Employment contracts are legally-binding agreements that can benefit both the employee and the employer. They define the employment relationship and provide protection if an employee is wrongfully terminated or if an employer breaches the entire agreement. While the contract terms are often standard, it’s important to go through them thoroughly.
But how many people actually read their employment contracts? What are the most desirable employee benefits? And how many people have turned down a job offer after reading the contract?
We surveyed 1,002 American employees to find answers to these questions and learn from their experiences with written employment contracts.
Employment Contracts: To Read or Not To Read
The details of an employment contract vary depending on the job description and how it’s structured. For example, a contract for a freelance job would look very different than one for a salaried position. In any case, every contract contains valuable information about the terms of employment, so employees and contractors alike should know what they’re getting themselves into.
In the first part of our study, we wanted to see who read their employment contracts and who didn’t, based on the type of contract they signed.
Although the vast majority of employees (95%) said they take their employment contracts seriously, nearly one in five said they barely read through them.
Freelancers made up the highest percentage of employees who didn’t read their contracts at all (85%), even though they probably should – 63% of respondents have turned down a job offer after reading theirs (80% of Gen Z had done so).
What’s in an Employment Contract
Depending on your priorities, some aspects of an employment contract will be more crucial than others. Benefits are likely essential to an employment contract, especially now that employees seek customized compensation packages according to their needs.
Here’s what our respondents looked for in their contracts and the biggest green and red flags.
Overall, wages and compensation were the biggest priorities, with 66% of respondents rating them as their top concern. Baby boomers, Gen Xers, and millennials viewed these as the most essential parts of the contract. But for Gen Z, job responsibilities were the most important. Excellent benefits were the biggest green flag overall, as reported by 63% of respondents, followed by salary transparency (61%) and growth transparency (46%).
There are plenty of red flags to look out for when searching for a new job, and many of them can be found in the employment contract. The biggest one, according to our respondents, was feeling pressured to sign the contract with little time to review it (59%).
The second biggest was a one-way indemnity clause, identified by 44% as a cause for concern. Indemnity is compensation paid by one party to another to cover any damages or losses, and one-way indemnity can put all liability on the employee.
Breach of Employment Contract
An employment contract breach can have serious ramifications. These situations can occur for many reasons, like violating a non-compete or non-disparagement clause. When an employer or employee breaches a contract, they might get sued by the other party.
In the last part of our study, we asked respondents if they ever experienced a breach of contract, wrongful terminations, or workplace discrimination.
Over three-fourths of Gen Zers have breached their employment contract, and nearly all did it on purpose (94%). Only 56% of baby boomers, 50% of millennials, and 44% of Gen Xers said they had done so.
Of those wrongfully terminated by their employers, the top causes they reported were racial discrimination (38%), sexual harassment (38%), and retaliation over compensation claims (33%).
Some contract violations have been severe enough to warrant legal action: 55% of respondents said they had to seek an attorney because of a breach in their contract. Fortunately for them, 95% won their case. Since their legal costs averaged $550 and settlement profits averaged $1,500, it was worth the effort.
Know What You’re Signing
When considering a new job, knowing what you’re signing up for is the best way to protect yourself. Reading through an employment contract before accepting can mean the difference between a great experience and a terrible one.
Overlooking the fine print may increase your chance of unknowingly breaching a contract. You might also miss a red flag that would have warned you that the potential employer doesn’t have your best interests in mind.
Methodology
We surveyed 1,002 Americans regarding employment contract literacy. The mean age of respondents was 40 years old. Among them, 54% were male, 45% were female, and 1% were non-binary. The generations surveyed were Gen Z (24%), millennials (30%), Gen X (28%), and baby boomers (19%).
To help ensure that all respondents took our survey seriously, they were required to identify and correctly answer an attention-check question. Survey data has certain limitations related to self-reporting. These limitations include telescoping bias, exaggeration, and selective memory.
About Legal Templates
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Fair Use Statement
If you’re a job seeker or employee and appreciate our study, you’re welcome to share it. We just ask that you link back to this page and that your purposes are noncommercial.
