Employment contracts, like most other contracts, are generally legal and enforceable, even in states that are considered "at-will" employment states. In those states, unless there is an employment contract that states otherwise, your employer can terminate your employment at will – i.e., whenever he or she chooses to do so. But, how do you handle the situation where your employer forces you to sign an employment contract, after you have accepted the position and begun working, in order to remain employed?
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Employment Contracts Must Be Voluntary
The main issue in this legal scenario is whether the employee actually signed the agreement voluntarily. If the employee can prove that he or she was induced or coerced into signing the contract, then the validity of the contract can be challenged.
Consider this scenario. An employee, on her second day of work at a new employer, is asked to sign an employment contract. This contract substantially limits the amount of severance she can receive upon termination. Although the employee does not want to agree to these terms, she has already resigned her previous job in order to accept the new position. Essentially, she is left with no other choice but to sign the contract for fear of losing the new position.
Generally speaking, in terms of contract law, if an employee is given a contract after he or she starts a new job, the contract must provide something of additional value in exchange for signing the contract. Otherwise, the employee is being put at a severe disadvantage. There have been cases, similar to this scenario, where courts have struck down employment contracts signed under these circumstances.
Are Employment Contracts Being Used as Loopholes by Employers?
Unfortunately, yes. Companies with sufficient knowledge and understanding, can use an employment contract to their advantage by requiring its employees to sign one-sided contracts that essentially reduce the legal rights of those employees. Because the employees have basically no bargaining power whatsoever, nor an equal understanding of the law, they usually do not realize that their legal interests are being compromised.
Is this use of an employment contract legal?
In some ways, yes. Ever heard the phrase, "ignorance is no excuse?" The law assumes that if you signed the contract, you read, understood and agreed to its terms, unless you can prove fraud or other limited exceptions. As a result, an employment contract, even one that limits or eradicates an employee's rights, may still be legal. That is why it is critical that you read and understand any document before you sign it. You should also have the right to allow an attorney to review the contract for you.
What rights are employees giving up by signing employment contracts?
Absent a written employment contract, each employee is guaranteed a number of legal rights and protections. Some of these rights are implied, such as the right to reasonable notice of termination, the right to refuse adverse changes to compensation or position, and the right to compete with a former employer. Courts have established these implied rights over time, through case law, in order to encourage fairness.
There are also numerous explicit legal rights that have been enacted by federal lawmakers which, for example, prohibit discrimination or harassment based on gender, race, age, disability, or pregnancy. There are also laws that protect whistleblowers and protect against overtime and other pay violations.
So, what can I do?
It may surprise you, but the doctrine of freedom of contract is still very widely accepted. However, employees do have the right to negotiate the contract in order to place themselves on more equal footing with their employer. Yet, most employees are not courageous enough to do so. The best advice is to ask an experienced employment attorney in your area to review the contract and challenge any terms that may be questionable. If you or someone you know has been presented with an employment contract and you have questions about how to proceed, contact Wrady & Michel, LLC either online or by calling us at (205) 265-1880.