Employment Agreements: Pros and Cons

Just like any undertaking, when one employs the services of another, an agreement or contract should embody their terms. An employment agreement is a written document signed by the employee and employer setting forth the terms of their relationship. It is used every time an employee is hired or re-hired.

The terms and conditions of employment such as job description, work duration, benefits, limitations of work, salary, confidential obligations and dispute resolutions should comprise the agreement. It must also include a framework for bargaining additional entitlements and other similar related details.

An employment agreement formalizes the relationship of the parties. It consists of provisions which are mandated by law. The employer may also incorporate his own conditions so long as they are not contrary to law and public policy.

Advantages of Employment Agreements

Agreements regarding employment are beneficial to the employer if the latter wants to control the employee’s ability to leave the company.

For instance, finding an applicant or training a replacement could be very expensive or time-consuming so the employer may include in the agreement specific term within which an employee could leave. The employer could also provide that the employee shall be penalized in case of premature departure from the company.

Agreements Cover Confidential Information

Employment agreements also find relevance in keeping confidential and sensitive information about the employer’s business. Confidentiality clauses may be inserted in the agreement to prevent an employee from disclosing any information or using it for personal advantage. Moreover, an agreement can protect the company by preventing an employee from competing against the employer’s business after cessation of the employee-employer relationship.

In some instances, an employment agreement can entice a potential skilled individual to work for the employer by promising job security and beneficial terms incorporated in it. Finally, an agreement enables the employer to control the employee’s performance such that an employer can easily terminate an employee if the latter failed to live up to certain standards.

Disadvantages of Employment Agreements

Employment agreements are contracts of adhesion. Employees are made to adhere to the terms imposed by the employer. In short, it limits the employee’s flexibility. For instance, if the agreement could no longer adapt to the current employment conditions or the needs of the business change, the employee is forced to leave under pain of penalty or suit or ask that the contract be renegotiated.

Fair Dealings with Employees

Another disadvantage of an employment contract is that it forces the employer to deal fairly with the employee. In legal parlance, this is called "covenant of good faith and fair dealing." Hence, if the employer ends up treating the employee in an unfair way, legal responsibility attaches for violating the contract and breaching the duty to act in good faith.

If you want to know more about employment agreement and your rights as an employee, engage the services of an employment attorney to enlighten you on the matter.


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