A contract is an important element when it comes to employment. With this, the employee and employer set forth terms of employment and rules that both parties have to abide by while the relationship between them exists. Writing down what is agreed is important because it is a concrete document that proves the existence of agreement. But there are also other advantages.

  • Written contracts give the employer control over his employees' capability to leave the company. This will come in handy if looking for a replacement and training him will be expensive and time-consuming. The contract will secure the employee for a specific period of time or require him to give ample time for the employer to find a suitable replacement if ever he decides to leave. The employee will likely to comply if the contract states that failure to do so will entail penalties.
  • Contracts can also help employers gain control employees through other provisions, like a standard for employee performance and policies regarding termination.
  • Sometimes, an employee will learn some confidential or sensitive information about a business while working for them. Confidentiality clauses on written contracts prevent employees, especially those who decide to leave the company, from releasing this information to others for their personal gain. It will also prevent them from competing against the company after leaving.
  • Promising job security and beneficial terms in the employment contract is also way for employers to attract highly-skilled individuals to work for them, instead of their competition.

But there are also a couple of disadvantages that written contracts entail.

  • Written contracts are a physical proof of the agreement that binds the employer and employee. This may limit the flexibility and create problems for both parties, for example, if one party wants to get out of the contract or wants to change some terms. Renegotiating the terms of the contract is the only way to change or get out of it, but only if both parties will agree to it. Not fulfilling the terms is considered a breach of contract.
  • The document brings with it what is known as the "covenant of good faith and fair dealing," or a special obligation to deal with the employee honestly. This is a disadvantage for the employer because once he treats the employee unfairly, he may be liable for violating the contract and breaching the duty to act in good faith.

Consult the help of a Los Angeles employment law attorney before making a contract or when faced with some problems regarding the agreement.