Employee Service Agreement
The Definition: What is an Employment Contract?
Employee Service Agreement: An Employment Contract memorializes a legal business relationship between two parties — the employer and the employee. The employee is being hired to perform a certain set of functions and responsibilities, and the employer often provides resources and training for the employee to succeed. This agreement further confirms that the person being hired is an employee for legal and tax purposes.
A simple contract will identify the following basic elements:
• Employee: Name of person being hired to work.
• Employer: Name of company hiring the employee.
• Position: Title and description of role and responsibilities of employee.
• Compensation: Amount of money paid per hour, week, or monthly, and any overtime or commission, and the dates compensation will be paid.
• Hiring Date: When the employee will start working for the employer.
• Term: Indefinite (or at will) or fixed amount of time the employee is expected to work.
• Benefits: Details about disability protection, health insurance, vacation, sick days, paid time off (PTO), maternity leave, and any other perks. (Employee Service Agreement)
However, most contracts also include at least one of these additional clauses:
• Confidentiality: Trade secrets, client lists, and sensitive information cannot be shared while working for this employer or future employers.
• Non-compete: The employee will not work for competing companies or compete with the employer if they leave, including misusing confidential information. Employers can include a non-compete provision in the contract. Learn more about non-competes from this article published by the American Bar Association.
• Non-solicitation: Employees may not recruit other co-workers to join them when they leave or ask a company’s clients or customers to follow them to their new company. If you live in California, Montana, North Dakota, and Oklahoma, however, restrictive covenants are not allowed and employees are allowed to work for competitors.
• Reimbursements: The company will pay back employee for expenses related to the job like a cell phone, business travel, or relocation.
• Probation Period: A period of time where the employee is essentially “on trial” and may be terminated if deemed unsuitable.
• Termination: The reasons why the employee relationship may be ended.
• Work for Hire: Anything created by the employee at work belongs to the company.
As a reference, people refer to this document by other names:
• Employment Agreement
• Agreement of Service
• Contract of Employment
• Contract of Service
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