THE USE OF CONTRACTS ON EMPLOYEES: THEIR WIDESPREAD USE, AND THE IMPLICATIONS FOR MANAGEMENT

While many management studies have documented the rise of alternative, nonemployment working arrangements like the “gig” economy and electronic platforms, the application of contracting practices to actual employees is far more common in traditional employment, but understudied in the management literature. These practices include requiring employees to sign legal contracts such as noncompete agreements that limit their ability to quit, or mandatory arbitration clauses. We begin by describing the unique nature of traditional employment and of contracting. We then document the various contracting arrangements now imposed on employees, their prevalence, their effects, and what happens when these two systems operate at the same time. We also discuss the implications for the practice of management and provide a guide to research questions raised by this development.