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Employment Contract

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Restrictions

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Frequently Asked Questions
How long should each clause last?You should choose a time period that is reasonable, given the employee's position and knowledge, as well as the business of the employer.

An employer may protect their legitimate business interests, but should not unreasonably restrict employees.


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EMPLOYMENT CONTRACT

THIS EMPLOYMENT CONTRACT (the "Agreement") dated this ________ day of ________________, ________.


BETWEEN:

____________________________________________ of ____________________________________________

(the "Employer")

OF THE FIRST PART

- AND -

____________________________________________ of ____________________________________________

(the "Employee")

OF THE SECOND PART

  1. BACKGROUND:
  2. The Employer is of the opinion that the Employee has the necessary qualifications, experience and abilities to assist and benefit the Employer in its business.
  3. The Employer desires to employ the Employee and the Employee has agreed to accept and enter such employment upon the terms and conditions set out in this Agreement.

IN CONSIDERATION OF the matters described above and of the mutual benefits and obligations set forth in this Agreement, the receipt and sufficiency of which consideration is hereby acknowledged, the parties to this Agreement agree as follows:

  1. Commencement Date and Term
  2. The Employee will commence permanent full-time employment with the Employer on the ________ day of ________________, ________ (the "Commencement Date").
  3. Job Title and Description
  4. The initial job title of the Employee will be the following: ____________________.
  5. The Employee agrees to be employed on the terms and conditions set out in this Agreement. The Employee agrees to be subject to the general supervision of and act pursuant to the orders, advice and direction of the Employer.
  6. The Employee will perform any and all duties as requested by the Employer that are reasonable and that are customarily performed by a person holding a similar position in the industry or business of the Employer.
  7. The Employer may make changes to the job title or duties of the Employee where the changes would be considered reasonable for a similar position in the industry or business of the Employer. The Employee's job title or duties may be changed by agreement and with the approval of both the Employee and the Employer or after a notice period required under law.
  8. The Employee agrees to abide by the Employer's rules, regulations, policies, and practices, including those concerning work schedules, vacation, and sick leave, as they may from time to time be adopted or modified.
  9. Employee Compensation
  10. Compensation paid to the Employee for the services rendered by the Employee as required by this Agreement (the "Compensation") will include a wage at the rate of __________.
  11. This Compensation will be payable every two weeks while this Agreement is in force. The Employer is entitled to deduct from the Employee's Compensation, or from any other compensation in whatever form, any applicable deductions and remittances as required by law.
  12. The Employee understands and agrees that any additional remuneration paid to the Employee in the form of bonuses or other similar incentive remuneration will rest in the sole discretion of the Employer and that the Employee will not earn or accrue any right to incentive remuneration by reason of the Employee's employment.
  13. The Employer will reimburse the Employee for all reasonable expenses, in accordance with the Employer's lawful policies as in effect from time to time, including but not limited to, any travel and entertainment expenses incurred by the Employee in connection with the business of the Employer. Expenses will be paid within a reasonable time after submission of acceptable supporting documentation.
  14. Place of Work
  15. The Employee's primary place of work will be at the following location: ____________________________________________.
  16. Employee Benefits
  17. The Employee will be entitled to only those additional benefits that are currently available as described in the lawful provisions of the Employer's employment booklets, manuals, and policy documents or as required by law.
  18. Employer discretionary benefits are subject to change, without compensation, upon the Employer providing the Employee with 60 days written notice of that change and providing that any change to those benefits is taken generally with respect to other employees and does not single out the Employee.
  19. Vacation
  20. The Employee will be entitled to two weeks of paid vacation each year during the term of this Agreement, or as entitled by law, whichever is greater.
  21. The times and dates for any vacation will be determined by mutual agreement between the Employer and the Employee.
  22. Upon termination of employment, the Employer will compensate the Employee for any accrued but unused vacation.
  23. Duty to Devote Full Time
  24. The Employee agrees to devote full-time efforts, as an employee of the Employer, to the employment duties and obligations as described in this Agreement.
  25. Conflict of Interest
  26. During the term of the Employee's active employment with the Employer, it is understood and agreed that any business opportunity relating to or similar to the Employer's actual or reasonably anticipated business opportunities (with the exception of personal investments in less than 5% of the equity of a business, investments in established family businesses, real estate, or investments in stocks and bonds traded on public stock exchanges) coming to the attention of the Employee, is an opportunity belonging to the Employer. Therefore, the Employee will advise the Employer of the opportunity and cannot pursue the opportunity, directly or indirectly, without the written consent of the Employer.
  27. During the term of the Employee's active employment with the Employer, the Employee will not, directly or indirectly, engage or participate in any other business activities that the Employer, in its reasonable discretion, determines to be in conflict with the best interests of the Employer without the written consent of the Employer.
  28. Contract Binding Authority
  29. Notwithstanding any other term or condition expressed or implied in this Agreement to the contrary, the Employee will not have the authority to enter into any contracts or commitments for or on the behalf of the Employer without first obtaining the express written consent of the Employer.
  30. Termination of Employment
  31. The Employer and the Employee agree that the Employee's employment is at-will. As such, this Agreement is subject to termination by the Employee or the Employer at any time with or without notice, and with or without cause. Nothing in this Agreement, or in any of the Employer's policies or procedures, should be interpreted to eliminate the at-will employment status of the Employee.
  32. The Termination Date specified by either the Employee or the Employer may expire on any day of the month and upon the Termination Date the Employer will forthwith pay to the Employee any outstanding portion of the compensation including any accrued vacation and banked time, if any, calculated to the Termination Date.
  33. If notice has been given by either party for any reason, the Employee and the Employer agree to execute their duties and obligations under this Agreement diligently and in good faith through to the end of the notice period. The Employer may not make any changes to compensation or any other term or condition of this Agreement between the time termination notice is given through to the end of the notice period.
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Last updated July 3, 2024

