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Print articleThe Employment Offer Letter: Practical Tips for Minimizing Litigation Risk
April, 2023 - Heather M. Garrison
The process of selecting the right candidate for a new position involves time and resources. Extending an offer of employment is generally an exciting endeavor for both the employer and its new hire - which is why the details set forth in that offer of employment are so critical. While a verbal offer of employment is perfectly appropriate to provide, it is equally important that a written offer follow. Not only will a written offer letter set expectations for the new employee, but it also clarifies any matters that were discussed prior to an offer being made.
Employers should not disregard offer letters as an after-thought. In many cases, the existence of an offer letter can be incredibly valuable for employers. For example, clearly identifying any post-offer steps that must be successfully completed prior to starting employment (drug screen, background check, etc.) in an offer letter can serve as the basis for rescission of an offer where such checks are not satisfied. Additionally, a well-written offer letter also acts as clear and definitive proof as to the circumstances upon which employment was offered and accepted.
A few practical considerations for employers when drafting offer letters:
General Information
Every offer letter should include information such as the position title, hire date, orientation date, employment status, exemption status, compensation amount, and pay schedule. Organizations should include an acknowledgment that the offer letter supersedes and replaces prior oral or written understandings or agreements regarding the matters addressed in the letter, including anything that may have been discussed during the interview process. This is important because it ensures that the terms of the offer letter control in the event there is ever a dispute as to the terms upon which employment was accepted.
Work Location
The offer letter should describe regular or expected hours of work and location, including whether the employee is working in-person, remotely, or a hybrid remote arrangement. If working remotely, the company should know where the employee is physically located and may want to restrict the employee from working in certain locations to avoid inadvertently establishing a business presence in a jurisdiction where the company has no other operations.
Pay Details
The offer letter should provide details on salary and pay periods. Employee compensation should be stated in an hourly, a weekly, or a per-pay-period salary amount to avoid the expectation of receiving the full annual salary if employment is terminated mid-year.
By contrast, offer letters should not include guarantees of promotions, pay raises, or bonuses. To the extent these benefits are discussed in the offer letter, employers must ensure that there is appropriate qualifying language contained in the letter so that the employee cannot claim in the future that they were automatically entitled to a promotion, pay raise, or other benefit.
Benefits Information
Include a summary of the applicable benefits and eligibility requirements for health care insurance, 401(k) plans, life insurance, educational assistance, flexible spending accounts, short- and long-term disability, and accidental death and dismemberment coverage. The amount of leave that the employee is entitled should be described next. This should include holidays, paid time off or vacation, sick and personal time.
Contingencies and Conditions of Employment
This section typically covers items such as successful completion of a background check, signing of confidentiality agreements, compliance with immigration law and completion of a Form I-9. The offer letter should discuss any special license or certifications that are required and could threaten successful employment. Employers should include conditional language regarding hiring eligibility; therefore, if a candidate begins before the background check is completed, parting ways is easier.
In addition, employers should remind potential new hires of their responsibility if they have an active non-compete agreement with their current employer and include a statement that the candidate acknowledges that they are able to accept employment without legal restriction.
At-Will Employment
Most employees are hired on an at-will basis, meaning that, in the absence of a contractual provision to the contrary, the employer or the employee can terminate the employment relationship at any time, for any legal reason. The offer letter should unambiguously state that it is not a contract of employment and that employment is at-will. Without a clear at-will statement, the letter could be interpreted as a binding employment contract, entitling the employee to damages if the employer terminates the employee without just cause. The offer letter should specify that the at-will employment cannot be altered or modified except in a writing signed by the Chief Executive Officer (or similar position) of the company.
To further reinforce the at-will nature of the employment relationship, offer letters should not include direct or indirect references to long-term employment. For example, if the offer letter states an annual salary for the candidate, it could be construed as evidence of the employer’s intent to keep the employee on the payroll for at least a year. Carefully review the language used in the offer letter to ensure that it does not contain inadvertent promises or turn a job offer into an employment contract.
Closing
The offer letter should provide an acceptance deadline allowing candidates three to seven days to review and accept the offer along with a point of contact for questions or concerns. Finally, the letter should end with a line for the employee's signature and date. Employers may want to include a sentence that the offer letter is for informational purposes only and is not a binding contract.
Other Considerations
Employers should ensure that their offer letters are consistent with their personnel policies, practices, and documents, such as employee handbooks, job application forms, and job descriptions. As a best practice and for compliance with applicable law, employers should keep copies of all signed offer and update letters in employees’ personnel files for at least the minimum time period required by applicable state law.
