In most cases, employers and employees are free to enter into employment contracts.
In many professions and for many high-level executive positions, it is even expected for an employee and employer to negotiate the terms of employment and to put those terms in writing.

Possible legal issues with employment contracts

Employment contracts do offer many advantages to employers and employees alike. For employers, a contract can offer employees a strong incentive to stay with their employers, as the contract can offer a guarantee of compensation and tenure.
On the other hand, the contract can also set out penalties for an employee who leaves, thereby protecting the employer. Contracts can also be used to protect an employer’s trade secrets, competitive advantage and market share.
Finally, employment contracts will ideally set out terms, like employment benefits, responsibilities, and the like, clearly so that everyone understands them.
The biggest disadvantage to an employment contract is that once it is signed, both the employer and employee have limited flexibility since they must follow the terms of the contract. From an employer’s perspective, this means that it may be more difficult to terminate an employee.
Moreover, whenever an employment contract is in play, there can always be employment disputes about the terms of the contract. In such cases, either side may accuse the other of a breach of contract and demand compensation for damages.
A dispute can be need not be over a discharge from employment; for instance, terms about bonuses, stock options and other incentives can also be the subject of a dispute.
Legal arguments over an employment contract can quickly get expensive and time-consuming. A business or individual in the San Jose area who is facing a dispute should consider speaking with an attorney who has experience handling California employment contract disputes.