Employment Contracts
Last updated: 04/21/2026
Introduction
Whether you’re starting a job, freelancing, or renewing a contract, understanding what’s in your employment agreement can save you stress and money in the future. Here’s a quick guide prepared by our caseworkers on some key things to look for
What should be in an employment contract?
An employment contract should clearly spell out the details of your role and working relationship. Look for:
Job Title & Position: The specific title or role you’ll hold.
Duties & Responsibilities: What you’re expected to do.
Work Hours & Location: Whether you’ll work on-site, hybrid, or remote, and your expected schedule.
Rate of Pay / Salary: Your hourly rate or annual salary, including how and when you’ll be paid.
Benefits: Health insurance, retirement plans, paid time off, and other bonuses.
Breaks & Vacation: Details on meal/rest breaks and vacation time accrual.
At-Will Status: Whether your employer can terminate your employment at any time (see below for more info).
Dispute Resolution: How conflicts will be handled; for example, through mediation, arbitration, or court.
This list is not exhaustive, but includes some key points.
Reading the Fine Print
When reviewing your contract, pay close attention to:
Termination Clauses: How much notice (if any) is required before you or your employer can end the contract.
Time Limits: Whether the employment is fixed-term or ongoing.
Benefits Details: Make sure health, retirement, and leave benefits are clearly defined (Source: IRS).
Under the Affordable Care Act (ACA), large employers are required to offer affordable health insurance plans.
Work Flexibility: Some contracts may include remote or hybrid work provisions.
Understanding Overtime
Source: State of California Department of Industrial Relations
If you’re a non-exempt employee, you’re entitled to overtime pay under California law:
You cannot work more than 8 hours a day or 40 hours a week without overtime pay.
1.5x pay applies for:
Over 8 hours/day (up to 12 hours)
The first 8 hours worked on the 7th consecutive day in a workweek
2x pay applies for:
Over 12 hours in one day
Over 8 hours on the 7th consecutive day in a workweek
Note: Some workers are exempt from overtime laws, including executives, administrators, professionals, outside salespeople, and certain creative or technical workers.
You must pass two tests to be qualified as exempt:
Salary test: Above the threshold
To be exempt, you must earn at least 2× CA minimum wage and be paid a true salary.
Duties test: Spend 50%+ of time doing real managerial/administrative/professional work.
Job titles don’t decide your status.
California labor laws refer to what you actually do, not just your job description.
Misclassification is common.
Before signing a contract, check:
Your classification (exempt vs. nonexempt)
Your actual duties
Your salary vs. the threshold
Overtime claims can be filed with the Division of Labor Standards Enforcement (DLSE).
Fixed Term & Freelance Contracts
Source: U.S. Department of State
If you’re working freelance or on a project basis, a fixed-price or cost-reimbursement contract may apply to you.
Fixed-Price Contracts
These outline a total project cost upfront. Great for projects with clear deliverables and deadlines:
Firm-Fixed Price (FFP): Price doesn’t change; contractor assumes most of the risk.
Fixed Price with Economic Adjustment (FPEPA): Allows price changes for market or labor fluctuations.
Fixed Price Level of Effort (FPLOE): Focuses on hours worked or research performed rather than deliverables; common in consulting or R&D.
Cost-Reimbursement Contracts
Used when the project scope is less defined:
Cost-Plus-Fixed-Fee (CPFF): Contractor reimbursed for costs + fixed profit.
Cost-Plus-Incentive-Fee (CPIF): Profit tied to efficiency and performance.
Cost-Plus-Award-Fee (CPAF): Contractor reimbursed and given an award fee for excellent performance.
At-Will Employment
Source: National Conference of State Legislatures
Most U.S. employment is at-will, meaning either you or your employer can end the relationship at any time, with or without notice.
There are important exceptions to this:
Public Policy: You can’t be fired for refusing to break the law, reporting violations, performing civic duties (think jury duty), or exercising legal rights (filing a workers’ compensation claim).
