Common Employment Agreement Provisions
Every employment agreement is different. Most contain the start date, salary, and benefits, but most have many more provisions. Eight common employment agreement provisions that often appear in employment agreements are explained below:
- Arbitration. An arbitration clause is an agreement that if a dispute between the employer and employee should arise (about any aspect of the employment relationship), the dispute will be submitted to arbitration rather than a court of law.
- At-Will Employment / Termination. Most employment agreements state that either party may terminate the employment for any reason. The termination provision may set forth a certain amount of notice (often two weeks). For more on at will employment, see this article.
- Best Efforts. While it is assumed that the employee will work hard, sometimes employers add a best-efforts clause. This states exactly what it seems – that the employee will make his or her “best efforts” at work. This provision is almost always meaningless.
- Confidentiality. A confidentiality provision forbids an employee from sharing certain information about the employer's business, such as secret processes, plans, formulas, data, or client lists. Usually a confidentiality agreement continues after the employee no longer works for the employer. For a more detailed analysis on confidentiality agreements, you can read this article.
- Exclusive Employment. An exclusive employment provision prohibits an employee from “moonlighting,” i.e. working for another employer. With an exclusive employment provision, the employee may only work for the employer, and nobody else.
- No Additional Compensation. This provision requires that the employee is not entitled to any additional compensation even if that employee becomes a director or officer, or serves on a committee.
- Non-Competition. A non-competition clause prohibits an employee from “competing” against the employer for a certain period of time (in a certain geographic area) after he or she stops working for the employer. For a more detailed analysis on non-compete agreements, you can read this article.
- Ownership of Inventions. These provisions are to ensure that anything an employee invents during his/her employment with the employer is property of the employer (i.e. NOT the employee). For most employees, this provision is not important, but in the rare cases it comes up, it is critical. Imagine that you come up with “the next big thing” while tinkering around at home … by the express language of this common employment law contract provision, that “next big thing” would be property of the employer. These agreements also require an employee to disclose any pre-existing inventions.
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