Written by 

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What is an Employment Contract?

An Employment Contract outlines an employer's and employee's rights, responsibilities, and obligations during a period of employment. Once the employer offers the employee the job and the two parties sign the contract, they become bound to its terms.

Besides basic details about the parties, our Employment Contract template allows you to include information about compensation, vacation time, probationary periods, duties of confidentiality, and termination procedures.

An Employment Contract is also known as an:

  • Employment agreement
  • Contract of employment
  • Contract employee agreement
  • Job contract template
  • Working agreement
  • Terms of employment

Need an Employment Contract in Spanish?

Use our Contrato de Trabajo.

Who needs an Employment Contract?

Employers, and anyone managing employees on behalf of an employer, may create an Employment Contract each time they hire a new employee, including:

  • Small business owners
  • Human resource professionals
  • Managers
  • Recruitment officers

If an employer does not present their employee with a contract, the employee can also initiate the creation of a contract for both of them to sign.

Please note that independent contractors should not use Employee Contracts to outline the terms of a service arrangement because there are important legal differences between contractors and employees, such as tax obligations. Instead, contractors should use Independent Contractor Agreements.

What are the different types of Employment Contracts?

Employment Contracts for employees can appear very similar but include very different terms, depending on whether their employer hires them permanently or temporarily and on a full-time or part-time basis.

Permanent full-time Employment Contract

An employee on a permanent full-time contract should meet their employer's requirements for full-time hours and have no predetermined end date to their employment.

There is no standard hour requirement for full-time employment. Generally, the number of hours required a full-time employee must work is set by the employer, in accordance with the laws in their jurisdiction. The Bureau of Labor Statistics defines full-time work as at least 35 hours per week. The IRS defines a full-time employee as someone working on average at least 30 hours per week for a calendar month, or 130 hours per month.

Permanent part-time Employment Contract

An employee on a permanent part-time contract should not meet their jurisdiction's requirements for full-time hours and have no predetermined end date to their employment.