Implied Contract Exception: Sometimes, verbal promises, employee handbooks, or long-standing company practices can constitute an implied agreement that employees will only be fired for cause.
Implied Covenant of Good Faith & Fair Dealing: Employers can’t act in bad faith or terminate workers to avoid paying benefits or commissions.
Final Pay
Source: California Labor Code
If terminated, you must receive all wages owed immediately at the moment of termination
This includes unused vacation, but not unused sick leave.
Must be paid at the place of discharge
If an employee voluntarily quits:
With 72+ hours’ notice to the employer → final pay is due at the time you quit.
With no notice → employer has 72 hours to pay you.
Late final pay can trigger penalties:
Up to 30 days of additional pay (“waiting time penalties”) if the employer willfully delays.
Employers can avoid penalties only if there’s a good-faith dispute over what’s owed, but they must still pay the undisputed amount on time.
Tips for Protecting Yourself
Always get it in writing, even for part-time or temporary work.
Confirm your rights to minimum wage, overtime, and safe working conditions before signing.
Review benefits and dispute clauses carefully.
Keep a copy of everything you sign.
Disclaimer
This document is for general informational purposes only and is not legal advice. For guidance on your specific situation, consult an employment attorney or legal aid organization. For additional questions, feel free to contact us at legalclinic@asuc.org.
Sources
14 FAH-2 H-230 CONTRACT TYPES. (n.d.). Fam.state.gov. Retrieved from https://fam.state.gov/FAM/14FAH02/14FAH020230.html
Acquisition.gov. (n.d.). Federal Acquisition Regulation (FAR) subpart 16.2 — Fixed-price contracts. Retrieved from https://www.acquisition.gov/far/subpart-16.2
California Code, LAB 201. (n.d.). Retrieved from https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=201.&lawCode=LAB
California Code, LAB 202. (n.d.). Retrieved from https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=202.&lawCode=LAB
California Code, LAB 203. (n.d.). Retrieved from https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=203.&lawCode=LAB
Department of Industrial Relations, State of California. (n.d.). Overtime FAQ. Retrieved from https://www.dir.ca.gov/dlse/faq_overtime.htm
Hinz Consulting. (n.d.). Firm fixed price / level of effort. Retrieved from https://hinzconsulting.com/firm-fixed-price-level-of-effort/
Icertis. (n.d.). Fixed price contract / contracting basics. Retrieved from https://www.icertis.com/contracting-basics/fixed-price-contract/
LexisNexis. (n.d.). Commercial transactions — Termination clauses. Retrieved from https://www.lexisnexis.com/supp/largelaw/no-index/coronavirus/commercial-transactions/commercial-transactions-termination-clauses.pdf
National Conference of State Legislatures. (2008, April 15). At-will employment – Overview. Retrieved from https://www.ncsl.org/labor-and-employment/at-will-employment-overview#:~:text=At-will%20means%20that%20an,with%20no%20adverse%20legal%20consequences.
Project-Management-Knowledge.com. (n.d.). Fixed-price economic price adjustment (FP-EPA) contract definition. Retrieved from https://project-management-knowledge.com/definitions/f/fixed-price-economic-price-adjustment-contract-fp-epa/
Questions and answers on employer shared responsibility provisions under the Affordable Care Act | Internal Revenue Service. (n.d.). Retrieved from
U.S. Department of Energy. (n.d.). Terms & definitions – Cost-Plus-Award-Fee (CPAF) contract. Retrieved from https://www.directives.doe.gov/terms_definitions/cost-plus-award-fee-cpaf-contract
Defense Acquisition University. (n.d.). Glossary – Cost-Plus-Incentive-Fee (CPIF) contracts. Retrieved from https://www.dau.edu/glossary/cost-plus-incentive-fee-contracts
Federal Acquisition Regulation. (n.d.). 48 CFR 16.306 – Fixed-price contracts with economic price adjustment. Retrieved from https://www.law.cornell.edu/cfr/text/48/16.306