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Home Resources Do Americans Read Employment Contracts?

Do Americans Read Employment Contracts?

Josh Sainsbury

Published September 10, 2022 | Written by Josh Sainsbury
Reviewed by Brooke Davis

employment contract with pen and glasses

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 terms of a contract 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.

Key Takeaways

  • Less than one in five employees read through their employment contracts before signing.
  • 85% of freelancers haven’t read their employment contracts.
  • 55% of employees had to seek an attorney due to a contract breach, and of those, 96% won their case.

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.

reading employment contracts statistics

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. In any case, benefits are likely an essential part of 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 they came across.

terms of employment contracts

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.

breaching employment contracts statistics

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

Legal Templates empowers you to make informed legal decisions. Our team of experts is here to help you draft legal documents for your business, personal, or real estate needs, all without costly lawyers.

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.

Josh Sainsbury

Josh Sainsbury

Business Content Editor

Josh Sainsbury is a business content editor at LegalTemplates. His background in a variety of industries allows him to create legal content that’s accessible and understandable for all audiences.

In This Article

  • Employment Contracts: To Read or Not To Read
  • What's in an Employment Contract
  • Breach of Employment Contract
  • Know What You're Signing

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