You've grown your business to the point where you need to hire more help. It's an exciting time! But you don’t want to get carried away on adrenaline and forget to do everything by the book. To hire new employees, you’ll need more than a handshake agreement.
There’s a lot to do before you make the hire, like preparing for payroll and drawing up documents. This is where you’ll need an employment agreement. It’s an important piece of paperwork because it defines the working relationship, your expectations, and conditions.
Before you start posting job ads, take a look at this blog. We’re here to help you learn some of the most common kinds of employment that employment contracts can cover, what they're best used for, and how a lawyer can help you navigate this process.
An employment contract is a written agreement between an employer and an employee that explains the terms of the professional relationship and binds each party to those terms. The exact document can vary by role, state, and business needs.
When you’re creating an employment contract, it’s important to consider all the potential issues that could impact the relationship. Include components that define all of your requirements and responsibilities as well as the employee’s.
Employment contracts may include these components:
Acceptable provisions differ by state, so be sure to talk to a lawyer when preparing an employment agreement to avoid the invalidation of your entire agreement or fines/penalties for violating the law.
Employment contracts specify the type of relationship, including the scope, pay, hours, and duration. Fixed term contracts may note end dates, while ongoing contracts may not list a duration.
A contract can cover many different types of employment relationships. Let’s take a look at a few of the options.
A full-time permanent employee works on an ongoing basis, usually with a regular schedule. Most full-time roles involve at least 35 work hours each week, but the exact number can depend on the role and the rules tied to certain benefits.
Businesses can pay full-time employees a salary or by the hour, and these roles may include benefits. Think paid time off, sick leave, health benefits, retirement plans, and professional development.
Although these are often called “permanent,” either party can end the relationship at any time in most states. There are certain exceptions and protections when letting employees go, so it’s important to consult with a lawyer to see what rules apply to your situation.
Some businesses hire part-time employees when they need scheduling flexibility and/or ongoing work for fewer hours per week. This is a more complex issue than it may seem. Employers can set hours according to their own policies. However, there are official definitions used to determine an employer’s responsibilities. For example, the IRS defines full-time employees as those who work 30 or more hours per week, or 130 hours during a calendar month, for calculating shared responsibility provisions.
An employment contract in this scenario can explain the worker’s expected hours, whether that schedule can change, and how and when the employer will assign shifts.
Often, part-time employees don’t get the same employment benefits as full-time employees. For instance, a part-time role may not include health insurance, paid time off, or access to a retirement plan. The contract typically makes those details clear, so neither side is surprised.
Fixed-term employment may be useful when you only need a worker for a specific project or a set time period.
For example, you might need to cover parental leave time for a full-time employee. You could hire a fixed-term worker to support a product launch, finish a grant-funded project, or otherwise bring in help for a defined period.
In any case, the employment contract might explain these important details:
This is not the same as a probationary period. A fixed-term role covers a time period or project. A probationary agreement typically provides a set time to evaluate whether a new hire is a fit for an ongoing role.
Project-based or seasonal workers may not be W-2 employees, but instead are independent contractors. If that’s the case, an employee agreement isn’t the right document for that situation.
Seasonal employment is a type of fixed-term employment that follows patterns like the weather or holidays. This kind of employment often repeats annually. Holiday retail work, summer tourism jobs, tax season support, agricultural harvest work, and short-term warehouse staffing are all common examples of roles that seasonal workers support.
The contract might explain when the job begins, when it should end, how many hours the employee will work, and the role itself. Anything from a few weeks to several months could be appropriate for seasonal work.
For students, internship contracts provide access to practical experience. For businesses, internship contracts provide access to extra support. Accepting an intern may come with additional requirements set by the university where the intern is a student.
Internships can be paid or unpaid, but the unpaid ones call for careful review. If it’s all about the employer’s need for labor, that could cause a host of legal problems. A lawyer can help you wade through these nuances.
Apprenticeships are roles that combine paid work with structured training. They’re common in skilled trades and technical fields like plumbing, HVAC, construction, electrical work, and healthcare support roles.
The actual agreement text can explain the apprentice’s duties, training schedule, pay, supervision, and program completion. It’s common for apprentices to earn less at the start and more as they sharpen their skills.
Apprenticeships can give workers a path to build skills, and in some fields, work toward a credential of some kind. The employer, meanwhile, gets the chance to train someone for their business needs. In a well-structured employment agreement, both parties benefit from the relationship.
Casual employment terms can look similar to seasonal and temporary terms, but they’re usually more flexible. If you only need occasional work, or your needs are unpredictable, this could be a good option. You won’t need to guarantee hours, and instead pay for work as it’s accepted or completed.
An employee contract for this kind of role can cover how payment works, when the arrangement ends, how the employer will offer work, and whether either side must offer or accept a minimum amount of work.
Employment contracts can describe how either the employee or the employer may end a relationship. That said, they still must follow the law, so it’s important that businesses understand what their state allows.
Many employment contracts contain conditions under which the employer can terminate the relationship, based on the employee’s actions. These are usually related to job performance and workplace conduct.
An employer contract may restate if an employee is at-will. At-will employment means that the employer or employee can end the work relationship at any time (with or without cause), provided the reason isn’t illegal. All states, with the exception of Montana, are at-will employment states. Even if an employee is at-will, employers can violate the law if they terminate an employee due to discrimination, retaliation, or other worker protections.
Probationary contract terms create an initial period where the employer can evaluate whether the employee is a good fit for the role or team. The probationary period’s length varies.
The contract might explain how the employer will assess performance during this time. It may also discuss the training the employee will get and what happens if things don’t work out. Importantly, a probationary period does not change the need to follow applicable laws, like wage and anti-discrimination laws.
A LegalShield® Small Business Plan can help you get legal guidance before you use hiring or firing documents. Members may consult with provider law firms about employment contracts.
Employment contracts may include terms that cover what happens if the relationship ends. They will define the amount and time period of compensation following termination. These may vary depending on the reasoning for ending the relationship, like a layoff or if a person was terminated for a cause.
For example, a layoff would likely trigger compensation, but if someone is fired with cause, they may not receive it.
A well-written employment contract can make the working relationship easier to understand and more productive from the very beginning. But getting it right isn't easy, especially with so many options.
When you’re ready to move forward, a LegalShield Small Business Plan can give you access to provider lawyers who can review common business documents. You may consult with provider law firms about employment agreements, hiring documents, and other contracts.
Get legal support for your business when you need it with a LegalShield Small Business Plan.
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Verbal contracts may be enforceable if the basic elements of a contract are present. However, agreements like employment contracts are typically easier to prove and manage with written-down terms for things like pay, duties, schedules, and termination.
An implied contract is not a formal written or spoken contract. It is instead implied by actions, conduct, or circumstances. This can come up in employment situations when an employer’s statements, practices, or policies create expectations about the working relationship.
Written contracts may be impossible to enforce if they include illegal terms, were signed under pressure or through fraud, or conflict with state or federal law.
Communications Director at LegalShield overseeing content creation designed to make legal protection simple and approachable. He focuses on offering straightforward, trustworthy guidance that empowers people to make informed decisions about their legal rights and responsibilities.
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