Different Contracts of Employment

Written by robyn lynne schechter
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Different Contracts of Employment
A presumption of at-will employment usually applies to an employment contract. (firma contract 10509 image by pablo from Fotolia.com)

Employment contracts are contracts that establish an employer-employee relationship between two parties. Employment contracts spell out the terms (e.g., length, salary) that govern the relationship during the course of employment. There are three basic types of employment contracts, and, while not always spelt out in an employment contract, federal and state laws apply to the employment relationship as well.

Fixed-Term Contract

A fixed-term employment is a contract between an employer and employee for a specific period of time which is stated and agreed upon in the contract. The termination of a fixed-term employment contract requires no notice by either party; it simply terminates on the end date specified in the contract. If the parties wish to continue their employment relationship, they must draft and execute a new employment agreement.

Fixed-term employment contracts are preferred by parties who wish to enter into an employment relationship for a specific purpose, such as hiring an event planner for a promotional event, or for a limited time period to cover temporary absences of permanent employees.

At-Will Contract

An at-will employment contract is a contract between an employer and employee wherein the employment is at the will of either party, and can be terminated at any time by either party without good cause. "Without good cause" means that the terminating party does not need to provide a reason or justification for termination of the employment relationship.

At-will employment contracts are popular in the United States because they offer flexibility to both parties. Unless a contract indicates otherwise, most states presume employment to be at-will.

While at-will employees usually do not have to provide notice of termination of the agreement, the standard professional practice is to provide written notice to an employer giving two weeks notice of the intention to end employment.

Executive Contract

An executive employment contract is a contract between an employer and a high-level employee such as a chief executive officer or vice president. Compared to fixed-term and at-will contracts, executive contracts are complex employment agreements that are heavily negotiated because the high-level employee's expertise makes him a valuable employee in the workforce. Executive contracts cover topics such as base compensation, performance-based incentives, stock options, subsequent employment agreements and successors.

One heavily negotiated provision of an executive contract is the termination clause. High-level employees typically want to have a "for good cause" provision included in their contract because this makes it more difficult for their employment to be terminated and when it is, the clause requires the employer to provide a justification for the termination.

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