Employment Contracts: Good or Bad?

Employment relationships are inherently contractual, regardless of whether the terms are reduced to writing. Alabama is an employment-at-will state, meaning your employer does not need good cause to fire you. As such, there is a strong presumption that employment relationships in Alabama are at-will unless there is evidence to the contrary. Alabama courts can enforce a written or implied contract if it is based on a clear and specific promise of employment for a certain duration. So, if written employment contracts can be enforced, is it a good idea to have one?

Employment Contracts – the Basics

In basic terms, an employment contract is an agreement between you and your employer setting forth the terms of the relationship. The agreement can either be expressed or implied. An express agreement is typically written, whereas an implied agreement is usually established through representations made to the employee by the employer. Those representations must constitute an offer of employment. In Alabama, however, an employment contract must be in writing, unless it is capable of being performed within a year.

Common Terms Included in an Employment Contract

The general terms of an employment contract include a description of the job duties of the employee and how much the employee will be paid. An employment contract can also include terms regarding the duration of the job, applicable benefits the employee will receive, grounds for termination, protection of trade secrets, non-compete provisions, dispute resolution terms and other elements.

Advantages of Having a Written Employment Contract

An employment contract binds both you and your employees, so it limits the flexibility your employer will have with regards to the terms of your employment. In other words, your employer is not able to arbitrarily change the contract terms for its own benefit, regardless of the consequences to you, the employee. If your employer wants to change the terms of the contract or terminate it early, they will have to renegotiate with you first.

Another advantage is that a contract creates a special obligation for the employer to deal fairly with the employee. In other words, it creates a "covenant of good faith and fair dealing." So, if the employer violates the terms of the contract, there could be a claim, not only for violating the contract, but also for breaching the duty to act in good faith.

Disadvantages of Operating under a Written Employment Contract

Employment contracts are often used by employers to control the employee's ability to leave their business. For instance, a written employment contract can lock the employee into a specific term. Although an employee cannot be forced to continue working, an employment contract can include some sort of penalty for leaving before the agreed upon time has expired.

Employment contracts typically include confidentiality clauses and non-compete provisions which create additional hoops for an employee to jump through. If you are not careful, you could inadvertently violate one of these provisions and suffer serious consequences.

Employers can offer employment contracts as a way to entice a highly skilled candidate to come work for them instead of the competition. But it is wise to have your employment law attorney review the contract before you sign. If you have any questions regarding employment contracts or any other employment rights, contact the experienced attorneys at Wrady & Michel, LLC, either online or by calling us at (205) 265-1880.

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