Note: You can review sample employment contracts and compensation agreements in FindLaw's Corporate Counsel Center.

An employment contract can take the form of a traditional written agreement that is signed and agreed to by employer and employee. More frequently, however, employment agreements are "implied" -- from verbal statements or actions taken by the employer and employee, through company memoranda or employee handbooks, or via policies adopted during the employee's employment.

Termination and "At Will" Employment

Employment contracts are most often used by employees to show that the employer's right to fire an employee was limited.  In most states, employment is generally considered "at will," meaning that the employer can terminate employment (or the employee may voluntarily leave) at any time. An employer's right to fire an employee may be limited, however, where the employee can show that the employer entered into either an explicit contract to retain the employee for a certain length of time, or an "implied contract" which dictates that employment will be terminated only for specific disciplinary reasons.  For example, an implied contract may be enforced against the employer where a policy or handbook has been distributed to the employee, and the employee, knowing the terms of the policy or handbook, has opted to continue working for the employer.

Many states also recognize that a verbal statement by an employer, such as "you'll be here as long as your sales are above budget," may create a binding contract of employment.  The enforceability of such verbal contracts is limited, however, by a legal doctrine known as the "statute of frauds," which provides that any verbal agreement that cannot be carried out in less than one year is invalid.  So, in the above example, because the employee conceivably could have fallen below budget and been fired within one year, the agreement would be enforceable, even if the employee was not actually fired. A verbal contract must also be specific in order to be enforceable.  A statement such as "You'll have a job here as long as you like" generally will not be enforced.