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3 Important Employment Contract Terms Explained

Last time you were hired, did you take the time to read through every provision of your employment contract? If you didn't, you may be surprised by some of the terms that were included.

While employment contracts usually contain common elements like your start date, salary, and benefits, they sometimes include lesser-known provisions as well.

Below, we've laid out three important contract terms and how they affect you.

Nondisclosure Agreements

Many businesses gain their competitive edge through trade secrets they've developed. In order to protect this edge, some companies use confidentiality agreements to keep their secret processes, plans, data, and formulas secret. Under these agreements, employees are generally prohibited from discussing confidential matters with third parties.

If an employee breaks the confidentiality agreement, employers typically reserve the right to fire the person. If the breach costs the employer money, the employee may face a civil suit as well for breach of contract.

Noncompetition Agreements

Employers are often concerned that after they invest time and resources into developing an employee's skills, the employee may up and leave the company to work for a competitor. In order to prevent this, employers often include noncompetition clauses in their employment contracts.

Such clauses typically prohibit employees from working for a competitor or in the same industry for a certain period of time. However, depending on the industry, the clauses are often limited to a particular geographic area. Unfortunately for workers, noncompetes are enforceable in most states, unless they're overly broad or restrictive.

Arbitration Clauses

Lawsuits have a tendency to be expensive and time-consuming. In order to save time and money, employers often include arbitration clauses in their employment contracts. In the clauses, the parties agree to settle any dispute they may have through arbitration rather than through a court case.

In arbitration, a neutral third party (the "arbitrator") will hear both sides of the dispute and then issue a decision. Under the terms of most agreements, this decision is then binding on both the employee and employer. Arbitration clauses typically specify who gets to choose the arbitrator.

More Questions About Your Contract?

These are just a few of the many provisions that may show up in an employment contract. If you have questions about a certain provision, you'll want to consult with an attorney as soon as possible.

Another way to get a professional to look over your contract is to sign up for a personal legal plan like those offered by LegalStreet. With LegalStreet plans, attorney contract reviews (up to 10 pages) are included, as are attorney-drafted letters on your behalf. And plans are affordable, averaging out to less than $13 a month.

Employment contract terms can be confusing, but don't let that stop you from fully understanding what you're signing up for.

Disclosure: LegalStreet and are owned by the same company.

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