Written Employment Contracts

In the United States, most employees work at will. This means they can quit at any time and for any reason, and they can be fired at any time, for any reason that is not illegal. (Illegal reasons for firing include discrimination, retaliation, and other acts that are prohibited by statute or public policy.)

A written employment contract that says you will be fired only for specified reasons (such as committing a felony or committing fraud against the company) or only for good cause changes your at-will status: If an employee with this type of contract is fired for reasons that aren't set out in the agreement, the employee can sue for breach of contract. However, not every written contract changes at-will status. Some employers use written contracts precisely to make clear that the employee works at will.

What Is a Written Employment Contract?

A written employment contract is simply a signed agreement that details the terms of the employment relationship. There are no legal requirements about what must go into an employment contract; that's up to the employer and the employee. Typical contract provisions include information on the start date and length of employment, the job title and duties, salary, hours, benefits, trade secrets and other confidential information, and termination provisions.

When Employment Contracts Are Used

Written employment agreements can serve two different purposes. Some employers use them to attract or retain star employees, whom the employer wants to keep for a set period of time. If, for example, an employer really wants to entice a highly marketable applicant or wants to retain its key executives during a transition period, the employer might use this type of written contract. In this situation, the employer typically offers a term of employment (for example, two years) during which the employee can be fired only for reasons set out in the contract. In other words, the employer gives up its right to fire the employee at will. The employee must stay for the entire contract term, and the employer may not fire the employee during that time except for the reasons set out in the contract; if either breaks the agreement, it's a breach of the contract.

Some employers use written employment agreements for just the opposite reason: to confirm (and have proof, if it later becomes necessary) that employment is at will. Some employers use their offer letter for this purpose. The letter offers the job to the employee, sets out key details, such as start date and salary, and states that the employee will be working at will. An employee who wants to take the job must sign and return the letter, acknowledging that employment will be at will.

When a Contract Is Breached

Employment contracts can be broken. Employers and employees can't be forced to continue their relationship if either wants out. However, the party who breaks ("breaches") the contract can be sued for damages. Generally, damages consist of what the other party would have gotten had the contract been honored. For example, if you have a one-year written employment contract specifying that you can be fired only for committing a felony, and you are fired after one month so the boss can put his nephew in your job, you could sue for breach of contract. Your damages would be what you would have earned during the contract (the 11 months of salary you didn't receive) minus what you were able to earn because the contract was broken (what you earned during the same period from your next job, if you were able to find one).

In some situations, additional damages may be available. For example, if you sold your house, uprooted your family, and moved across the country to take the job, you may have a fraud claim against an employer who breaches an employment contract. An experienced employment lawyer can review your employment contract and help you determine how to proceed.