It is important that offer letters be drafted carefully, reviewed regularly, and tailored to each individual employee to ensure compliance with legal requirements and to avoid creating unintended contractual obligations. If you have any questions about employment offer letters or would like our assistance with reviewing and updating your practices in this area, please contact one of our experienced labor and employment attorneys.
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Employers should not disregard offer letters as an after-thought. In many cases, the existence of an offer letter can be incredibly valuable for employers. For example, clearly identifying any post-offer steps that must be successfully completed prior to starting employment (drug screen, background check, etc.) in an offer letter can serve as the basis for rescission of an offer where such checks are not satisfied. Additionally, a well-written offer letter also acts as clear and definitive proof as to the circumstances upon which employment was offered and accepted.
A few practical considerations for employers when drafting offer letters:
General Information
Every offer letter should include information such as the position title, hire date, orientation date, employment status, exemption status, compensation amount, and pay schedule. Organizations should include an acknowledgment that the offer letter supersedes and replaces prior oral or written understandings or agreements regarding the matters addressed in the letter, including anything that may have been discussed during the interview process. This is important because it ensures that the terms of the offer letter control in the event there is ever a dispute as to the terms upon which employment was accepted.
Work Location
The offer letter should describe regular or expected hours of work and location, including whether the employee is working in-person, remotely, or a hybrid remote arrangement. If working remotely, the company should know where the employee is physically located and may want to restrict the employee from working in certain locations to avoid inadvertently establishing a business presence in a jurisdiction where the company has no other operations.
Pay Details
The offer letter should provide details on salary and pay periods. Employee compensation should be stated in an hourly, a weekly, or a per-pay-period salary amount to avoid the expectation of receiving the full annual salary if employment is terminated mid-year.
By contrast, offer letters should not include guarantees of promotions, pay raises, or bonuses. To the extent these benefits are discussed in the offer letter, employers must ensure that there is appropriate qualifying language contained in the letter so that the employee cannot claim in the future that they were automatically entitled to a promotion, pay raise, or other benefit.
Benefits Information
Include a summary of the applicable benefits and eligibility requirements for health care insurance, 401(k) plans, life insurance, educational assistance, flexible spending accounts, short- and long-term disability, and accidental death and dismemberment coverage. The amount of leave that the employee is entitled should be described next. This should include holidays, paid time off or vacation, sick and personal time.
Contingencies and Conditions of Employment
This section typically covers items such as successful completion of a background check, signing of confidentiality agreements, compliance with immigration law and completion of a Form I-9. The offer letter should discuss any special license or certifications that are required and could threaten successful employment. Employers should include conditional language regarding hiring eligibility; therefore, if a candidate begins before the background check is completed, parting ways is easier.
In addition, employers should remind potential new hires of their responsibility if they have an active non-compete agreement with their current employer and include a statement that the candidate acknowledges that they are able to accept employment without legal restriction.
At-Will Employment
Most employees are hired on an at-will basis, meaning that, in the absence of a contractual provision to the contrary, the employer or the employee can terminate the employment relationship at any time, for any legal reason. The offer letter should unambiguously state that it is not a contract of employment and that employment is at-will. Without a clear at-will statement, the letter could be interpreted as a binding employment contract, entitling the employee to damages if the employer terminates the employee without just cause. The offer letter should specify that the at-will employment cannot be altered or modified except in a writing signed by the Chief Executive Officer (or similar position) of the company.
To further reinforce the at-will nature of the employment relationship, offer letters should not include direct or indirect references to long-term employment. For example, if the offer letter states an annual salary for the candidate, it could be construed as evidence of the employer’s intent to keep the employee on the payroll for at least a year. Carefully review the language used in the offer letter to ensure that it does not contain inadvertent promises or turn a job offer into an employment contract.
Closing
The offer letter should provide an acceptance deadline allowing candidates three to seven days to review and accept the offer along with a point of contact for questions or concerns. Finally, the letter should end with a line for the employee's signature and date. Employers may want to include a sentence that the offer letter is for informational purposes only and is not a binding contract.
Other Considerations
Employers should ensure that their offer letters are consistent with their personnel policies, practices, and documents, such as employee handbooks, job application forms, and job descriptions. As a best practice and for compliance with applicable law, employers should keep copies of all signed offer and update letters in employees’ personnel files for at least the minimum time period required by applicable state law.
It is important that offer letters be drafted carefully, reviewed regularly, and tailored to each individual employee to ensure compliance with legal requirements and to avoid creating unintended contractual obligations. If you have any questions about employment offer letters or would like our assistance with reviewing and updating your practices in this area, please contact one of our experienced labor and employment attorneys.
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