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Hiring employees in California isn’t as simple as handing over an offer letter and calling it a day. In fact, skipping important details in your employee contract agreement can set you up for costly disputes down the road. California has strict employment laws that favor workers, so if you’re running a business, your contract needs to do more than name the job and the salary. It needs to clearly define expectations, reduce legal risk, and comply with state regulations.
Start with the basics, but don’t stop there. Spell out the employment status, such as whether the position is full-time, part-time, temporary, or seasonal. Although California assumes employment is at-will, stating this clearly in the employee contract agreement reinforces your position and helps avoid misunderstandings. Never refer to a job as permanent as that could imply the job is not at-will and you would need good cause to terminate an employee.
Next, include a detailed description of the employee’s job responsibilities. Be specific. A vague list of duties can create problems if a dispute arises over performance or whether a task was outside the scope of the job.
Also include:
If you offer a probationary period, note the duration and purpose, but remember: even during probation, employees in California have the same legal rights and protections.
When you clearly define roles and expectations upfront, you reduce the chances of miscommunication and future conflict. And if you ever have to defend a termination or performance-related decision, your contract serves as a critical piece of documentation.
Money talks—and your contract needs to say the right things. Include the agreed-upon salary or hourly wage, how often the employee will be paid, and how pay will be calculated (including overtime if applicable). If the employee is exempt from overtime, that should also be made explicit, along with the basis for the exemption.
Be thorough when listing:
In California, it’s also a good idea to clearly outline the benefits you offer, even if you provide a separate handbook. The contract can reference the handbook or benefit documents but should mention major items like:
California has its own paid sick leave requirements, so make sure your policy complies. If you have a PTO cap or a "use-it-or-lose-it" policy, the contract should reflect that—just be careful: under California law, vacation time is considered earned wages and can't expire.
Finally, explain any conditions under which benefits can be changed, and what happens to accrued time off upon resignation or termination.
This is where many employers fall short. Your employee contract needs to include clauses that protect your company’s interests, both during employment and after it ends.
Confidentiality and Trade Secrets: Every contract should include a confidentiality clause that prohibits the employee from disclosing or using your business’s confidential information for personal gain or for the benefit of another employer. This includes client lists, internal systems, proprietary data, marketing strategies, and more.
Intellectual Property Ownership: If the employee creates work, content, designs, software, or inventions as part of their role, your contract must state that these belong to the company. Otherwise, you could face legal hurdles trying to assert ownership later.
Non-Solicitation: California generally doesn’t enforce non-compete agreements, but you can and should include a non-solicitation clause. This prevents former employees from poaching your clients or team members after they leave. Courts in California are cautious, though, so keep these clauses narrowly tailored to protect legitimate business interests.
Dispute Resolution and Governing Law: Specify how employment disputes will be handled. Many employers include arbitration clauses, though recent changes to California law make this tricky. You’ll want to be careful with mandatory arbitration and ensure the language complies with the state’s latest labor rules.
Always include:
Termination Terms: Even in an at-will employment relationship, it’s wise to clarify termination procedures. State that employment can be ended by either party at any time, with or without cause or notice. If you offer severance or require notice periods, include the terms here.
Don’t forget to include a clause that requires the employee to return all company property—laptops, files, intellectual property—at the end of their employment.
Employment contracts aren’t just paperwork—they’re protection. They clarify rights, set expectations, and keep your business legally sound. California’s labor laws are some of the most complex in the country, and a well-drafted agreement can go a long way toward preventing disputes and staying compliant.
If you need help reviewing or drafting your employee contracts, contact JDS Law, Inc. today. We’ll make sure your agreements protect your business.
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