Employment agreement

What it is and when it is used

An employment agreement records the terms on which a company hires an employee. It sets the nature of the relationship (at-will, permanent or fixed-term), the pay package, working hours and location, and the rules that continue after employment ends, such as confidentiality and any restriction on competing.

It is used when hiring salaried staff, sales staff paid partly on commission, and employees who receive stock options or restricted stock units. It is the counterpart to a consulting agreement: an employee works under the company's direction and with statutory protections, while a consultant is an independent contractor.

Who signs it and in which role

Two parties sign:

• The Company (the Employer), which employs and pays the employee.
• The Employee, an individual.

The parties fill in the facts: the start date, an end date for fixed-term employment, the base salary, the bonus percentage, the number of shares under options or restricted stock units, the office days per week and office address, the time zone for core hours, the geographic area of any non-compete, the city for dispute resolution and the arbitration body.

Key clauses

Employment type

At-will employment (either party may end it at any time, with or without cause), permanent employment with no end date, or fixed-term employment that ends automatically on a set date. At-will is the default in California under Labor Code section 2922 and is not available in England and Wales.

Compensation structure

A fixed annual salary; a base salary plus a performance bonus of up to a set percentage, which is not guaranteed; or a base salary plus commission under a commission plan. Pay must respect minimum wage rules. The skill notes that California requires commission agreements in writing.

Equity compensation

A stock option grant that vests over four years with a one-year cliff, a grant of restricted stock units that convert into shares on vesting, or no equity. Grants are subject to board approval and to the company's equity incentive plan and a separate grant agreement.

Probationary period

Three months, six months, or none. During probation either party may end the employment on short notice (one week in the skill's text), and the company may extend it by up to three months. Probation matters most in England and Wales; in California it mainly sets timelines such as benefit eligibility.

Working hours and flexibility

Standard full-time office hours, hybrid working with a minimum number of office days and core hours, or fully remote work with occasional in-person events. The skill flags California overtime rules for non-exempt employees and the 48-hour average weekly limit under the UK Working Time Regulations 1998, unless the employee opts out in writing.

Termination notice period

Two weeks, one month or three months, with the company able to pay in lieu of notice. The three-month option also allows garden leave, during which the employee stays employed and paid but does not work.

Non-compete restriction

A 12-month or 6-month restriction on working for, or setting up, a competing business within a defined area, or no non-compete. Both restrictive options are unavailable in California.

Intellectual property assignment

A broad assignment of all work-related inventions and works (with the California section 2870 carve-out written in), a narrow assignment limited to work done in the course of the employee's duties, or a broad assignment with a non-exclusive licence back to the employee for personal, non-commercial use such as a portfolio.

Confidentiality obligations

A standard obligation lasting indefinitely for trade secrets and 3 years for other information; a narrow obligation limited to defined categories for 2 years, which expressly excludes general skills and experience; or a mutual obligation under which the company also protects the employee's personal data and prior inventions.

Dispute resolution

The courts of the chosen jurisdiction, mandatory arbitration (with the company paying the arbitration fees), or mediation first and then court. In England and Wales, statutory claims remain with the Employment Tribunal whichever option is chosen.

The standard terms also cover position and duties, benefits, expense reimbursement, return of company property and termination for cause, with defined terms for Cause and Good Reason.

What the two sides usually negotiate

The company generally prefers at-will or fixed-term employment, commission or bonus pay, no equity, a longer probation, a non-compete, a broad IP assignment and mandatory arbitration. The employee generally prefers permanent employment, restricted stock units, no probation, remote work, a longer notice period, no non-compete, a narrow IP assignment and access to the courts.

When the two sides disagree, Dealroom proposes the balanced positions in the skill:

• Compensation: a fixed annual salary.
• Equity: a stock option grant.
• Working hours: hybrid working.
• Notice: one month.
• Confidentiality: mutual.
• Disputes: court jurisdiction.

On employment type, probation, IP and the non-compete there is no fully neutral option; the closest to the middle are permanent employment, a three-month probation, a narrow assignment or an assignment with a licence back, and (in England and Wales) a six-month non-compete.

Jurisdictions and languages Dealroom supports for it

Dealroom drafts this agreement under the law of California and of England and Wales, in English or Spanish.

• California: governed by California law; includes the Labor Code section 2870 notice on employee inventions, severs any restrictive covenant that is unenforceable under section 16600, and requires final wages and accrued vacation to be paid under Labor Code sections 201 to 203.
• England and Wales: governed by English law; preserves statutory rights under the Employment Rights Act 1996, starts continuous employment on the start date, applies the greater of statutory or contractual notice, and records the company's duties under the Data Protection Act 2018 and the UK GDPR.

For an employment contract governed by Spanish law, use the Spanish employment contract.

Common mistakes

• Using at-will wording in England and Wales. It is not recognised there; employees have statutory protections.
• Including a non-compete for a California employee. It is void. The skill recommends relying on confidentiality and IP protections instead.
• An overbroad non-compete in England and Wales. A restriction that is not reasonable in scope, duration and area may be struck down; the skill notes that six months is more likely to be upheld than twelve.
• Leaving out the section 2870 notice. A California IP assignment must preserve the employee's rights to personal inventions, and the employer must give written notice of them.
• Discretionary bonuses with unclear criteria. The skill notes that they can lead to disputes about what was expected.
• Successive fixed-term contracts in the United Kingdom. If they run beyond four years, the employee may become permanent.
• Mandatory arbitration that ignores local limits. In California it must meet the Armendariz requirements (employer pays the costs, full remedies, adequate discovery); in England and Wales it cannot exclude the Employment Tribunal for statutory claims.
• Contractual notice below the statutory minimum. Two weeks may fall short for longer-serving employees in the United Kingdom.

# 1. Read the clauses, options and the facts it needs
curl https://dealroom.todo.law/api/v1/agent/templates/EMPLOYMENT \
  -H "Authorization: Bearer drk_YOUR_KEY"

# 2. Create the contract (clauses you leave out take the default option)
curl -X POST https://dealroom.todo.law/api/v1/agent/deals \
  -H "Authorization: Bearer drk_YOUR_KEY" \
  -H "Content-Type: application/json" \
  -H "Idempotency-Key: $(uuidgen)" \
  -d '{
    "schema": "dealroom.solo-intake/1",
    "contractType": "EMPLOYMENT",
    "governingLaw": "ENGLAND_WALES",
    "language": "en",
    "dealName": "Example EMPLOYMENT",
    "selectionPolicy": "defaults"
  }'