An employee is someone who works for an employer in exchange for wages, salary, or other compensation. An employer is an entity that hires employees to work for it. This can be done by hiring higher-level executives via an employment contract, for example, or by hiring lower-level employees who may work for an hourly wage. The main difference between an employee and an independent contractor—a person or organization that performs services, but is not an employee—is that with an employee, the employer dictates virtually all of the terms of the employment relationship and the specific duties of the employee.
An employer has the right to require an employee to perform the following duties:
- Be on time
- Track their time
- Work in the best interests of the company
- Follow the practices, laws, policies, and procedures as designated by the employer
Many employers provide an employee handbook to employees that contains the rules, policies, and procedures of the employer. A handbook is a description of an employee's rights and responsibilities as defined by their employer. While these handbooks often contain specific language to clarify that they are not intended as an employment contract, it is important to work with Human Resources (HR) and consider the wording of employee handbooks carefully to avoid creating unexpected liabilities.
Sometimes the employer-employee relationship is created through a collective bargaining agreement. Collective bargaining is when a group of workers bargain together with an employer for a contract. This usually exists in unionized settings—that is, industries in which employees organize into a labor union that will act as an intermediary between employees and company management. The collective bargaining agreements will set forth the terms and conditions of employment, such as pay scales, discipline, and vacation time. The employment relationship can also be created through an employment contract, which can contain similar provisions. In the absence of such agreements, many states default to an at-will employment standard.
An employment at will relationship means that employers are free to terminate an employee for any reason or no reason (in other words, no cause is necessary), as long as it is not a discriminatory, retaliatory, or illegal reason.
Types of Employment Relationships
| Collective Bargaining Agreement | Employment Contract | At-Will Employment | |
|---|---|---|---|
| Defined | When employees bargain together through union representatives for a contract | When an employer and employee have a written agreement | When there is no contract and an employee may be terminated for any reason as long as it is not discriminatory, illegal, or retaliatory |
| Example | Unionized workers in the automotive industry may bargain to improve health care benefits. The agreement forms a reference for any future issues between employee and employer. | An employer and an employee with a specialized skill agree to specific terms of employment in writing, including length of employment and wages. Attorneys may work on both parties’ behalf during the process. | An employee who is consistently late to work can be terminated without notice and without incurring legal liability. |
At-will employment, employment under a contract, and employment established through a collective bargaining agreement are employment situations that have their own employer-employee relationship.