An employee contract is an excellent tool in detailing both the employer and prospective employee’s expectations regarding the position being filled, job responsibilities, employment benefits and compensation. If the employment relationship needs to be terminated, an employment contract can allow for certainty regarding the terms of the separation of the employment relationship. For example, the employment contract may include a termination clause, choice of law provision, noncompete agreement, restrictive covenants and other provisions to protect the parties’ interest in the event the employment relationship must be terminated.

Employers continue to be exposed to claims by at-will employees, who claim that their termination of employment was in violation of an implied employment contract based on language contained in an offer letter or employee handbook, or by verbal statements of job security by the employer. Therefore, if an at-will employment relationship is intended, employers must make clear to the employee that he or she is an at-will employee and disclaim any contractual relationship.

Some states recognize implied employment contracts when an employer makes statements or takes certain actions that are inconsistent with an at-will employment relationship – even if they are unintentional. If an implied employment contract is found, an employer may be bound by its terms. Therefore, since employment contract law is state driven, employers should check the laws in which they do business to avoid creating an implied employment contract.