In the Marshall Islands, employment agreements primarily fall into two categories: Fixed-Term Employment Contracts and Seafarer Employment Agreements.

Fixed-Term Employment Contracts

Fixed-term employment contracts establish a specific appointment for a designated position. These contracts detail the conditions of employment, including salary and benefits, job duties and responsibilities, and the start and end dates of employment. This type of contract is most commonly used for project-based work or filling temporary positions.

Seafarer Employment Agreements

As a significant maritime nation, the Marshall Islands has specific regulations for seafarers. Key aspects of Seafarer Employment Agreements include compliance with the Maritime Labour Convention, 2006 (MLC, 2006), adherence to applicable Marshall Islands laws and regulations, details regarding repatriation in case of contract termination or expiry, seafarer's qualifications and certifications, and wage and compensation structure. These agreements typically follow a standardized format.

Collective bargaining agreements may also play a role in some employment sectors within the Marshall Islands. These agreements, negotiated between employee organizations and employers, can influence the terms and conditions outlined in individual employment contracts.

Employment agreements should clearly identify the employer and employee by name and title. The specific job title, department, and a concise description of the employee's duties and responsibilities should be outlined.

Compensation and Benefits

The base salary amount, payment schedule (e.g., bi-weekly, monthly), and any overtime pay rates should be specified. Any fringe benefits offered, such as health insurance, vacation time, sick leave, and social security contributions should be detailed.

Term and Termination

Indicate whether the contract is fixed-term (specifying start and end dates) or open-ended. Outline the grounds for termination by either party, including notice periods required.

Confidentiality and Intellectual Property

Define the employer's confidential information and restrict the employee's disclosure of such information during and after employment. Clarify ownership rights to any intellectual property developed by the employee during the course of employment.

Workplace Policies and Regulations

Incorporate a clause by reference that the employee agrees to abide by the company's established policies and procedures handbook.

Dispute Resolution

Specify the Marshall Islands law as governing the interpretation and enforcement of the agreement. Outline the process for resolving any disagreements arising from the employment contract, such as mediation or arbitration.

In the Marshall Islands, the labor framework permits the inclusion of probationary periods in employment contracts. This initial phase is an evaluation period for both the employer and the employee. The employer assesses the employee's suitability for the role, while the employee determines if the position meets their expectations.

There is no universally mandated probationary period in the Marshall Islands. However, some government entities and private companies may have established policies outlining the use of probation. For instance, the College of the Marshall Islands Contract Administration details a probationary period of six months for new permanent employees, with a potential extension of another six months within the first year.

Key Considerations Regarding Probationary Periods

• Contractual Stipulations: The inclusion and duration of a probationary period should be clearly outlined within the employment agreement.
• Performance Evaluations: Probationary periods are often accompanied by performance evaluations to assess the employee's progress and adherence to job duties.
• Termination During Probation: Terminating an employee during probation is generally easier for employers compared to after the probationary period has ended, as long as the reason for termination is not discriminatory or unfair.

Employment agreements in the Marshall Islands often include clauses designed to protect the employer's confidential information and potentially limit the employee's ability to work for competitors after leaving the company.

Confidentiality Clauses

Confidentiality clauses are designed to protect the employer's sensitive information, such as trade secrets, customer lists, and proprietary data. These clauses typically restrict the employee's ability to disclose such information both during their employment and potentially even after termination.

However, the legal framework for enforcing confidentiality clauses in the Marshall Islands is not clearly defined. Courts are likely to consider the following factors when assessing the validity of a confidentiality clause:

• Identification of Confidential Information: The clause should clearly define what constitutes confidential information.
• Reasonable Scope: The restrictions placed on the employee's ability to disclose should be reasonable and not overly broad.
• Measures to Protect Confidentiality: The employer must demonstrate that they have taken appropriate measures to safeguard their confidential information.

Non-Compete Clauses

Non-compete clauses, which restrict an employee's ability to work for a competitor after leaving the company, are not as common in the Marshall Islands as they are in other jurisdictions. There is currently no specific legislation governing non-compete clauses.

Important Note:

In January 2023, the U.S. Federal Trade Commission (FTC) proposed a rule that would ban non-compete agreements for most employees nationwide, including those working in U.S. territories like the Marshall Islands. While the final ruling on this proposal is pending, it's a significant development that could potentially impact the enforceability of non-compete clauses in the Marshall Islands for companies with U.S. ties.

Given the uncertainties surrounding non-compete clauses, employers in the Marshall Islands should carefully consider the potential benefits and limitations before including such a clause in an employment agreement.