Employment contract
An employment contract or contract of employment is a kind of contract used in labour law to attribute rights and responsibilities between parties to a bargain.
The contract is between an "employee" and an "employer". It has arisen out of the old master-servant law, used before the 20th century. Employment contracts rely on the concept of authority, in which the employee agrees to accept the authority of the employer and in exchange, the employer agrees to pay the employee a stated wage.
Terminology
A contract of employment is usually defined to mean the same as a "contract of service". A contract of service has historically been distinguished from a contract for services. The differing terminology implies a dividing line between a person who is "employed" and someone who is "self-employed". The purpose of the dividing line is to attribute rights to some kinds of people who work for others. This could be the right to a minimum wage, holiday pay, sick leave, fair dismissal, a written statement of the contract, the right to organise in a union, and so on. The assumption is that genuinely self-employed people should be able to look after their own affairs, and therefore work they do for others should not carry with it an obligation to look after these rights.Following the unification of the city-states in Assyria and Sumer by Sargon of Akkad into a single empire ruled from his home city circa 2334 BC, common Mesopotamian standards for length, area, volume, weight, and time used by artisan guilds in each city was promulgated by Naram-Sin of Akkad, Sargon's grandson, including those of shekels. Codex Hammurabi Law 234 stipulated a 2-shekel prevailing wage for each 60-gur vessel constructed in an employment contract between a shipbuilder and a ship-owner. Law 275 stipulated a ferry rate of 3-gerah per day on a charterparty between a ship charterer and a ship-owner. Law 276 stipulated a 2-gerah per day freight rate on a charterparty, while Law 277 stipulated a -shekel per day freight rate for a 60-gur vessel.
In Roman law the equivalent dichotomy was that between locatio conductio operarum and locatio conductio operis.
The terminology is complicated by the use of many other sorts of contracts involving one person doing work for another. Instead of being considered an "employee", the individual could be considered a "worker" or as having an "employment relationship" or a "professional" or a "dependent entrepreneur", and so on. Different countries will take more or less sophisticated, or complicated approaches to the question.
Employee vs. independent contractor
An independent contractor is in business for him or herself providing services to other businesses and does not work for or under an outside authority. Independent contractors are contracted on a temporary basis and paid at the completion of a project upon which their contract will be terminated. An employee works for an organization and is covered by federal and state employment and labor laws, which entitles them to certain benefits such as social security, income tax withholdings, and workers compensation, among others per the United States government.Types of employment
Employment contracts define the type of employment, which fall into two categories: at-will employment and for-cause employment.For-cause employment
For-cause employees can only have their employment terminated for a just reason. The employer's decision to terminate an employee also must be reviewed by an independent body to ensure the termination was indeed just and provide protection for employees from unfair or arbitrary termination. The three largest classes of just-cause employees are federal and state employees, as well as union members.At-will employment
On the other hand, at-will employment does not require an employer to give any cause for termination. At-will employment is unique to the United States, as most countries require specific procedures for employment termination. At-will employment was considered common law in the United States prior to the nineteenth century as opposed to the standard employment law in England, which was the annual hiring rule or seasonal hiring. In 1877, Horace Wood wrote his treatise on employment titled Master and Servant, which is considered by some to be the origin of at-will employment in the US. However, critics of Wood indicate that he incorrectly cited the cases to support his claim that employers can discharge workers for any reason. Shortly after, courts across the country upheld his claim.There are several theories as to why at-will employment became a legal standard in the US. According to Jay Feinman in The Development of the Employment at Will Rule, as a result of the Industrial Revolution and increasing economic pressures, courts adopted the rule because it favored employers who were trying to avoid mounting employment lawsuits. Employers did not want employees to have a voice because if they knew they could be dismissed at any point, they would be less likely to protest working conditions, wages, etc. At-will employment doctrine also maximized employers’ ability to decrease their workforce in times of economic contraction.
A second theory, proposed by Sanford Jacoby, argues that trade unions were much weaker in the US than in England during this period, so the courts did not offer as much protection for the annual hiring rule. Additionally, white collar workers in England during the nineteenth century garnered much more protection from the English courts due to their higher status compared to white collar workers in the United States.
More recently, Deborah Ballam argues in Exploding the Original Myth Regarding Employment-At-Will: The True Origins of the Doctrine that the employment-at-will rule was the norm throughout the history of the United States because the agriculturally based economy and labor market were not conducive to the English annual hiring rule. "Because of the extensive use of indentured servitude, slavery, and express contracts for specified terms, and because of the severe labor shortage, few laborers would have been in situations where the annual hiring rule could have applied".
Types of employment contracts
The two most common types of employment contracts include fixed-term and open-ended contracts.Fixed-term contract
are used when an employer wishes to hire an employee for a specific amount of time that is agreed upon in advance. Also known as task contracts, a fixed-term contract can also be used for the completion of a specific task and the contract will be terminated automatically upon completion of the task. Either party may terminate the contract before the end of the specified term if appropriate notice is given by either side.Open-ended contract
Conversely, an open-ended employment contract does not have a specified end date. Open-ended employment contracts are also called permanent, indefinite, or continuing contracts as they are typically used for long-term employment situations. This type of employment contract may be terminated if either party gives appropriate notice to the other party or in specific instances such as health concerns, resignation, or misconduct.Structure
An employment contract should clearly define all terms and conditions of the employment relationship. The most common elements to any employment contract include the following:- Terms of employment
- Employee responsibilities
- Employee compensation
- Employment absence
- Dispute resolution
- Nondisclosure agreements
- Ownership agreements
- Assignment clauses
- Employment opportunity limitations
- Grounds for termination
Common clauses