California Employment Contract: Definition, Key Considerations

What is a California Employment Contract?

A California employment contract is a legally binding contract between an employer and an employee that lays out the specific rights and obligations of both parties in the employment relationship. Employment contracts can be used when hiring permanent employees, temporary employees, contractors, and subcontractors.

Some employment issues that may covered in a California employment contract include:

• Pay rate
• Working hours
• Vacation and time off
• Job duties
• Employment start date
• Duration of employment
• Procedures for discipline and grievances

A well drafted employment contract can be used to protect the rights of both the employee and the company. For example, the contract can lay out what circumstances constitute cause for termination which would take away an employer’s ability to fire an employee for no reason under “at-will” employment laws.

On the other side of the contract, non-disclosure agreements and non-compete agreements often included in employment contracts protect an employer’s business interests by limiting an employee from competing against the company or revealing trade secrets.

Are Employment Contracts Enforceable in California?

California has strict laws governing the relationship between employers and employees that can be found in the California Labor Code. California views all employment relationships as contract based even if the contract is verbal.

This means that all contracts – even oral contracts – are enforceable as long as the employee and employer had a “meeting of the minds” when creating the agreement. It is however strongly recommended that all contracts be in writing. Written contracts are more reliable and easier to enforce.

What Are the Legal Requirements for California Employment Contracts?

The legal requirements for a California employment contract are governed by California contract laws. This means an employment contract needs to show mutual intention of the parties, there needs to be an offer, acceptance, and an exchange for something of value.

The contract cannot include any unreasonable terms that violate the law or public policy like unreasonable limitation on an employee's ability to find future employment created by an unfair non-compete agreement. In addition, the employer cannot use undue influence or fraud to persuade an employee to sign the agreement.

Employment Contract Violations

Employers are not permitted to include provisions in an employment contract that are against the law or violate public policy. Common employment contract violations that will render an employment contract unenforceable include:

• Minimum wage. Each state has a set minimum wage and employers cannot force employees to accept less than this wage.
• Lunch and breaks. Employees have the right to lunch and rest breaks. If an employer tries to make an employee sign away their break rights, it could be considered wage theft.
• Non-compete clauses. Some states enforce non-compete clauses, however; California has very strict requirements for these limiting contracts. The contract must be reasonable and often, a California employer cannot stop you from applying with competitors or trying to start a new business.
• Non-solicitation clauses. Like non-compete clauses, these clauses are often unenforceable in California.
• Union activity. Employers cannot ban union activity in an employment contract. All California workers have the right to discuss pay with coworkers, unionize, or take other forms of collective action.

Types of California Employment Contracts

Employment contracts come in many forms based on the type of work the company does or the type of employee being hired to complete the job. The three most common types of employment contracts are permanent, fixed term, and consultant agreements.

• Permanent. This contract is used by a company to hire a permanent employee with regular hours and an hourly wage or salary.
• Fixed term. Used when hiring employees who will only work for a specific period of time or to complete a specific job.
• Consultant agreement. When a company hires a contractor or a freelance worker, a consultant agreement lays out the terms and conditions for independent workers who are not employees of the company.