
• Consider the jurisdiction where the contract will be enforced, as non-compete and confidentiality agreements may be illegal or unenforceable in certain jurisdictions.
• Outline the information or trade secrets that the employee must keep confidential.
• When you are finished, make sure to review the provisions to make sure that they are tailored to the particular employment relationship.

You know you have completed this step when you have included all the necessary provisions in the non-compete and confidentiality agreements.

Tips for Drafting an Effective Employment Contract

• Research the applicable labor laws for the state the employee will be working in, as well as federal labor laws.
• Be specific in your language and avoid vague, overly broad terms.
• Consider addressing potential issues that may arise in the future, such as the use of technology and social media in the workplace.
• Clearly define the employee’s job duties and responsibilities.
• Include a clause outlining the company’s policies and procedures.
• Make sure the contract is written in clear and concise language that everyone can understand.
• Have a lawyer review the contract before signing it.

When you have completed these tasks, you can check them off your list and move on to the next step.

Research Relevant Laws

• Understand the relevant federal and state laws, regulations, and ordinances that apply to the contract
• Research any special provisions that apply to the particular industry or job type
• Make sure the contract is compliant with all applicable labor and employment laws
• Consult a lawyer to ensure the contract is legally valid

Checklist when you can move on to the next step:

• Understand the relevant federal and state laws, regulations, and ordinances that apply to the contract
• Research any special provisions that apply to the particular industry or job type
• Make sure the contract is compliant with all applicable labor and employment laws
• Consult a lawyer to ensure the contract is legally valid

Consider Your Desired Outcome

• Determine what your desired outcome is from the employment contract
• Ask yourself questions such as:
• What type of employee is the contract for?
• What is the scope of their job duties?
• What are the terms for compensation, benefits, and termination?
• Outline your desired outcome in a written document
• Make sure to include any other clauses you consider necessary
• Once you have a clear outline of your desired outcome, you can check this step off your list and move on to the next step.

Define the Scope of the Employment Contract

• Clearly identify the parties involved in the contract, including their contact information, names, and job titles
• Outline the specific terms of the employment, such as the employee’s job title, expected responsibilities, and salary
• State the duration of the employment, including start and end dates or whether the contract is open-ended
• Specify the location of the job and any potential for relocation
• Detail any benefits or perks associated with the position, such as health insurance and vacation time
• Clarify any potential termination procedures and stipulations

Once you have included all the relevant details in your contract, you can check off this step and move on to the next step in the guide.

Include Relevant Details

• Include your full legal name, title, and address as the Employer.
• Include the full legal name, address, job title, and salary of the Employee.
• Include a description of the job duties and responsibilities.
• Outline the benefits and perks, such as vacation days, sick leave, etc.
• Establish the duration of the employment contract and any potential termination provisions.
• Specify any non-compete, non-disclosure, or other relevant clauses.
• Note any additional conditions related to the job.

You’ll know you can move on to the next step when you have included all of the relevant details as outlined above.

Have the Contract Reviewed by an Attorney

• Have an attorney review the employment contract to ensure it is legally sound.
• Ask the attorney to look for any areas that need clarification or that could be problematic.
• Have the attorney make any necessary changes or suggestions to improve the contract.
• Once the attorney is satisfied with the contract, check this step off your list and move onto the next step.

Protecting the Employer’s Interests in an Employment Contract

• Include a non-compete clause to prevent the employee from working for a competitor within a specified time period and geographical area
• Include a non-solicitation clause to prevent the employee from soliciting customers or other employees after leaving the company
• Include a confidentiality clause to protect trade secrets and other confidential information
• Specify the employer’s right to terminate the contract at any time
• Include a provision specifying that the employer owns all materials, products, and inventions created while employed

Once you have included each of these clauses in the contract, you can move on to the next step.

Protecting Intellectual Property

• Define intellectual property rights of the employer through the employment contract.
• Ensure the contract includes language that assigns all intellectual property created by the employee, either during or outside of work, to the employer.
• Include language in the contract that assigns copyright and patents to the employer.
• Specify the conditions under which the employee can use the employer’s intellectual property.
• Define the employer’s right to use the employee’s intellectual property.

You will know you have completed this step when the employment contract includes specific language that outlines the employer’s intellectual property rights.

Defining the Employer’s Right to Terminate

• Clearly detail the grounds and procedures for legally terminating an employee
• Include the employer’s rights to terminate with or without cause
• Specify the notice period an employer must provide an employee before termination
• Make sure the contract is in compliance with state and federal laws regarding termination
• When you have completed these steps, you can move on to the next step: Determining the Employer’s Liability.

