Free Employment Contract

Employment Contract FAQs

What is an employment contract?

An employment contract is an agreement that governs the terms of the working relationship between the employer and the employee by outlining each party’s rights and obligations.

Why do you need an employment contract?

The contract will ensure both the employer and employees know their obligations and there will not be any ambiguity in the working relationship. An employment contract should be used if business owners, managers, human resource managers or recruiters are hiring an employee for their respective company.  However, if an independent contractor is being hired for a fixed term or for on going services, an independent contractor agreement or service agreement should be used instead of an employment contract.

What areas are covered in an employment contract?

Typically an employment contract should cover the following topics:

• Duties of the employee: What type of work the employee will be responsible for and the type of daily tasks the employees will be expected to perform.

• Probation period: How long the probation period will be for the employee, if any.

• Terms of the employment: How long will the employee be working for the employer, such as whether the work will be full time or part time, or whether the position will be temporary or permanent.

• Working scheduling: specifying the employee’s working days, working hours and work location.

• Salary: How much monetary compensation will the employee receive, whether the employee will be paid per hour, paid by commission, or a paid by a fixed amount.

• Employee benefits: What other perks and benefits will the employee have in addition to the salary?  Typically terms can include vacation time, health and dental insurance, paid leave, employee discounts, pension plan, and paid professional development.

• Confidentiality: Prevents the employee from sharing sensitive business information and trade secrets of the employer.

• Non-compete clause: Prevents the employee from working for a competing business after leaving the employer or inducing the employer’s other employees to leave their job.

What is employment at will?

Employment at will means the employee can be terminated for any reason as long as the reason is not illegal. (Some examples of illegal terminations include but not limited to: terminating an employee based on their sex, race, colour, creed, religion, national origin, pregnancy, age, disability etc.)  All states have some form of employment at will with some restrictions. The exception is Montana which only allows employment at will during the 6 month probation period.

What is a confidentiality clause and why do you need one in an employment contract?

A confidentiality clause prohibits the employee from sharing confidential information about the employer’s business both during and after the employee’s employment. For example, sales data, marketing plans, product designs and ingredients, and any business information relating to the employer’s business are confidential needs to be protected.

Having a confidentiality clause or confidentiality agreement will be a good step to ensure the employer’s company will retain a competitive edge by preventing the employee from sharing or utilizing such sensitive information.  The typical confidentiality clause lasts from 1 to 2 years but can also last indefinitely for some extreme cases for proprietary recipes and trade secrets, for example, the formula to Coca-Cola.

What is a non-compete clause and why do you need one in an employment contract?

A non-compete clause prohibits the employee from entering into competition against the employer both during and after the employee’s employment.  This is also tied in with the confidentiality clause since the goal is to prevent the employee from using and sharing sensitive information from the employer.  Typically, the non-compete clause will prevent the employee from working for a competitor of the employer in the same sector for a short period, or limit the geographic location in which the employee may work while working in the same sector.  The limit however must be reasonable since the employer cannot prevent the employee from seeking meaningful work after leaving the position.

What is the difference between an employee and an independent contractor?

An employee works directly under the employer’s control and direction, typically following set schedules, using the employer’s tools or equipment, and receiving employee benefits. An independent contractor, on the other hand, operates as a separate business entity, controls how and when the work is done, and does not usually receive employee benefits. The distinction is important because employment laws, tax obligations, and contract requirements differ for each.

Can an employment contract be changed after it has been signed?

Yes, but any changes must be mutually agreed upon by both the employer and employee. Amendments to an employment contract should be made in writing and signed by both parties to ensure clarity and avoid misunderstandings. Verbal agreements are generally discouraged, as they can be difficult to prove if a dispute arises.

Is it necessary to have a written employment contract?

While some jurisdictions allow for verbal employment agreements, having a written contract is strongly recommended. A written agreement clearly outlines the rights and obligations of both parties, helps prevent disputes, and serves as evidence if legal issues arise.

What happens if an employment contract is breached?

If either the employer or the employee fails to fulfill the obligations outlined in the contract, it may be considered a breach. The non-breaching party may seek remedies such as compensation for losses, enforcement of the original terms, or termination of the contract. The available remedies depend on the severity of the breach and the laws of the applicable jurisdiction.

Does an employment contract need to comply with local labor laws?

Yes. Regardless of what is written in the contract, it must comply with the labor and employment laws of the jurisdiction where the employee works. Any clause that conflicts with statutory requirements, such as minimum wage laws, overtime pay rules, or mandatory leave entitlements, will generally be considered invalid.

What jurisdictions can use our employment contract?

You can use our template to create a legal and valid employment contract for the following jurisdictions: