In this section, we're going to talk about interpretation, and understanding what's in employment contracts. How do courts figure out what employment contracts mean, and what terms they have to have, and what terms that can't have. The first thing I want to say, which is probably obvious, is that employment contracts are just more regulated or more constrained than contracts in some other domains. If I'm selling my used car, I can set the price, and I can sell it as is, even if it's in pretty bad shape. Employment contracts are subject to federal and state laws though that mandate certain terms, and prohibit others. Especially with respect to some price terms, and health and safety terms. It's important to know this, not because I'm going to be able to list every state's employment laws, or I guess I could, but it would be really boring. But because you want to know what you're looking for in whatever jurisdiction you're trying to write an employment contract. There are three big categories of mandatory rules. You can think about a mandatory rule as something that the law insists that one party promise. Contracts typically is an area where the law gives a lot of freedom to the parties to set their own terms, to decide what deal they like the best. In employment, there are a few places where that's not quite true. This is mostly going to be familiar to you, but maybe it's not thinking about it in terms of the mandatory term, construct. The first is compensation. The major piece of federal legislation on this is from 1938. It's a new deal statute coming out of the Great Depression. As you can imagine, what it's doing is doing something to try increase employment and protect workers, and it's the Fair Labor Standards Act. That law did three important things. It bans child labor, which from a contracts perspective is pretty straightforward because normally you can't make a contract with children. It set minimum compensation, and it set out rules for overtime pay. The Fair Labor Standards Act, it started to reign in what deals employers could make with their employees. Mandatory rules for compensation are familiar to most of us in the form of the minimum wage. The minimum wage has been an extremely hot topic recently. If you think about why the minimum wage is controversial, or at least interesting from a contract standpoint, compare it to a sale of goods case. I can sell my used car for as little as I want. If I have a used car and I think this thing's pretty good, but I'm going to sell it to someone for really cheap, I can basically do that. I can sell my used car for way below market value. But I actually generally cannot sell my labor for less than the federal minimum wage, or the state or municipality. One important thing to say here as a caveat is that, there are some important exceptions for certain work not classified as employment, and whether or not people are classified as employees per se is an issue for employment law that we don't see much in this particular module. In large part because employment contracts span a wide range of deals, or arrangements, that sometimes are classified as an employee relationship or a contractor. One thing to know about these mandatory rules, they apply differentially depending one's status as, for example, as an employee or not. Assuming you are an employee though, the overtime rules guarantee also premium pay for employees who work over 40 hours a week. This is probably familiar to most folks who've heard of overtime. The initial purpose of overtime pay was to encourage employers to hire more people, so rather than pay current workers, for example, time and a half, the idea is employers have an incentive to hire new workers instead of the standard wage, thus getting more people on payroll. As many people are familiar with, overtime rules only apply to a subset of employees. Salaried employees who work in an executive, or administrative, or professional capacity are exempted, which is why you don't see lawyers or investment bankers making overtime pay, even if they're logging 70 hours a week. The second big category of mandatory rules is leave time. Most people are familiar with the legislation on this issue, because when employees take family leave, they often refer to it as FMLA leave. That's the Family and Medical Leave Act. That act which applies only to larger employers with more than 50 employees, and only to workers who worked a certain number of hours for at least a year, basically guarantees that workers who take up to 12 weeks of unpaid leave for family or medical care obligations, can return to their same or substantially similar job. It's not exactly a law that guarantees leave per se, it's more of a law that guarantees job security in the event that employees need to take leave for family or medical reasons. This is not a mandatory term in the sense that it sets a cap. The parties can contract for more generous leave for sure. Many employers offer, for example, paid parental leave, or even sabbatical opportunities. But this is a term that most larger employers cannot contract around, in the sense they can't offer an employee or give you a high salary but less job security. If you have a family medical emergency and have to take a leave, we're going to reserve the right to fire you should you choose to care for them. That's the sense in which the FMLA is as a mandatory term, or a floor in terms of what kind of leaves employers must promise. The third set of mandatory rules you've probably heard of are, health and safety rules. The Occupational Safety and Health Act, often called OSHA, basically says employees can't contract away their right to a workplace free of serious and avoidable harms. Now, with health and safety regulations, the actual requirements for any particular workplace are going to be really fine tuned to that context. The rules regarding what precautions must be taken, for employers who have their employees working with hazardous chemicals for a living. That's the situation both where everyone's aware that there's a high level of risk, and that they're surely entitled to a higher-quality protections, than for example, people in my job, where my job is mostly talking to people or reading and writing. I both have little chemical risk, and also don't need to wear protective equipment. The important thing to know here is just that being subject to health and safety rules is not something that parties can fully contract out of. An employee can't promise, "I'm just okay with taking on enormous personal safety risks at work." Employment contracts can be negotiated and individualized, but one of the things that makes this area of law distinct, is that there are some terms that are non-negotiable, and they're made non-negotiable largely by statute. Most employers have to pay a minimum wage. Many employers must promise job security in the event of family and medical leave, and nearly every workplace has to promise a level of acceptable safety.
