What makes an employment contract void?

Despite an employment contract being valid and enforceable at the start, there are factors that can make it void

What makes an employment contract void?

A good hiring manager should know the importance of an employment contract and how valuable it is when it comes to the daily operations between the company and the employee. Therefore, employers need to know what makes a good and sound employment contract and the factors that can make an employment contract void.

Below, we discuss what makes an employment contract void and what hiring managers should do to prevent it.

Basic elements of a valid contract

A null and void employment contract is useless and unenforceable from the start, making any following agreements and negotiations between the company and employees non-existent and non-applicable to their employment. Therefore, it is essential for employers to ensure that their contracts are legally binding and follow both state and federal laws.

Certain elements are essential in making a valid employment contract. The first one is making sure the terms and conditions of the employment are explained in detail and that both parties, especially the employee, accept the terms fully. Details such as the compensation and benefits, job title, job description and responsibilities, and other employment policies like leave processes and probationary period should be mentioned and discussed in the contract. Moving forward, when one party is unaware of specific details of the agreement, it can lead to miscommunication and possible legal disputes in the future.

The details in a valid contract should also be legal and in compliance with federal and state laws. All parties involved – the employer and employee – must be over the age of consent and be in sound mind when agreeing to the employment contract.

In addition, a valid contract must thoroughly explain how both employer and employee benefit from the relationship they are about to build. A valid employment contract ensures both parties are being treated fairly and are benefitting from each other.

Read more: At-will employment: Everything you need to know

Null and void vs voidable employment contract

While it may seem like they share the exact definition and people use them interchangeably, a null and void employment contract is different from a voidable employment contract. The main difference is the time wherein the employment contract is considered void. A null and void contract is a formal contract that is regarded as unenforceable from the very start. This happens due to the agreement being seen as illegitimate because of missing essential terms or states illegal terms, involves a party that is not of sound mind or under the legal conditions of consent when signing, or violates any rights of the parties involved. An employment contract can be void when there are changes in laws that affect the contract, and the company did not update the contract before it was signed and agreed upon by both parties.

Meanwhile, a voidable employment contract is a formal contract that starts off as valid but becomes unenforceable later on. This happens for a myriad of reasons, from a party being forced into signing an agreement to the terms of the contract being violated, and even information in the contract being misrepresented or withheld.

What makes an employment contract void?

Despite an employment contract being valid and enforceable by the parties involved at the start, the agreement is still viable to being void and unenforceable. There are more reasons which causes an employment contract void aside from those mentioned above.

Below listed are some common factors that can make an employment contract void:

  1. Provisions are too broad

An employment contract should have detailed and specific policies to avoid too broad terms and conditions. Having overly general provisions and a “one-size-fits-all” type of contract leaves room for misinterpretation and unnecessary policies clashing. It could also lead to a lot of damages for the parties during a legal dispute since the contract details are too broad to cover any specific issue. For example, an employee could claim false promises if the employer promised to provide something in the employment and was not clearly stated in the contract due to the terms being too broad.

  1. Provisions are inappropriate

Companies should be detailed and precise in an employment contract’s terms and conditions but should still be fair and reasonable with the provisions to be put in place. Having too restricting and inappropriate terms usually happen due to the company’s desire to protect their data, image, clients, and employees from any possibility of failure or competition.

For example, restricting an employee’s access to certain information and tools that help them in their work while limiting them from buying other external devices themselves may be considered unjust and could lead to a void employment agreement. Employers should know their limits in controlling the actions of employees and understand that giving employees the freedom to decide and act on things related to their work is key to a successful company.

  1. No consideration for the employee

A good employment contract includes considerations that see employees benefitting from the agreement. The consideration they receive is important for employees as it is what they are usually looking for from companies to stay and grow in their role. This could be in the form of a benefit, a promotion, or a raise. When no consideration is offered in the employment contract, it is considered void.

  1. Including illegal terms

An employment contract is automatically voided if the terms and conditions of an employment contract do not comply with federal and state laws. It is the employers’ duty to ensure that the agreement follows all the rules and regulations that cover the employee, especially those enforced by the local government, as it can be tricky if the company operates in different states. In addition, asking an employee to agree to an illegal provision is also void.

  1. Lack of severability clauses

Employers usually include severability clauses in an employment agreement. A severability clause is a provision that allows the remainder of the contract to remain enforceable despite other terms and conditions being unenforceable or illegal.

Severability clauses allow companies to protect the contract if a part of the agreement becomes voidable. If a contract lacks a severability clause, then a court can dismiss an entire contract when it is taken to court for a dispute.

Read more: Employee handbook provision ‘not proof’ of agreement to arbitrate

The importance of reviewing an employment contract

It may seem tedious, especially to add to a checklist for a very long employment process, but reviewing an employment contract from start to finish before sending it off is crucial to avoid any null and void contracts. It is the responsibility of employers and employees to take the time to read the entire contract to ensure every term and condition is legal, reasonable, and correct.

Creating a safe and open environment is also essential to encourage employees to voice out any concerns about the employment contract. Employers need to be ready to listen to what employees have to say to better improve the contract and resolve any issues that have gone unnoticed.

In addition, it is important to keep all agreements in writing. Oral contracts are valid, but it is best to formally document terms and any revisions in writing to make things easier in the future should there be a need to clarify a conflict. It also serves as data and proof for future research when the company reviews and updates how they handle the organization and its employees.

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