An Employment Contract is, as the name suggests, an agreement used in labor law to define the responsibilities for both the employer and the employee, as well as the employee’s rights. These agreements are usually designed for long term stable employment, as they typically require that the employee remain under the employment for a period of time specified in the agreement itself.
The vast majority of employment relationships in the United States are what are considered At Will employment, meaning that either party can end the employment essentially at their discretion. Employers should note that, under US federal law, if the employer terminates the agreement due to the employees age, race, national origin, sex, religion, military status or physical or mental disability, they can be sued for wrongful termination, even if they do not have an employment contract. Some states have other protected status, such as sexual orientation or gender identity. In addition, under the Equal Pay Act from 1963, it is illegal to pay employees differently based on gender.
An employment contract, on the other hand, will lay out the terms by which either of the parties can terminate their employment, or how long the employment is required to run until the contract expires. In this case, if the employer terminates the contract without just cause, they can be sued for wrongful termination or breach of contract. It will also include the rules regarding the employees wage (which must be equal to or higher than either their state’s minimum wage or the federal minimum wage, whichever is higher) and required hours of work, as well as less universal inclusions such as the employees vacation time and health insurance.
These agreements are favored by long term employers, who want to ensure that their employees do not attempt to quit or renegotiate the terms of their employment suddenly. All Employment Contracts will have a time when the agreement is terminated, and the employee will have the option of either leaving to find a new place of employment or renegotiating. Sometimes the employee will shift from being a contract employee into being an independent contractor once their Employment Contract has terminated, although this is rare.