What You Should Know Before Signing a California Employment Contract

The best part of job hunting is, without a doubt, receiving a job offer and no longer having to keep job hunting. So, if your job offer comes with an employment contract, the impulse to rush forward, sign and put interviewing in the rearview may be hard to resist. However, you may come to regret that haste, and wish you had taken the time to review (and potentially renegotiate) your employment contract. After all, those few pieces of paper define the terms and expectations of your chosen career.

So, once you’ve put the celebratory champagne on ice, where should you dedicate your attention and what should you know when deciding whether or not to sign?

1. Understand what a contract is and what it is not. An employment contract is a legally binding document between you and your employer, be it a large corporation or a single individual. This contract will outline your income, how and where you will work, your pathways for professional growth and also assign individual risk and liability. What your contract leaves out is as important as what it actually says.
2. Don’t forget to pay attention to the details. Make sure to read how the contract defines your job title, responsibilities and place of work. This defines the scope of your responsibilities and what your employer can or cannot require you to do. When job descriptions are vague or overly broad, an employer has the ability to shift the goalposts by asking you to take on unwanted duties. Likewise, if your place of work is not specific, then you may find yourself on thin ice should you object to an employer-ordered transfer to a new location at a later date. And importantly, if working remotely is a possibility, then your contract should reflect this.
3. Count your hours. A first step is to understand if you are an exempt or nonexempt employee with regards to overtime. Employees who are nonexempt in the state of California are entitled to overtime payments (at 1.5 times their normal rate of pay) for hours worked beyond the 40 hour workweek. Note that exceptions to this rule apply even for nonexempt employees. Regardless of whether you are exempt or nonexempt, you’ll want to check whether your contract specifies that you will work beyond eight hours a day and/or 40 hours a week, or on evenings and weekends. And, if so, are there limits to this requirement? And if you are not entitled to it under California law, will they nevertheless pay overtime? Should a contract simply require you to “work the necessary hours that a job entails,” define what is expected in that statement. If you anticipate that you will need flexible hours, or that you cannot work overtime, it is best to establish that from the outset and in writing.
4. Consider the entire compensation package. Don’t stop reading after you see the base salary. First, you should be clear on whether your employment will be as an employee or as an independent contractor, as this will affect your tax obligations and benefits. You will also want to know whether the salary listed is gross or if it is post tax deductions (such as income tax, social security and Medicare), whether it is guaranteed or incentive based, and whether health benefits and retirement savings are deducted from the salary. Also, depending on your job, be certain that the contract delineates the expenses that you may responsible for (such as transportation, mandatory continuing education, etc.). If you have to check your email and make calls during business travel, will roaming charges be covered? Or will a dedicated work phone be provided? If you are required to drive to meetings not located at your home office, will gas and depreciation be reimbursed?
5. Define the mileposts. Words like productivity and promotion can be a bit slippery when you really need to define them. Your employment contract should define productivity (is it billed hours, fees collected, etc.?). And with that in mind, the contract should lay out the specifics of annual pay increases, stepwise salary increases, and profit-sharing, as they may apply.
6. Plan for the bad times. Although we all hope that our next job is our last job, there’s a chance that you and your employer may part ways. Your contract may stipulate whether you may be terminated for cause or without cause. If you are employed and may be terminated without cause, any party may end the employment without specifying a reason. However, it should be stated that sufficient written notice must be given. And if your employment states that you may be terminated for cause, review the section that lists the reasons for which you may be terminated. Be aware of subjective language like “inappropriate behavior” or “actions that are negative for the business.” Also, if it is not present, you want a clause that gives you a chance to rectify the problem and defines the period of time during which you may do so. In both circumstances, you may want to know whether you are compensated for unused vacation days, whether you are entitled to ownership of any client records or information, and whether a non-compete clause would prevent you from seeking alternate employment in your same industry.

Remember that initial contracts are often worded in the best interest of the employer, and are truly an invitation to negotiate. And while negotiation is strengthened by an awareness of industry-wide employment practices and a firm grasp of your own priorities, the secret to a successful strategy is knowing how and when to make your requests.

Aiman-Smith & Marcy is a California law firm focusing on employment law that provides a knowledgeable, multi-dimensional perspective on issues of employment.