Employment contracts

Scope

A written contractor policy usually has guidelines to govern host facility relationships with outside contractors. The contract is designed to clarify everything involved in the job. Written contracts are important tools for outlining responsibilities and limiting liabilities. When a host employer takes on certain responsibilities for controlling the work of contract employees, the host employer can become liable for withholding payroll taxes, paying overtime, providing benefits, and complying with immigration laws.

Regulatory citations

• None

Key definitions

• None

Summary of requirements

Some elements of a contract may include the following:

• The scope of the work,
• 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 having employment contracts, and it basically boils down to what works for a particular situation.

Some of the benefits of contracts include the following:

• Control over how long the employee will be with the company — contracts generally dictate employment duration, so there are no surprises.
• Control over when the employee can leave the company — if a contract does not dictate employment duration, it requires ample notice, which may allow for locating a replacement.
• Control over confidential company information — contracts often have clauses that prohibit the employee from disclosing such information.
• Protection from an employee becoming a competitor — noncompete clauses are not uncommon and protect the organization from allowing a former employee from taking company information and becoming a competitor.
• Contract may not have to adhere to regular employment policies — the organization may have the freedom to offer benefits or other perks that make a position more attractive to an accomplished candidate.
• Control over the employee’s performance — if the employee does not meet the performance criteria spelled out in the contract, it may be easier to terminate.

There are times when an organization would not benefit from the control an employment contract can offer and would do better without one.

Some of the cons of such contracts include the following:

• Things change — the terms of the contract may not fit the situation after a time, but the organization is still bound to the terms, unless they are renegotiated. Without a contract, employers may make changes, such as the number of holidays, without having to go through the trouble of renegotiating.
• Good faith — employment contracts have an obligation on the part of the employer to treat the employee with good faith and fair dealing. If the employee believes the employer has not done so, they may end up in court.

Implied contracts. Sometimes company representatives may say things to a prospective or current employee that may lead that person to believe something that isn’t necessarily true; however, in saying them, the company may be bound to that statement.

For example, a recruiter tells candidates that the company has never experienced a layoff and does not expect to. Candidates may then believe that, if they join the company, they will never be laid off. If they are laid off, the employee can argue (and sue) that there was an implied contract that there would not be any layoffs. The organization would have broken the implied contract.

Organizations need to be careful not to make any promise that they cannot keep or don’t intend to keep. This includes promises about stock prices, pay increases, job security, the position, and other terms and conditions of employment.

Some companies will include statements in their employment applications that employment is at-will and can be terminated at any time for any non-discriminatory reason.