Job Applicants and Preemployment Agreements: What Employment Counselors Need to Know

Article excerpt

U.S. society is becoming increasingly litigious. Nowhere is this more evident than in the employment process, where preemployment agreements for job applicants are becoming more common. Preemployment agreements require applicants to accept certain terms or provisions before they are offered a position. In this article, the authors describe types of preemployment contracts and legal issues associated with them and present attorney-selected sample cases to assist employment counselors to better prepare their clients for addressing this legal phenomenon.


Employment counselors' clients are confronted with many legal issues as they seek employment. In recent years, there has been an increase in the number of companies and organizations that use preemployment agreements, which require job applicants to sign contracts promising to engage in or refrain from certain behaviors in order to be considered for employment. Once reserved for the highest ranking executives, these agreements are being required more frequently of other applicants and employees, from decision makers through middle managers to rank-and-file employees, especially those in high-tech occupations (Flynn, 1999). A possible reason for this trend is the economic shift from manufacturing to service in the United States (United States Department of State, 2002). Another possible factor contributing to the increased usage of preemployment agreements is that more organizations realize that their most valuable resource is trained and skilled employees and the information they possess (Pfeffer, 1994). As a means of protecting that information, more firms are turning to employment agreements for self-protection.

To better help counselors understand the preemployment contract phenomenon and to assist clients regarding possible postemployment ramifications, we discuss general considerations of preemployment agreements and their place within the context of contract law. Also presented are five frequently recognized preemployment concepts: training expense reimbursement, nondisclosure of business information and trade secrets, noncompetition by the employee, mandatory dispute resolution, and nonsolicitation. Next, we explore the implications of preemployment agreements for employees.


Employment agreements between employers and employees explain various aspects of employment relationships (Legal Q & A, 1997). Agreements vary from industry to industry, employer to employer, and from applicant to applicant. Agreements may regulate a single aspect of employment (e.g., when the employee is entitled to pay increases or under what circumstances the employee may be terminated) or may cover the entire employment relationship (Hansen, 2000). Agreements may be presented in the form of formal written contracts, in an employee handbook, or through other means. Some employers have incorporated such agreements into employment applications (Circuit City Stores, Inc. v. Adams, 2001), where simply signing the application form may constitute a preemployment contract. Although more common to some industries than to others (e.g., high tech), the use of such agreements may be found in other sectors of business and industry, including security, retail, restaurants and hotels, health care, and broadcasting (Equal Employment Opportunity Commission [EEOC], 1997). Irrespective of the business, the legal force behind all preemployment agreements falls within the legal theory of contracts.

Preemployinent agreements are contracts governed by basic common law contract principles. Even though each state has enacted legislation that affects various and specific employment contract principles, basic common law contract theory still applies. In general, all states recognize contracts and require an offer, an acceptance, and consideration ("The Restatement [Second] of Contracts," 1981). …