Most of the time, employers don’t intend offer letters to cover all the material subjects about the employment relationship. After an offer has been accepted, new hires are asked (i.e., required) to sign lengthier and more formal documents. A recent case illustrated how an employer should clarify that an offer letter is not the complete employment agreement. Pulse Technologies Inc. v. Notaro, No. 6-MAP 2012 (Pa. May 29, 2013).
In Pulse Technologies, an engineer quit to take an equivalent position with a competitor. His former employer tried to stop the engineer from starting the new job by enforcing a non-compete covenant in an employment agreement with the engineer. The engineer argued that he had no non-compete because his offer letter described his position, duties, salary, benefits and other employment terms, but did not mention any restrictive covenant. The non-compete only appeared in a longer document he had to sign on the first day of employment.
After two conflicting decisions from lower courts, the Pennsylvania Supreme Court ruled that the offer letter was not the effective agreement, but was basically part of the negotiation process. The employer had wisely warned in the offer letter that the employee would be required to “sign an employment agreement with definitive terms and conditions outlining the offer terms and conditions contained herein.” Consistent with that notice, the employee – without objection – signed the comprehensive employment agreement with the non-compete covenant on the first day of work.
Before the curtain rises on a dispute with a departing employee, consider whether your offer letters are meant to define the terms of employment. If not, let the employee know up front that there are more features to come on the first day of employment.