Fixed-term Employment Contract

An employee on a fixed-term contract should have a prearranged end date to their employment. The contract automatically expires on the end date, and no notice is required from either party to end the employment at that time. If an employee wants to end the contract early and they can do so without repercussions, they may provide their employer with a Resignation Letter.

At-will Employment Contract

An at-will Employment Contract allows an employer to terminate an employee at any time, without notice or cause, as long as the reason for the termination is not illegal.

If an employer wants the right to terminate an employee at their own will, they must document it clearly within the Employment Contract, employee handbooks, and employment policies and procedures.

What is included in an Employment Contract?

When creating an Employment Contract, you can include the following terms:

  • The type and rate of compensation
  • The frequency of payment
  • Vacation time
  • Specified work hours
  • Specified work location
  • Employee responsibilities
  • Length of a probationary period
  • Confidentiality, non-solicitation, or non-competition clauses
  • Termination terms

What is a probationary period in an Employment Contract?

A probationary period is a set time in which an employer can terminate an employee at any time without cause, notice, or severance pay. Generally, at the end of a probationary period, the employer will review the employee's performance to determine if they continue employment as a regular employee.

Probationary periods allow employers time to determine if employees:

  • Can help accomplish the employer's goals
  • Have the necessary skills to perform the required tasks
  • Fit with the employer's work environment

Generally, once a probationary period ends, an employee qualifies for health and other benefits. In addition, once a probationary period ends, employers must have just cause to terminate an employee. In the United States, 90-day probationary periods are standard.

What is a non-compete clause in an Employment Contract?

A non-compete clause keeps an employee from working for an employer's direct business competitors during their work relationship and after it has ended. Generally, non-compete clauses can only last for a specified amount of time. Additionally, non-compete clauses must meet specific requirements to be enforced, such as being limited to a reasonable geographic location.

What is a confidentiality clause in an Employment Contract?

A confidentiality clause keeps an employer's confidential information private. Confidentiality clauses can prohibit current and former employees from discussing or misusing an employer's secrets, marketing plans, and product information. They can either last indefinitely or have an expiration date.

Confidentiality clauses protect employers from many different circumstances that could otherwise cause employers to lose business, employees, and trade secrets.

Additionally, employers can protect themselves during the recruitment process. While interviewing an applicant or negotiating a position with a potential new hire, employers may ask them to sign a Confidentiality Agreement to prevent them from sharing any valuable information they may learn during the interview process.

How do you update an Employment Contract?

There are a variety of reasons why you may need to update an Employment Contract. For example, you may want to raise an employee's wage and revise their contract to reflect this change. To record a change in wage, you can use a Compensation Agreement. For larger changes, you may need to use a Contract Addendum.

A Contract Addendum allows you to make one or more changes to an existing contract without invalidating it. Suppose you need to make a significant change to an employee's current job description and duties. In that case, using a Contract Addendum will prevent you from having to create an entirely new Employment Contract. A Contract Addendum must be attached to the Employment Contract and signed by both parties.

What happens if an employee or employer breaches the Employment Contract?

When an employee breaches their Employment Contract, their employer's response will depend on the severity of the infraction. For some infractions, an employer may only issue their employee an Employee Warning Letter. Some employers may consider the following breaches to be minor and worthy of an initial warning:

  • Being frequently late
  • Failing to complete certain job duties
  • Missing work without proper notice

If an employee continues to breach the Employment Contract after receiving a warning, their employer may need to fire them with an Employment Termination Letter. Certain infractions may not require a warning and are grounds for immediate termination, such as:

  • Breaching a confidentiality policy
  • Not following health and safety policies
  • Breaching a drugs and alcohol policy
  • Misrepresenting qualifications
  • Threatening co-workers
  • Theft

When employers breach Employment Contracts, employees can take action to protect their interests. Depending on the severity of the infraction and if the employee suffers a financial loss because of the infraction, they may be entitled to collect damages.

If you are an employee dealing with discrimination or harassment, wrongful termination, an illegal wage, uncompensated overtime, or unsafe workplace conditions, there are numerous federal protections.

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