National, Inc. needed to hire a customer service representative. It advertised for applicants, interviewed and evaluated the applicants, and decided to offer the position to one of the applicants. This was a three-month process. To complete the process, National, Inc. drafted and sent the applicant an offer letter.
The offer letter may be a contract. It may bind National, Inc. to promises, or may not address oral promises upon which an applicant relied when quitting his previous employer, and becoming employed by National, Inc. With the wrong wording, the applicant may claim that National, Inc. promised employment for a specific period of time, made oral promises, did not protect its confidential information and misclassified the applicant as entitled to overtime pay. Therefore, National, Inc., as well as every company, needs to review its offer letter to protect itself from liability.
Other than the new employee's job title, supervisor and start date, every offer letter should have the following essential elements:
At-Will Employment: At-will employment is the most common form of employment. Both the company and employee may end employment with or without cause, at any time, and with or without notice. At-will employment gives the company the most freedom to make decisions about its employees' status as an employee, wages, benefits and working conditions.
Annual Salary/Hourly Rate: If a company incorrectly states the annual salary, the offer letter may create an employment agreement for a specified period of time.
Exempt/Non-Exempt Status: Every employee is either entitled to earn overtime pay or receives a salary and no overtime pay. Companies must examine each employee's duties and categorize the employee as either exempt or non-exempt. Identifying the category will avoid confusion and notify the employee of his entitlement to overtime pay.
Intellectual Property: During the course of their employment, almost all employees will learn the company's trade secrets and confidential information. To protect the company from the disclosure of its trade secrets and confidential information, every company should require employees to sign a separate confidentiality agreement as a condition of becoming employed. In addition, companies may want to ensure that new employees do not disclose the trade secrets and confidential information of a previous employer. This will protect the company in case of a lawsuit filed by the employee's previous employer.
Entire Agreement: After becoming employed, an employee may contend that the company made oral promises. Therefore, an offer letter should state that every agreement between the new employee and company is listed in the offer letter.
Companies should not treat offer letters as a formality. Despite its short length, it may create contractual promises. Its language needs to protect the company from liability. Therefore, companies need to carefully craft offer letters to avoid disputes and establish important ground rules for the relationship created between the employee and company.