Determining the Employer’s Liability

• Research applicable state and federal laws to determine what liabilities the employer may face when drafting the employment contract
• Draft clauses to cover the employer’s liabilities, such as liability for violations of wage and hour laws, workplace safety regulations, and anti-discrimination laws
• Consult with an attorney to review the contract and confirm that all appropriate liability clauses have been included
• Once you have confirmed your contract covers the employer’s liability and an attorney has reviewed it, you can move on to the next step.

Outlining the Employer’s Right to Monitor

• Identify the methods of monitoring the employer wishes to use, such as email, web-surfing, telephone, etc.
• Establish the circumstances in which the employer can monitor the employee, such as when they are working at the company premises.
• Ensure the employee is given appropriate notice of the employer’s monitoring, either through a clause in the contract or a separate document.
• Outline any restrictions on the employer’s monitoring, such as the requirement to obtain the employee’s consent before monitoring.

When you can check this off your list and move on to the next step:

• Once you have identified the methods of monitoring the employer wishes to use, established the circumstances in which the employer can monitor the employee, ensured the employee is given appropriate notice of the employer’s monitoring, and outlined any restrictions on the employer’s monitoring, you can move on to the next step.

Protecting the Employee’s Interests in an Employment Contract

• Clearly outline the wages and benefits to be provided to the employee
• Include provisions for the payment of overtime wages
• Address the employer’s rights to withhold wages in certain circumstances
• Outline the employee’s rights to commission, bonuses, and other incentives
• Specify the circumstances under which the contract can be terminated
• Include a non-disclosure agreement from the employer to the employee
• Establish a grievance procedure for the employee to use in the event of a dispute

You’ll know you can check this off your list and move on to the next step when the employee’s interests have been clearly established in the contract.

Securing Payment

• Specify the employee’s salary or hourly wage in the contract
• Make sure to include any bonuses, commissions or other forms of payment that the employee may be entitled to
• Include information on how the employee will be paid (electronically, checks, etc.)
• Add any payment arrangements for overtime, holidays or vacation pay
• Outline any other forms of payment or compensation the employee may receive, such as stock options
• When you’re done, review the contract with the employee to make sure they understand the payment terms and conditions
• Once the contract is finalized and signed, you can check this off your list and move on to the next step: Establishing Benefits.

Establishing Benefits

• Identify the benefits that are applicable to the employee, such as health insurance, vacation, sick leave, and other benefits.
• Determine if any of the benefits are subject to collective bargaining agreements or regulations.
• Include a clause in the contract that outlines the benefits available to the employee.
• Specify how the employee can access their benefits.
• Outline the circumstances in which an employee might be entitled to certain benefits, such as maternity leave.
• When applicable, address the vesting of benefits and the employee’s right to those benefits in the future.

You’ll know you can check this off your list and move on to the next step when your contract includes a clear and comprehensive clause outlining the benefits available to the employee, as well as the circumstances in which they are entitled to those benefits.

Establishing the Employee’s Right to Terminate

• Draft a clause that clearly states the circumstances under which the employee can terminate the contract
• Make sure the clause outlines the notice the employee must give prior to terminating the contract
• Specify how the employee should provide this notice, such as in writing
• Outline the employer’s responsibility upon receiving notice from the employee
• Once all of the above points have been included, this step can be marked as complete.

Ensuring Job Security

• Identify the specific job security provisions that may be appropriate for your particular contract, such as non-compete clauses, non-solicitation agreements, and confidentiality agreements
• Decide if the job security provisions will be mandatory or optional for the employee
• Draft language in the contract that outlines the job security provisions, including any penalties for breach of contract
• Have the employee review and sign the contract to ensure they understand the job security provisions they are agreeing to
• Once the employee has signed the contract, you can check off this step and move on to understanding common misunderstandings and pitfalls in employment contracts.

Common Misunderstandings and Pitfalls in Employment Contracts

• Know the applicable laws within your state. Some states have their own employment contract laws that supersede the federal rules, so be sure you understand the requirements for your state.
• Make sure you’re aware of any union contracts that may be in effect with your employee.
• Make sure all parties fully understand the terms of the contract. If there is any ambiguity, it is best to clarify before signing the contract.
• Be aware of any potentially one-sided terms that could be seen as unfair. This could be anything from non-compete agreements to rules about termination.
• Be aware of any deadlines that could be set in the contract.
• Make sure to include all the necessary elements of a contract, such as the name of the employer, the name of the employee, the date of the contract, the job duties, and the compensation.

