6 Tips for Drafting Offer Letters

Just as in romance, employer-employee relationships often are at their best in the courting stage.  During the after-glow of an initial hire, many employers wish to make new employees feel welcome by sending confirmatory offer letters.  Yet, in that warm and fuzzy moment, employers also should keep in mind that they may be binding themselves to certain obligations to which they never intended to be bound. 

To minimize regret when the employer-employee relationship goes sour, here are my top six tips of things to avoid in offer letters:

  1. If you intend for the employee to actually stay on for a set period of time, the term may be included, but be sure to couch the term as “anticipated term” and allow yourself the ability to terminate the relationship before the end of the term.  If the employment is “at-will,” specifically state “your employment is at-will, which means that you or the company may terminate your employment at any time for any reason or no reason at all.”
  2. Avoid stating compensation as an annual salary.  For example, state that the compensation to be provided an employee is $X per week, which is the equivalent of $Y annualized.  A promise of a yearly salary may bind an employer to an implied employment term of at least one year, which may result in a claim that an employee is entitled to one year’s worth of compensation even if he is terminated mid-year for misconduct.
  3. Do not use terms such as “guaranteed” or “entitled,” unless they are preceded with the word “not.”  Similarly, avoid phrases such as “shall be paid” or “shall receive” related to compensation.  Under Massachusetts law, and many other states’ laws, once compensation is deemed earned, or when an employee has a legitimate expectation of being entitled to certain compensation, it may be considered an accrued wage which must be paid.
  4. While it is perfectly fine to state the title of the job and the direct reporting arrangement contemplated at the time of hire, avoid describing the employee’s job duties and obligations in anything other than general terms.  For example, the letter may state “your job duties and obligations are as generally described in your interview and will be described in more detail upon commencement of employment.  The job duties and obligations may change from time to time as determined by the Company.”  Alternatively, it may be best to state “initially, your job title is expected to be _____,” or “initially, you will be expected to perform _____ duties.”
  5. Identify any contingencies of the offer, such as executing a nondisclosure agreement, receiving appropriate papers to satisfy immigration requirements or satisfactorily completing drug testing.  (Of course, it is just as important not to allow the employee to commence work if a contingency has not been met.)
  6. If an employee is required to sign and “accept” the terms of the offer letter, then it may be a binding contract.  To avoid this risk, plainly state that “this letter is for information and guidance purposes only and is not intended to be a binding contract.” 

Because offer letters may be deemed to be contracts of employment, employers need to be careful in their drafting.  If an offer letter is necessary, review the wording carefully to ensure that what is not intended is not set forth in the offer letter.  If the employer intends to bind the employee or the company to certain obligations, then a properly drafted employment agreement is often the better practice to avoid unintended liabilities and the mistaken belief that the offer letter is not a legally binding document.