Employment contracts historically were limited to highly paid, upper management employees. Both sides were sophisticated and wanted something more than a “handshake” deal. Now employment contracts for employees at all levels are common. Employers seek to add more and more limits on what employees can do during and after their employment — and a contract may make those demands legally binding well beyond job termination.

What is a Contract?

A legally binding contract involves:

• An offer by one party to the other;
• A “meeting of the minds”;
• Both parties exchange lawful consideration; and
• Each party accepts the offer.
• The employment relationship is governed by an Employee Handbook that spells out the parties’ respective rights and obligations.

After an initial offer, there are often negotiations because the other party wants a better offer in exchange for their acceptance. Proposals and counter-offers may go back and forth, yet eventually, there’s a “meeting of the minds” where both parties understand their mutual rights and obligations and are willing to memorialize them in a signed writing.

The parties must exchange consideration, but what is it? It must have value, but it need not be tangible. It could be money, stock options, a pledge to do something, or to refrain from doing something a party has a right to do. After all this takes place, the offer (in its original form or as amended if it’s mutually agreed upon) is accepted, and a binding employment contract is circulated for final signatures and distribution.

Must a Contract Be Written?

No, but both parties are better off if it is. There are express terms (the agreement’s in writing but unsigned or verbally made), and a contract can be implied by the parties’ actions or the circumstances of their relationship.

In an implied contract, party A may be obligated to pay for services provided by party B if B reasonably expects A to compensate them and if a reasonable person in A’s position would know B is performing services expecting payment.

It’s easier to enforce a written contract because its terms and conditions are right there, and both sides have already shown their intent to accept them. Both parties can too easily dispute what is or isn’t part of an implied contract or one they only discussed (but may or may not have agreed to).

What Makes a Contract an Employment Contract?

An employment contract covers the terms and conditions of the employee’s job, plus compensation and benefits. Typical sections of an employment contract include:

• Identification of the parties;
• The contract’s effective date and term;
• The pay and benefits the employee will receive;
• Whether this is a part- or full-time job and if the employer must approve outside employment;
• The person’s title and duties;
• The hours and days the individual is expected to work;
• The employee’s work product is solely owned by the employer;
• How either party may bring the contract to an end, with or without the consent of the other party;
• How employment disputes will be worked out, possibly including negotiation, mediation, arbitration, and/or court intervention;
• If there’s a dispute over the contract, which state’s laws would apply; and
• Restrictive covenants, such as the employee agreeing that they, while working or for a period after leaving (whether by resignation or firing), may not: compete with the employer, solicit fellow employees or current customers to another business, and disclose confidential trade secrets, financial, and other private information.

What’s in the contract is up to the parties, though if a section violates the law, it wouldn’t be enforceable. New Jersey law changed in 2019 to make some employment contract clauses unenforceable. For example, an employer can’t prevent you from filing a discrimination complaint with a government agency enforcing those laws, but if the employee seeks compensation due to alleged discrimination they may be required to resolve the issue through mediation and or arbitration.

A New Jersey employer may not force an employee to go to binding arbitration about gender discrimination or sexual harassment, nor may the employer prohibit the employee or former employee from publicizing such claims, provided the employer is allowed to rebut the employee’s allegations once made public.

When Can a Contract Violation Result in Legal Action?

A minor, partial, or immaterial breach of the employment contract — such as missing work hours, not receiving all sick days promised, or not performing minor duties of the job — won’t be enough to justify legal action.

A party could file legal action for breach of contract if there’s a material breach that threatens the primary purpose of the agreement and it goes against the parties’ intent when the contract was created. The breaching party could be ordered to comply with the contract and or pay the other party what they lost due to the breach. It can also mean, in fairness, the non-breaching party later may be forgiven for not complying with the contract’s terms.

Does Your Employer Want You to Sign a Contract?

Never sign a contract you haven’t read or fully understood. If your employer (or potential employer) gives you a “take it or leave it” contract, doesn’t give you time to review it, or doesn’t want your lawyer to look at it, then don’t sign it and start looking for another job. An employer who doesn’t want you to understand what’s in the document and wants you to blindly give up your legal rights isn’t an organization you want to work for.

What Kingston Law Group Can Do for You.

The Kingston Law Group can review draft employment contracts and tell you what’s good, bad, and unacceptable. We can also propose changes and negotiate the contract for you. Our firm can also represent you if you’re accused of breaching an employment contract or if you claim your employer isn’t living up to their end of the bargain.

If you have questions concerning an employment contract or a breach of contract claim has been made or threatened, contact Kingston Law Group through email (hisaacs@kingstonlawgroup.com) or call us at 609-683-7400.

We will schedule a near-term reduced fee initial consultation. We will listen to your facts, explain the laws, and discuss your options to obtain social and economic justice. We can speak with you on the phone, through a Zoom call, or in-person — if you’re vaccinated against Covid-19. We accept credit card payments, and our appointments are from 9 a.m. to 5:30 p.m., Monday to Friday. We can schedule evening appointments during the workweek by special appointment only.

Contact us today. You’ll be glad you did.