Most employees in the United States work without formal employment contracts. They show up on their first day, fill out paperwork, maybe sign an employee handbook acknowledgment, and get to work. That's perfectly legal and extremely common in restaurants, retail stores, and other shift-based businesses.
So why do some employers create detailed written agreements? Understanding when contracts make sense can help you protect your business while keeping things simple.
At-Will Employment: The Default Setting
Employment relationships in the United States are presumed "at-will" unless otherwise specified in writing. Either party can end the relationship at any time, for almost any reason, without advance notice. Most hourly workers in restaurants, retail, and hospitality operate this way.
At-will employment offers flexibility. A server can quit without notice for a better opportunity. A manager can let someone go if they're consistently late or create customer problems. However, at-will employment still has limits. You can't fire someone for illegal discrimination or retaliate against employees exercising legal rights.
When Employment Contracts Actually Make Sense
Employment contracts aren't standard for most frontline positions, but they serve important purposes in certain situations. In restaurants and hospitality, contracts typically go to upper-level roles like executive chefs, general managers, and regional managers who access sensitive business information or make key decisions.
Your head chef knows your signature recipes. Your general manager understands cost structures, supplier relationships, and expansion plans. An employment contract protects that information through confidentiality clauses.
Contracts also make sense for special promises. Recruiting a talented chef from across the country? Guarantee a year of employment so they feel secure relocating. Offering a generous relocation package? Get assurance they won't leave after three months. Fixed-term arrangements work well for seasonal businesses contracting key staff for specific periods.
Types of Employment Contracts
Full-time contracts establish ongoing relationships with no predetermined end date, typically preserving at-will status unless specifically stated otherwise. Fixed-term contracts specify an exact employment period, automatically ending when the term expires. Zero-hours contracts let employers schedule employees only when needed, common for on-call retail and hospitality staff. Part-time contracts create ongoing relationships with reduced hours.
What Goes Into an Employment Contract
Employment contracts vary by role and industry, but certain sections appear consistently. You don't need detailed explanations of every element here since compensation, benefits, and policies have dedicated resources elsewhere.
Job details include the official title, primary responsibilities, and reporting relationships. Be specific enough for clarity but flexible enough to adapt as needs evolve.
Compensation terms outline payment structure and timing. Fixed salary or hourly wages? Exact amount? Payment schedule? This covers bonuses, commissions, profit-sharing, and other additional pay.
Work schedule expectations matter in shift-based businesses. Evening and weekend requirements? Minimum or maximum hours? Overtime policies? Set realistic expectations upfront.
Duration and termination explain how long the contract lasts and how either party can end it. Recent cases show termination clauses must comply with employment standards laws. When one provision violates these standards, courts may invalidate all termination provisions.
Confidentiality agreements protect recipes, customer lists, pricing strategies, and operational procedures. These obligations typically extend years beyond employment.
Non-compete provisions restrict where someone can work after leaving. These have become controversial, with some states limiting or banning them. Keep them reasonable in scope, duration, and geography.
Benefits and perks should be clearly outlined. Rather than repeating your entire package, reference your employee handbook or benefits plan documents.
Recent Legal Developments
US employment law is also seeing significant development, particularly around the limits of the "at-will" doctrine. The Pennsylvania Supreme Court's 2024 decision in Salsberg v. Mann illustrates how courts distinguish general employment status from specific contractual promises. The court ruled that an employer's right to terminate an at-will employee does not automatically extinguish other, specific contractual obligations, such as those concerning compensation. The case demonstrates that courts will look beyond the formal "at-will" label to the actual, specific bargains employers make.
Another significant case, Hall v. City of Plainview (2021), saw the Minnesota Supreme Court affirm a crucial principle regarding employee handbooks. The court ruled that an employer could be held liable for breaching its own paid time off (PTO) payout policy, which was detailed in the company handbook, finding it to be a binding unilateral contract. This was held to be true despite the handbook containing a general disclaimer that it was not an employment contract. The decision sent a clear warning to employers: if your handbook contains specific, promise-like policies, those policies can become legally binding terms you must follow.
California recently passed AB 692, which will prohibit contractual provisions requiring departing employees to repay debts to their employer for contracts entered into after January 1, 2026. States increasingly regulate what can and can't appear in employment agreements, making local legal compliance essential.
Practical Considerations
Written contracts introduce formality that hospitality and retail businesses traditionally avoid. Give employees time to review contracts rather than pressuring immediate signatures. A day or two shows respect and ensures people understand what they're agreeing to.
Employment contracts benefit from legal review, especially with restrictive covenants. Employment law varies significantly by jurisdiction, so local attorney review helps draft enforceable terms. Not every position needs a contract. Focus efforts on positions where protection, clarity, or commitment justifies the administrative burden.
Getting the Most from Employment Contracts
Used strategically, employment contracts clarify expectations, protect business interests, and demonstrate professionalism. They work best for key positions involving sensitive information, significant investment, or special promises beyond typical at-will employment.
Keep contracts simple while thorough. Clear language serves everyone better than dense legalese. Review contracts periodically since court decisions and employment laws change frequently. Most importantly, follow your contracts. Courts increasingly hold employers accountable when they ignore their own commitments.
