Compensation Agreements

There is a distinction in the law between employment agreements and compensation agreements. In Pennsylvania, most employees do not have employment agreements. They are considered “at will” employees who can be terminated at any time and for any reason. Even employees who have written employment agreements, often are subject to a contractual provision making their employment “at will.” This is like not having a contract at all because the employer has the right to terminate it. On the other hand, most employees do have some form of a compensation agreement. This means there is an enforceable agreement as to the rate or amount of compensation that the employee is entitled to for working. These agreements can be in writing or verbal. They can be a simple as the employer telling the employee the hourly rate of pay at the time of hiring. What is significant is that the employer is bound by the agreement with regard to the work actually performed. An employer does not have the right to change the compensation agreement in a way that negatively affects the compensation that an employee has already earned. However, an employer may change an employee’s compensation for services to be provided in the future, so long as the change in compensation is clearly communicated to the employee in advance and the employee is given an opportunity to accept or reject the new compensation agreement.