Choose Words Carefully
When bringing new employees on board, your business may provide applicants you want to hire with offer letters. In interviews, managers may make certain positive statements about the financial condition of the company in order to entice candidates to take the jobs. And after being hired, employees may sign employment contracts and be given employee handbooks.
Through all of these hiring steps — and other actions — your business may be making job security promises. In the future, employees may be able to argue that you promised them jobs for as long as they wanted. Reason: Certain statements can be treated as binding contracts, and even verbal statements can be considered implied contracts.
Managers and supervisors acting on behalf of your company can create contracts as binding as those made by the chief executive officer.
We’ll show you the types of statements that can get your business in trouble, but first, here are the key differences between offer letters and employment agreements:
An offer letter is a brief document offering a position to a candidate to whom you have already verbally made an offer. It should not contain statements about issues such as salary, benefits, possible disciplinary actions or the duration of the job. No statement should be able to be misconstrued as a promise. These letters generally contain an “at will” statement. This makes it clear that either the employer or the employee can terminate the relationship at any time for any legal reason. This means employees can be terminated without “just cause.”
There is no legal requirement to put offers in writing, although many companies use offer letters and many job candidates ask for them. Consult with your attorney about whether your organization should put offers in writing and what language should be used. Letters that are not carefully drafted could inadvertently create an employment contract or other claims.
An employment agreement is a more formal, lengthy legal contract. It generally contains basic information such as the name of the employee, job location, title, duties and the employee’s supervisor. As with an offer letter, there is generally an “at will” statement. The exact provisions in an employment contract vary (see right-hand box) but the agreements should be drafted by your attorney to ensure there are no unforeseen issues.