How you’ll know when you can check this off your list and move on to the next step:
You can check this off your list and move on to the next step when you have thoroughly reviewed the contract and ensured that all of the applicable laws, union contracts, and other potential issues have been addressed. Additionally, you should make sure that all the necessary elements of a contract have been included.

Unclear Terms

• Read through the contract to identify any language that may be unclear or open to interpretation
• Make sure all terms are clearly stated, and all roles and responsibilities are clearly defined
• Double-check all dates, wages, and other items to make sure they are accurate and up-to-date
• Identify any terms that may be subject to change, and make sure the contract includes provisions for those changes
• When all terms are clear and provisions for changes to the contract are in place, you can move on to the next step.

Failure to Address Changes in the Employment Relationship

• Ensure that the contract has a provisions addressing changes to the employee’s job title, location, duties, and salary
• Make sure that the contract specifies when and how the employer can make changes to the employment agreement
• Include language that states that the employee must be informed in writing of any changes before they take effect
• Add a clause that allows either party to terminate the contract if changes to the employment agreement are not mutually agreed upon

You can check this off your list when you have successfully included provisions addressing changes to the employee’s job title, location, duties, and salary in the contract, and have specified when and how the employer can make changes to the employment agreement.

Violations of Employment Laws

• Research and be familiar with the applicable federal and state employment laws to ensure the contract is in compliance
• Understand the employee’s job duties to ensure the terms of the contract do not violate any laws or regulations
• Ensure the contract does not contain any provisions that violate wage and hour laws such as minimum wage, overtime, and other wage requirements
• Make sure the contract does not contain any discriminatory language that violates equal employment opportunity laws
• Verify that the contract does not violate the Family and Medical Leave Act (FMLA) or any other leave laws
• Check that the contract does not contain any provisions that would violate the Occupational Safety and Health Act (OSHA) or any other safety and health laws
• Confirm that the contract does not violate any other employment laws such as the Worker Adjustment and Retraining Notification Act (WARN)

You can check this step off your list when you are confident that the contract does not contain any provisions that violate any applicable federal and state employment laws.

Key Takeaways for Drafting Employment Contracts

• Ensure that the agreement is written in clear, plain language to avoid ambiguity and confusion
• Include a detailed description of the employee’s job duties, hours of work, and job title
• Include a statement specifying that the employment is “at-will”
• Include language that clearly delineates the terms of the employee’s compensation and benefits
• Include a section that outlines the employer’s expectations for the employee’s performance
• Include a description of the employer’s policies and procedures, such as a code of conduct
• Include a section that outlines the termination procedures for both the employer and the employee

When you’ve completed the above steps, you can check this off your list and move on to the next step.

Research Relevant Laws

• Research any applicable state and federal laws that may affect the employment contract, such as minimum wage, overtime, and other labor laws
• Gather information on any local or industry-specific regulations that may need to be taken into account
• Research any existing court rulings that may impact the interpretation of the contract
• Once you have a good understanding of the applicable laws, you are ready to move on to the next step of defining the scope of the employment contract.

Define the Scope of the Employment Contract

• Identify the type of employment agreement you will be creating, including whether it is for full-time, part-time, or contract work
• Decide if the contract will be written or oral
• Consider the geographic scope of the contract, and decide whether it should be limited to the state or country in which the employee will be working
• Determine the duration of the contract and if it should be for a fixed term or open-ended
• When you have all of the above details determined, you can move on to adding relevant details to the contract.

Include Relevant Details

• Ensure the contract contains the following information:
• Date of commencement of the contract
• Names of the parties involved
• Position or job title of the employee
• Detailed description of the employee’s responsibilities
• Length of the employment contract
• Salary and benefits
• Termination clause
• Non-compete clause
• When you have all the relevant information included in the contract, you can move on to the next step.

Have the Contract Reviewed by an Attorney

• Contact an attorney who specializes in employment law to review the contract
• Make sure to provide all relevant information to the attorney so they can give an accurate assessment
• Ask the attorney to review the contract for any potential issues, such as omissions of important clauses, inappropriate wording, or any other legal matters
• Once the attorney has completed their review and given their approval, you can proceed to the next step in the process
• You will know you can move on when the attorney has given their approval for the contract to be used

Outline the Employer’s and Employee’s Rights

• Define the rights of the employer such as the right to set working hours, approve vacation and sick days, and set certain rules of conduct
• Define the rights of the employee such as the right to a safe working environment, receive timely payment, and receive proper training
• Outline any potential disciplinary actions that may be taken if the employee does not meet the expectations of the employer
• Include clauses that provide for termination of the contract, including any notice period that is required
• Include any other rights, such as overtime pay and health insurance

You can check this off your list once you have outlined all the necessary rights of both the employer and employee in the contract.

