Employment Contract

What an employment contract typically includes

• Parties and start date.
• Position, duties, reporting line and work location (including remote or hybrid terms).
• Compensation: base pay, pay frequency, overtime eligibility (exempt or non-exempt), bonus and commission terms.
• Benefits and paid time off, often by reference to plan documents.
• Hours and schedule expectations.
• Term: indefinite, at-will, or fixed-term with an end date.
• Termination: notice periods, grounds for termination "for cause", severance.
• Confidentiality and intellectual property assignment.
• Restrictive covenants: non-compete, non-solicitation of customers or employees.
• Dispute resolution: governing law, arbitration, venue.
• Entire agreement clause and how the contract can be changed.

Our employment contract template lays these out as clauses with placeholders you can adapt.

Employment contract vs offer letter

An offer letter is usually short and states the job, pay, start date and contingencies, with a line confirming employment is at will. It's legally an agreement too, but it's deliberately light, and it avoids promises of job security.

A full employment agreement is longer and negotiated. It typically appears for senior leaders, physicians and other licensed professionals, sales roles with complex commission plans, fixed-term contracts, and anyone asked to sign restrictive covenants. Many employers pair an offer letter with a separate confidentiality and invention assignment agreement instead of a full contract.

Outside the US the picture is different. In the UK, employers must give workers a written statement of the main terms of employment from day one, and in the EU the Transparent and Predictable Working Conditions Directive sets minimum information employers must provide in writing. In many countries a written contract is the norm for every employee.

At-will vs fixed-term contracts

Under at-will employment, either side can end the relationship at any time for any lawful reason, with or without notice. It's the default in every US state except Montana, which requires good cause after a probationary period.

A contract can change that. If it promises employment for two years, or termination only for cause, the employer may owe damages for ending it early without cause. Courts have also found implied contracts in handbooks or verbal promises ("you'll have a job here as long as you perform"), which is why handbooks usually include an at-will disclaimer and offer letters avoid words like "permanent."

Fixed-term contracts are common for executives, project roles, seasonal programs and international assignments. Spell out what happens at the end date: renewal, conversion to at-will or automatic expiry.

Restrictive covenants

Non-compete, non-solicitation and confidentiality clauses are where contracts get litigated. Enforceability of a non-compete depends heavily on state law. California voids most employee non-competes and restricts employers from trying to enforce them; Minnesota, North Dakota and Oklahoma also broadly ban them; many other states limit them by salary threshold, duration or industry. The FTC's 2024 attempt at a nationwide ban was set aside by a federal court and did not take effect. Non-competes for hourly and frontline workers are increasingly restricted and rarely worth the legal and recruiting cost. Have counsel review covenants for each state where you hire.

High-volume and staffing considerations

For hourly and frontline hiring at scale, long contracts slow everything down. Most large employers use a standardized offer letter, an acknowledgment of the handbook and at-will status, and a short confidentiality agreement, all signed electronically during preboarding. Staffing agencies typically have their own employment agreement with temporary workers plus assignment terms, separate from the agency's contract with the client company.

Whatever you use, version-control the templates, keep the signed copy in the personnel file, and don't let recruiters edit legal clauses by hand.

Common mistakes

• Promising job security in emails or offer letters that conflicts with at-will status.
• Using one non-compete template in every state.
• Commission and bonus terms that don't say what happens on termination.
• Changing terms without consideration or a signed amendment.
• Misclassifying an employee as an independent contractor through a contract labeled "consulting agreement". The label doesn't decide classification; the working relationship does.