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Read Before You Sign

Kate Traynor

You don’t need to be a high-level executive to face the prospect of signing an employment contract.

An employment contract is an agreement that spells out the relationship between a worker and an employer. Employment contracts can address many issues related to the terms of your employment. The contract is usually signed before you start work or on your first day at the job.

As with any other contract, you should pay close attention to what this document means—to you and to your employer.

Salary and benefits. An employment contract may state your agreed-upon starting salary and describe your benefits package. The contract may also outline the employer’s policy on promotions or give details about your eligibility for bonuses.

Nondisclosure agreement. Employers concerned about the leakage of proprietary or confidential information may include in the employment contract a nondisclosure agreement. By signing the contract, you agree not to reveal any trade secrets or other sensitive information that you learn while on the job.

Noncompetetion agreement. Some employment contracts forbid an employee from leaving a job to work for a competing organization or to start a competing business. In general, these noncompetition agreements must not prevent the employee from earning a living. Noncompetition agreements should expire within a reasonable time after the employee leaves the job. Some noncompetition agreements apply to a limited geographic area.

Just cause. A "just cause" provision means that the employer can only fire you for a valid reason. The phrase is more meaningful if the contract specifically states the conditions that constitute just cause. Stealing from your employer, excessive tardiness, and harassing your coworkers are good examples of just cause. But firing an employee for poor job performance or for financial reasons are also unlikely to violate a just-cause agreement.

If you have reservations about an employment contract’s terms, discuss your qualms with your new employer before you sign the document. You can ask your new employer to alter the contract if you disagree with any of its stipulations. And you can ask to add new provisions to the contract, such as a severance-pay agreement to compensate for a restrictive noncompetition or nondisclosure agreement. But some employers may balk at altering the contract.

Finally, be aware that even if you do sign an employment contract, any provisions that conflict with the rights granted to you or the employer under federal or state law are unenforceable. If you have doubts about a contract’s wording, it may be in your best interest to consult a lawyer.

CareerBuilder Inc.—An article by freelance writer Nichole Youtz offers insights on employment contracts for new graduates and first-time employees.—This site, which this year received an award from the American Bar Association, has an employment law section that gives a good overview of the legal terms used in employment contracts. The site contains a great deal of free legal advice. And, for a fee, consumers can have legal documents analyzed by MyCounsel lawyers.

Ask The Headhunter—Nick Corcodilos, author of Ask The Headhunter: Reinventing The Interview to Win The Job, offers his forthright perspective on noncompetition agreements.

Career Journal—You don’t have an employment contract, but you do have an employee handbook. Is this a legally binding document?