Everyone needs promise protection
By Bernard C. Dietz, Esq.
You would never think of buying a home without a written contract setting out all of
the details of the sale. It would be impossible to buy a new car without signing a contract that sets out the price to be paid
and the terms of the deal. And you can't get a credit card without signing a formal application contract.
So why do people routinely accept job offers without a written contract?
Your job is the source of the income used to pay for your house, your new car and your
credit cards, yet very few people have written contacts with the companies that hire them detailing the terms of their
employment. Sure, CEO's and other senior executives have written contracts covering their jobs, but why don't the rest of us?
The vast majority of the workforce would benefit from a written contract that covers how we'll be treated, how we'll be
compensated, what we'll be doing, and more. Otherwise, what governs all of the time we spend away from our families five or more
days a week? It is important and prudent to ensure that promises made at hiring time will be respected during the course of
The problems with verbal job offers
In general, at the time of an offer and acceptance of a new job, most new
employees are verbally told the details of their new employment, including the rate at which they'll be paid. But verbal offers
are not good for employees for a few reasons:
- If the information is not written down and there is a dispute or misunderstanding as
to what was said in the past, you will find it very difficult to prove your version of the original agreement.
- The manager that made all of the verbal promises may move to another part of the
company, or quit, or be fired, leaving no confirmation of your agreement;
- The manager may not have been authorized by the company to make certain promises to
you, and the company may refuse to stand behind the manager. The consequences can be profound if you have already resigned your
old job and uprooted your family for the new one.
Unless the promises made at hiring time are somehow secured, it can be difficult or
impossibleand costlyto enforce them.
An offer letter is not enough
Sometimes, employers provide new hires with an offer letter. This is a good
start -- a written document that could function as a contract, except that these letters often include statements that negate
their contract value. Problematic statements include "the terms of the offer letter are subject to change in the
future" and "new employees agree to and are bound by the terms of our employee handbook". Too often, the new
employee doesn't get to see the handbook until after the hire is made, and the handbook almost always states that it is subject
to change at any time by the company.
When the terms of a job offer are subject to change, it isn't good for the new
employee. There are no concrete promises to ensure that the employee is getting (and giving) what was agreed to at the time the
job offer was accepted.
At will: The mistake companies make
The number one reason employers are reluctantor refuseto provide an
employment contract to the vast majority of employees is because, "We want to be able to fire the employee if we feel
they're not working out, and we don't want a contract to limit our ability to do this." This concern arises from the
concept of "at-will employment."
Simply stated, when a company hires someone at will, it can fire the employee for any
or no reason at any time. (Likewise, the employee is free to quit the job.) Most states in the U.S. are considered
at-will states, where the legal presumption is that, absent a contract stating otherwise, all employees are at-will employees
and employers can fire them for any or no reason at all (other than for reasons of discrimination, of course).
But companies confuse at-will employment with employment contracts. Employers often
believe that having a contract with an employee automatically eliminates the freedom of at-will status. This is simply
A true contract defines a term of time for the employment period, making the
arrangement predictable for both parties. It can include an at-will clause. An essential part of the employment contract should
be the term, or length of time, of the agreement, which may be six months, a year, or at will, which means "for as long as
we both agree to keep it going but either party can end it at any time." Thus, other important terms can be enforced
without limiting the freedom to part company at any time.
The benefits of a good employment contract
When a company misunderstands at-will employment, it misses the clarity and
benefits offered by employment contracts.
With a well-written employment contract, settling disputes regarding an employment
becomes a much simpler and less expensive proposition for both sides. As with any contract, at the first sign of a dispute the
contract can simply be reviewed to confirm the rights and responsibilities of each side. If the contract is not being upheld by
the employer or employee and it can't be resolved by discussion or negotiation, then a lawsuit may be filed. But of course, a
central reason for a good contract is to avoid litigation. When there is a written agreement to refer to, the decision of who is
right or who is wrong may be decided quickly as a matter of contract law, rather than as a protracted matter of "he
A good contract protects promises
An employment contract doesn't have to be a long, difficult document, and it
can be tailored for any employee. First and foremost, the contract should protect promises made by both parties at the time of
hiring. Both an employee and an employer should look for these simple but very important terms in a contract:
- The position being offered and accepted;
- The compensation that will be paid;
- Whether the employment is for a set length of time or at will;
- Specifics regarding vacation time and sick leave and whether such time accrues from
year to year;
- And the responsibilities of both parties with regards to the work to be done and the
The contract should be signed by the company and the employee. If you're the employee,
you should store a copy in a safe place, like the safe deposit box where you keep the deed for your house and the title for your
car. The contract for your job is at least as important as those documents.
Employment contracts are good for everyone
Having a written contract benefits both the employee and the employer because it makes a clear, definitive record of what
everyone is agreeing to at the time of the agreement. These contracts are not just for executives, though an employment contract
for an executive will be more complex and detailed than for a staff employee or a middle manager. Anyone would rest more easy
knowing that the details of employment are set down in writing, both to promote success of the working relationship and to avoid
Employment contracts are good for everyone. The main benefit for employers is that
they don't have to worry about potential verbal promises made by a rogue manager that could come back to haunt them. A company
can, if it chooses, make it clear that the employment is not promised for any set length of time. The main benefit for employees
is that they are protected if their management changes and if memories fade about promises that were made. The contract ensures
promises will be kept.
Please tell us what you think of this article.
Bernie Dietz runs a private legal
practice in Richmond, VA. He is licensed to practice law in Virginia, Maryland and the District of Columbia and has more
than ten years' experience as an attorney representing entrepreneurs and businesses of all sizes in a wide variety of legal
matters, including employment issues. Bernie's firm focuses on corporate and commercial law
and litigation, and personal planning and asset protection services for entrepreneurs. More information can be found at his
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