Many workers take on new jobs with just a handshake or spoken agreement. But in some cases, businesses require employees to sign contracts before they begin to work. In other situations, labor unions negotiate contracts between their members and the businesses that compose an entire industry. Where labor contracts do exist, they provide certain benefits for workers and employers alike.
Fairness
The primary advantage of an employment contract is fairness for everyone who signs. Workers can examine employment contracts or union contracts before they apply to a union job or accept a nonunion position. Workers know what to expect from the job and also know that colleagues who signed the same contract are held to the same standards and compensated fairly. Contracts also discourage unfair treatment due to discrimination since subjects such as compensation and job duties are listed in the standard contract and are more difficult for an employer to change without reason.
Predictability
Labor contracts give both workers and employers a degree of predictability for the future. For example, a worker who falls under the protection of a union contract knows when to expect a raise based on experience, and how much that raise will be. At the same time, the employer knows that it will need to pay that raise. Labor contracts also allow workers and employers to anticipate retirements, giving them both the time to plan for the change. Finally, workers and employers know when contracts end, giving them time to prepare their positions for future negotiations for an extension of new contract terms.
Rights Protection
Labor unions and individual employees who enter into contracts know which of their rights are protected by the document. Typically, a work contract includes information about workers' rights to pay, including overtime rates and raises. Contracts also spell out benefits such as health insurance, a retirement savings plan and paid leave. Union contracts may establish a procedure for employees to express their grievances and seek compensation for unfair practices in the workplace. Finally, many labor contracts give workers the right to strike and return to their jobs once issues with management are resolved.
Property Protection
For employers, labor and employment contracts provide an added degree of protection in sensitive industries. Some businesses require employees to sign nondisclosure agreements as part of their employment contracts. These documents prohibit the employees from sharing trade secrets with competitors or leaving the business to work for a competitor after receiving training from the original employer. Businesses that deal in creative production also can use employment contracts to retain control over the intellectual property that workers produce during their employment.
