By Jizell Lopez, Wilke Fleury LLP

This article was originally printed in the March/April 2025 issue of the California Veterinarian magazine.

An employment contract is a written document that the employer and employee sign to define the terms of the employment relationship. It is important to understand the benefits and risks regarding the use of employment contracts, particularly given unique considerations in the State of California.

Advantages of Employment Contracts
There are several advantages of employment contracts. The first such benefit is that a contract provides clarity and sets expectations for both the employer and employee. In that regard, the employment contract should define the employee’s job duties, compensation, and benefits.

This is particularly important in the veterinary field, as many veterinarians are provided either a sign-on bonus or a base salary with a production-based bonus. This information should be clearly defined in the employment agreement.

Second, the employment contract should define the “term” of the contract. There are two options related to the contract term. The employer and employee can agree that this employment contract will be considered “at-will,” which allows the employer to terminate the agreement at any time, absent an illegal reason. Meanwhile, the second option is to include a “fixed term” in the agreement.

The fixed term allows both potential job security for employees and stability and predictability for employers. For example, the employer and employee may agree to a one-year term of employment. When it comes to setting a fixed term of an employment agreement, there are additional considerations for both parties to consider, including whether the employment contract will include termination provisions “for cause” and “without cause.”

It will be essential to determine this at the time of drafting the agreement, as this will set the parameters for either party to terminate the agreement subject to the limitations in the employment contract.

Third, employment contracts allow the parties to include customizable terms, such as specific benefits offered to the veterinarian, including a stipend for continuing education, paid vacation and/or PTO, insurance benefits, professional liability coverage, and more.

Further, employers may define what is considered “confidential information and intellectual property” to deter employees from the unauthorized use of confidential information and intellectual property.

Disadvantages of Employment Contracts
While employment contracts may set terms and clarify the scope of employment, there are disadvantages that both employees and employers need to take into consideration, including reduced flexibility, potential for costly litigation, limitation on at-will employment, the general unenforceability of non-compete restrictions, and potential for unintended obligations.

In California, employment contracts offer both benefits and risks. It is vital that both employers and employees weigh the pros and cons and seek legal guidance to avoid common pitfalls.”

As mentioned previously, employment contracts allow the parties to set a term for the agreement. This will alter the presumption of at-will employment. Depending upon the termination provisions of the contract, employers may have difficulty terminating employees before the contract expires, and employees may be bound to terms they later find unfavorable.

Further, if the contract has vague and ambiguous terms, this may lead to disputes by either the employer or employee. This can lead to costly litigation in the event a breach of contract claim is alleged.

Most importantly, a big change to be aware of is that non-competes are now generally unenforceable. Many employers, including those in the veterinary field, previously relied upon non-compete provisions in an employment contract.

The non-compete provision would prevent the employee from working for a competing company or starting a similar business within a specific geographic area and time period after their employment.

While non-compete provisions have been generally unenforceable for years, in October of 2023, Governor Gavin Newsom signed Senate Bill 699 (“SB 699,” effective Jan. 1, 2024) to enhance and clarify California’s prohibition against non-compete agreements. SB 699 now prohibits employers from enforcing non-compete employee agreements that do not fit within one of the exceptions under Business and Profession Code section 16600 (i.e., the sale of a business, the dissolution of partnership, or the termination of interest in a limited liability company).

SB 699 clarifies that non-compete agreements which do not fit within a statutory exception are void, regardless of where the agreement was signed or where the employee worked when the agreement was signed. Further, SB 699 bans employers from entering into a contract with an employee or prospective employee that includes a prohibited non-compete provision.

Keep in mind that, even if an employment contract containing a non-compete clause was signed outside of California, it is still considered void under California law, effectively protecting confidential information by not restricting an employee’s ability to move to a new job within the state; however, it does not prevent employers from using non-disclosure agreements (NDAs) to protect truly sensitive trade secrets and confidential business information.

Conclusion
In California, employment contracts offer both benefits and risks. It is vital that both employers and employees weigh the pros and cons and seek legal guidance to avoid common pitfalls. Employment contracts should reflect clear terms and reflect mutual interests.

Jizell Lopez is a civil litigation attorney who primarily represents clients in federal and state court litigation and before administrative agencies regarding all manner of employment claims, including single plaintiff lawsuits, class action lawsuits, and wage and hour representative lawsuits. Jizell’s practice includes allegations of harassment, discrimination, wrongful termination, retaliation, wage and hour non-compliance, and more.