What to Include in an Offer Letter
An Offer Letter is a formal offer of employment to a job applicant. It is used to summarize the basic terms of employment and takes the place of all the oral conversations and understandings between an employer and a new employee. It is the prospective employee’s first real exposure to the Company he or she will be working for and, as they say, “first impressions count.” Employers should be careful in crafting an Offer Letter so it does not go too far and become a binding contract of employment. Typically, an Offer Letter will contain references to:
- An employee’s job title/responsibilities;
- Reporting relationship;
- Start date;
- Exempt/non-exempt status;
- Rate of Pay;
- Hours of employment;
- Wage payment schedule;
- Basic benefits;
- Employment eligibility verification/reference checks; and
- Drug or other medical tests if required.
All of this information is fairly straight forward. However, there are a few landmines an employer should be aware of:
- At Will Employment: The Offer letter should make it clear that employment is “at will”, meaning the relationship is terminable at the will of either the employer of the employee at any time. It should state clearly that it is NOT a contract of employment. Without a clear “at will” statement, an employer runs the risk that a court may interpret the relationship as a binding employment contract entitling the employee to damages if the employer terminates the employee without just cause.
- Expressing salary on an annual basis: When salary is expressed on an annual basis, an argument can be made that there is an implied term of employment for an entire year. The better approach is to include language that states that compensation will be X, on an annualized basis.
- Work Authorization: All people employed in the U.S. must be able to produce valid work authorization. The Offer Letter must state that employment is contingent upon being able to provide the correct documentation to comply with Form I-9.
- Promises of future promotions/pay raises or bonuses: Growth within a Company is what every employee strives for. However, if an employer makes either explicit or implicit promises of future promotions, pay raises or bonuses, these statements could be construed as guarantees of these items. If they do not come about, an employee may seek to enforce those promises in a court of law or sue for damages.
- Bring closure to all prior discussions: The Offer Letter should contain a statement that the terms in the Offer Letter supersede any verbal discussions or understandings that may have take place beforehand so as to remove any ambiguity and bring closure to the offer of employment.
- Don’t tie your hands on termination: The Offer Letter should not imply that the employee can only be terminated for cause or upon prior notice. These types of statements clearly contradict the employment at will nature of the relationship.
- Close the deal: Make certain that the employee signs, dates and returns the Offer letter by a date certain and that the employee completely understands all the terms and conditions of the Offer Letter.
While all of this may sound like basic information, employers should make sure that their Offer Letters do not turn into contracts of employment. When in doubt, please contact Boznos Law and we will certainly guide you through the employment Offer Letter maze.
With over 34 years’ experience in advising employers and employees on workplace issues, let Boznos Law work with you to ensure you are ready to meet the challenges posed by the changes to the employment laws. Call Bill Boznos today at (630) 375-1958 or contact us at www.boznoslawoffice.com/contact-us through our website.