Address Changes in the Employment Relationship

• Include a section outlining the circumstances under which the employment contract may be modified or terminated
• Identify any changes that the employer may make to the employee’s job description, hours, or compensation
• Make sure that any changes to the employee’s job description, hours, or compensation are clearly communicated to the employee
• Include a clause that specifies that any changes to the employment contract must be agreed to in writing by both parties
• Outline the process for giving notice of any changes to the employee
• Ensure that any changes to the employment contract comply with applicable laws

Once you have included all of the above elements, you can check this step off your list and move on to the next step.

Understand the Potential Pitfalls

• Research applicable state and federal laws that may affect the contract
• Identify any potential risks for either the employer or employee
• Consider any clauses that may be difficult to enforce or are likely to be challenged in court
• Consider any potential areas of disagreement that could arise between the parties
• When you feel comfortable that you have identified all potential pitfalls, you can move on to the next step.

Enforcing an Employment Contract

• Review the contract and ensure all relevant clauses are included, such as non-disclosure, non-competition, and termination.
• Make sure the contract is signed and dated by both parties.
• Have the contract reviewed by a lawyer to ensure that all conditions are legally binding.
• Have the contract notarized to certify the signatures of the parties.
• Ensure that all copies of the contract are securely stored.
• When all the above steps have been completed, you can move on to the next step, which is mediation.

Mediation

• Identify potential mediators who are armed with expertise in the same field as the contract
• Contact potential mediators to set up a meeting
• Prepare a mediation agenda that includes the issues to be discussed
• During the mediation, discuss the contract and any discrepancies that may exist
• Work with the mediator to come up with a resolution that is mutually agreeable
• Finalize the agreement in writing

Once a mutually agreeable resolution is reached, the mediation step is complete and the parties can move forward with the agreed upon terms.

Arbitration

• Research the American Arbitration Association to learn more about the arbitration process in the US
• Draft an arbitration clause into the contract, outlining the process and costs that both parties can expect to incur if they need to take this step
• Make sure to include language that clarifies which laws will be used to resolve the dispute
• Check with an attorney to ensure that the clause complies with any applicable state laws
• When the arbitration clause is included in the contract, you can move on to the next step, Litigation.

Litigation

• Understand the potential legal risks associated with litigation, such as time and money
• Determine the best jurisdiction for a potential lawsuit based on the facts of the case
• Identify the potential causes of action, such as breach of contract, wrongful termination, discrimination, or other violations
• Draft clauses that address the potential litigation, such as a choice of law clause, choice of forum clause, and arbitration clause
• Include a clause that details who will bear the costs of the litigation if it is initiated
• When all clauses related to litigation have been included, you can move on to the next step in drafting a future-proof employment contract.

Terminating an Employment Contract

• Understand the legal requirements of your state regarding employment contracts and the termination process.
• Draft a termination clause that meets the legal requirements of your state.
• Specify whether the employee will receive a severance package, including any benefits or other compensation they may be entitled to receive.
• Include a release of any claims against the employer.
• Include a non-disclosure agreement if necessary.
• Have the employee sign the contract to confirm the termination.

You can check this off your list and move on to the next step once the employee has signed the termination contract.

Terminating with Notice

• Make sure to include language in the employment contract that outlines the notice period required for terminating an employee
• This should include how much notice must be given, what is expected of the employee during the notice period, and when the employee is expected to leave
• It is important to be fair in the notice period and not require too much or too little time for the employee to find a new job
• Once you have the language in the contract, review the contract to make sure that all the terms are clear and there are no discrepancies
• When you are satisfied with the contract and all the terms, you can check this step off your list and move on to the next step of Terminating without Notice.

Terminating Without Notice

• Familiarize yourself with the state’s laws regarding termination without notice
• Add a clause to the contract that outlines the conditions under which an employee may be terminated without notice
• Specify any applicable notice requirements for termination without notice
• Include a statement that outlines the employer’s right to terminate without notice and without cause
• Include a statement that the employee agrees to waive their right to notice in certain circumstances
• Once you’ve added all the relevant clauses, you can check this step off your list and move on to the next step.

Severance Package Considerations

• Determine whether the employee is eligible for a severance package
• Specify the conditions of eligibility for the severance package, including length of employment, performance reviews, and other factors
• Include the total amount of the severance package, if applicable
• Include a timeline for the payment of the severance package
• Outline the employee’s rights and obligations during the period of the severance package

You’ll know when you can move on to the next step when you have completed all the considerations for the severance package outlined in the contract and the employee has signed off on the agreement.

