• A written employment contract is an important tool that is used to lay out elements of an employment relationship including the scope of the work, terms, schedule and responsibilities.
• There are various types of employment contracts including full time, part time and implied contracts.
• There is no legal definition for part-time and full-time employees and employers can define these terms as they choose without listing specific hours.

Employment contracts specify the terms and conditions of an employment relationship. The main function of an employment contract is to lay out important elements of the employment relationship. Many employers also have policies or handbooks that communicate the terms and conditions of employment.

Written contracts are important tools for prescribing responsibilities and potentially limiting liabilities for the employer. It is important to remember that a contract employee is still an employee of the organization, subject to all applicable state and federal employment laws — including tax laws. The mere existence of a contract does not create an independent contractor relationship.

Common elements of employment contracts may include the following:

• The scope of the work,
• The term of employment or lack of term (employment at will),
• The schedule of the work,
• Responsibilities for providing materials,
• Responsibilities for providing training and information to employees,
• Responsibilities for supervising and disciplining employees,
• Provisions for canceling the contract,
• Final approval of completed work,
• Insurance and liability considerations, and
• Payment for services.

Pros and cons

There are arguments both for and against the use of employment contracts. When considering whether the use of employment contracts would be beneficial, employers need to consider the particular needs of all the parties involved. Some of the benefits of employment contracts include the following:

• They clearly define how long the employee will be with the company (contracts generally dictate employment duration, so there are no surprises).
• They dictate when the employee can leave the company (if a contract does not dictate employment duration, it should require ample notice, which allows time for finding a replacement).
• They give clear guidelines for the handling of confidential company information (contracts often include clauses that prohibit the employee from disclosing such information).
• They offer protection from an employee becoming a competitor (non-compete clauses in contracts can protect organizations by preventing former employees from joining or starting a competitive business).
• They afford an organization the freedom to deviate from its regular employment policies or practices (the organization may have more flexibility to offer benefits or incentives that make a position more attractive to an accomplished or unique candidate).
• They clearly define an employee’s expected duties and performance (if the employee does not meet the obligations spelled out in the contract, it may be easier to terminate them).
• They allow for the possibility of arbitration of any dispute the employee might have with the employer, even under federal and state laws (some employers prefer arbitration over the possibility and expense of litigation).

On the other hand, there are circumstances in which an organization would not benefit from the increased control that employment contracts can offer. The reasons may vary, but often include the following potential cons of using employment contracts:

• Things change — The terms of a contract may become outdated, no longer fitting the situation, but the organization will still be bound to those terms (unless they are renegotiated). This reality is especially true for highly dynamic or fluid workplaces. By foregoing a contract, employers retain the option to make changes without having to go through the trouble of renegotiating.
• Good faith — In many states (but not all), employment contracts implicitly include an obligation on the part of the employer to treat the employee with good faith and fair dealing. A poorly constructed employment contract could result in a situation where an employee believes the employer has not acted in good faith or fairness, and the parties may end up in court or arbitration.

Implied contracts

On occasion, a company representative may say something to a prospective or current employee that may lead them to believe something regarding their employment that isn’t necessarily true. In these instances, the company may still be bound to what was previously said because the speaker was acting as a representative of the company’s management.

For example, a recruiter may tell a candidate that the company has never experienced a layoff and does not expect to experience one. The candidate may then believe that they will never be laid off. If a layoff subsequently occurs, the employee may argue that there was an implied contract regarding layoffs and could attempt to sue the company — alleging that they broke an implied contract. Even if these lawsuits are unsuccessful, they can be costly and time-consuming for an employer to deal with.

Employers need to be careful that their representatives do not make any promises that the company cannot keep or does not intend to keep. This includes assurances about stock prices, pay increases, job security, specific duties of a position, or other terms and conditions of employment.

Companies should include statements in their employment applications, job offers, policy manuals, and employment contracts clearly stating that employment is at-will and can be terminated at any time for any lawful reason.

Employment agreements: Full-time, part-time, etc.

The Fair Labor Standards Act (along with most state laws), defines an employee as someone who is “employed by an employer.” In other words, if someone works for an employer, that person is usually considered their employee. Laws do recognize a few non-employee classifications, such as volunteers for civic or non-profit organizations, independent contractors (who are often self-employed), and interns who come to the workplace for their own educational benefit. If an individual does not fall into a non-employee category, however, that worker should almost certainly be classified as an employee.

Employers commonly use classifications to define employment relationships. Such classifications might include categories to define pay ranges and promotions (Technician 1, Technician 2, etc.), or they may describe the expected working relationship (full time, part time, seasonal, etc.). These terms are commonly adopted to help determine a worker’s eligibility for various benefits. For example, part time employees may have to pay a higher group health insurance premium or may not be eligible to participate at all. Another example could be that seasonal employees may not be eligible for earned vacation.

Despite the common use of terms such as “full time” and “part time,” there is no legal definition for these categories. Employers may define these terms however they choose, and do not need to list a specified number of hours. Employers might define “full time” as 40 or more hours, 35 or more hours, or even define it solely based on the job description. For example, if the listed job expectations include eight hours per day, five days per week, the position is full time. If a position only requires six hours per day, or four days per week, it might be classified as part time.

This has caused many employers to question when an employee’s status must be changed. If a part-time employee is working 40 or more hours, at what point should their status be changed to full time? Since there isn’t a legal definition dictating this status, there isn’t a specific obligation for employers to change a worker’s status after a specified time period. Alternatively, a full time employee might be working reduced hours for several months due to lack of business but could still be considered full time during that period. It’s all up to the company to decide how they want to define these classifications.

Part time employees commonly work longer hours during certain periods, which may last weeks or months, but if the overall expectations have not changed, they can remain classified as part time. For instance, if the job expectations specify that extra work is temporary, and the expected hours over the course of a year will support a part time classification, the employee can remain part time even while working 40 or more hours per week. However, if the employer expects the longer hours to continue for a substantial amount of time (up to a year or more), the organization should consider changing the employee’s classification to offer them full time benefits.