What Constitutes an Employment Contract?

A contract is in essence an agreement that sets forth the terms and conditions agreed upon by the parties involved. So, in the simplest sense, an employment contract establishes the terms and conditions of employment. It may be a written document or collection of documents, a verbal agreement, or some combination of both. A contract is made when an employer makes a specific offer, whose terms are accepted by the employee.

Explicit and implicit contracts

Explicit employment contracts are detailed agreements that specify the nature of the employment relationship: terms such as salary, job duties, benefits, or work hours. Although an explicit contract is typically in writing, it may not be a single-signed document. Explicit contracts may be a combination of materials that collectively represent an agreement of terms between parties. In a union job, there will be a collective bargaining agreement in place between management and labor.

An implicit contract is an agreement or understanding between parties that is implied, verbally or via documents other than a written contract. For example, a new hire may be issued an employee handbook that explains company policy including attendance, paid time-off, grounds for disciplinary action including dismissal, etc. Employment that is not explicitly contracted can lead to confusion when implied terms are not uniformly specified from one source to another, e.g. handbooks, posted policy notifications, etc.

Enforcing implied contracts

An implied contract may be legally binding despite it being only verbal in nature, provided it meets certain legal conditions. To meet the legal definition of an implied contract, the terms have to be specific. Some states have what is known as a statute of frauds that restricts the enforceability of an implied contract. If the terms of such a contract could not be satisfied within one year, a statute of fraud would not be met. So, if your boss implied an assurance of employment for a minimum of five years, in this case, the statute of frauds would have expired before any breach of contract could be claimed.

Since implied contracts can be enforced, employers will often take care to use language or disclaimers to avoid giving the impression of any guarantee of employment, particularly in an at-will employment relationship. It is important to examine all documents given to or signed by you to establish the nature of your employment contract.

Conflicts with at-will employment

A breach of contract is made when any term or condition specified in an employment contract is violated. It may also be claimed in conjunction with a wrongful termination claim, including discrimination violations. Terms of employment may inadvertently be implied by the wording of documents, which conflict with an at-will employment policy.

Bearing in mind that at-will employment may be terminated at any time by either party for any legal reason, or for no reason, an implied or explicit contract that specifies terms of employment may still restrict an employer from dismissing you, except under the conditions specified in the contract. This is one reason why many employers no longer provide a probationary period to train and evaluate new hires. The presumption of job security for the length of the probation would conflict with the at-will relationship.

Fired under contract

If you have been terminated from a contract job, you may be entitled to file a breach of contract claim. An attorney with knowledge of employment law can help you determine whether your termination was wrongful. Be sure to provide all signed documents, employee handbooks, witnesses to statements made to you that can be regarded as implied promises. Also, ask your employer for a copy of your personnel files. Your work history, job performance, attendance, etc., may help a wrongful discharge claim in court.