FAQ

Q: What’s the difference between US, UK and EU employment contracts?

Asked by Mary on July 17th, 2022.
A: US, UK and EU employment contracts are all subject to different laws, depending on the jurisdiction. In the US, employment contracts cover a wide range of topics from non-compete clauses and termination notices to wages and benefits. In the UK, employment contracts are largely regulated by the Employment Rights Act 1996 and cover topics such as hours of work, holiday pay, sick pay and dismissal procedures. In the EU, employment contracts are regulated by the EU Directive on Working Time which sets out rules for working hours and rest periods.

Q: How do I ensure my contract is future-proofed?

Asked by Jack on August 3rd, 2022.
A: Ensuring your contract is future-proofed is an important part of drafting a comprehensive employment contract. The key is to think ahead and plan for potential changes in technology, the workforce and the job market. You should think about potential changes in your industry or sector, as well as any changes that may affect your business model (e.g. SaaS, Technology or B2B). Consider adding a ‘force majeure’ clause to account for any unexpected events or circumstances that may arise in the future. Additionally, ensure that your contract includes provisions for updating or amending in light of any changes in the law or regulations governing your industry or sector, as well as provisions for dispute resolution or arbitration in case of disagreements.

Q: How do I ensure my contract meets local laws?

Asked by Emma on September 11th, 2022.
A: When drafting an employment contract, it is important to ensure that your contract meets all applicable local laws. Before drafting a contract, research state-specific laws that may affect the terms of an employment contract (e.g., minimum wage requirements). Additionally, consider any applicable federal laws (e.g., Equal Employment Opportunity Commission). Be sure to also consider any state-specific requirements regarding things like overtime pay and termination notices. Finally, it is important to keep up to date with any changes in the law that may affect your contract terms so that you can make sure your contract remains compliant with all applicable laws.

Q: Are there any other legal considerations I should take into account when drafting a future-proofed employment contract?

Asked by David on October 8th, 2022.
A: Yes, there are other legal considerations you should take into account when drafting a future-proofed employment contract. It is important to consider how local laws may affect the terms of an employment contract (e.g., minimum wage requirements) as well as applicable federal laws (e.g., Equal Employment Opportunity Commission). Additionally, you should be aware of any state-specific requirements regarding things like overtime pay and termination notices. Furthermore, make sure that your contract includes provisions for dispute resolution or arbitration in case of disagreements or disputes between parties involved in the agreement. Finally, be sure to include a ‘force majeure’ clause to account for any unexpected events or circumstances that may arise in the future.

Q: What if I don’t have a specific industry or business model?

Asked by Sarah on November 18th, 2022.
A: If you don’t have a specific industry or business model when drafting an employment contract it is important to think ahead and anticipate potential changes that may occur in the future. Consider including provisions for updating or amending your contract in light of any changes in regulations governing your industry or sector as well as provisions for dispute resolution or arbitration if disagreements arise between parties involved in the agreement. Additionally, be sure to include a ‘force majeure’ clause to cover any unexpected events that may arise in the future which could impact your business model.

Q: How do I make sure my employees are aware of their obligations?

Asked by John on December 26th 2022.
A: When drafting an employment contract it is important to make sure that employees are aware of their obligations under the agreement. This can be achieved through clear communication with employees before they sign the contract so they understand their rights and responsibilities under the agreement. Additionally, it is also important to include language in the agreement which outlines employee obligations such as following company policies and procedures as well as abiding by relevant laws and regulations pertaining to their job role (e.g., privacy regulations). Finally, employers should periodically review their agreements with employees to ensure they remain up-to-date with current regulations and practices related to their job role(s).

Example dispute

Suing a Company Based on an Employment Contract

• The plaintiff must be able to show that the defendant violated the terms of the employment contract.
• The plaintiff must also show that they suffered damages as a result of the defendant’s breach of contract.
• The plaintiff must also demonstrate that the terms of the employment contract are valid and enforceable.
• The plaintiff must prove that the defendant was aware of the contract and its terms and conditions.
• The plaintiff must also show that they have taken reasonable steps to mitigate their losses.
• The plaintiff may also be able to seek damages for loss of wages, emotional distress, or other losses associated with the defendant’s breach of contract.
• The plaintiff may also be able to seek an injunction to prevent the defendant from continuing to breach the terms of the employment contract.
• If the plaintiff can prove all of the above, they may be able to win the lawsuit and receive damages, an injunction, or both.

Templates available (free to use)

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