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Best Practices For Employment Offer Letters

An employment offer letter is an essential document that defines the terms and expectations of the employment relationship between an employer and employee. There are a number of different forms that offer letters can take, ranging from one-time documents given at the outset of employment to updated offer letters provided on an annual basis.

Regardless of which approach an employer follows, it is important that offer letters be drafted carefully, reviewed regularly, and tailored to each individual employee, to ensure compliance with legal requirements and best practices and to avoid creating unintended contractual obligations.

Types Of Offer Letters

Employment offer letters commonly take one of the following approaches:

  • One-Time Offer Letters. Most employers provide offer letters only when individuals first become employed. These one-time offer letters should detail all of the essential information specific to the individual’s employment with the organization, as outlined below. Employers who issue one-time offer letters may also provide employees with updated offer letters on an as-needed basis, referencing the employee’s “original” offer letter and detailing any changes to the employee’s terms and conditions of employment going forward, such as compensation, benefits, job title, or job duties.
  • Annual Offer Letters. Other employers (including many schools) provide annual offer letters to employees, setting forth in detail each year all of the essential information specific to the individual’s employment with the organization. This approach can also function well, as long as the annual offer letters are carefully drafted – in particular, to make clear that the employee will remain employed on an at-will basis, notwithstanding that the offer letter applies to a particular year.

At-Will Employment Relationship

However an offer letter is drafted, it should make clear that the employment relationship is “at will,” meaning that the individual is not being employed for any definite term and that either the employer or the employee may terminate the employment relationship at any time and for any reason, with or without notice. In this regard, an offer letter should not refer to a specific “term” of employment or promise that the employer will terminate only for “cause” or only after following specific procedures (such as a defined progressive discipline process).

Essential Information To Include In Offer Letters

In addition to detailing the at-will employment relationship, offer letters should include other important, employee-specific information, such as:

  • Job title
  • Job duties
  • Employment classification (e.g., exempt or non-exempt, full-time or part-time)
  • Work schedule
  • Starting compensation
  • Frequency of pay
  • Benefits.

For new employees, offer letters should also detail the employee’s expected start date and any hiring contingencies (e.g., criminal background checks, reference checks, and proof of eligibility to work in the U.S.).

Offer letters may also include other terms of employment, such as confidentiality obligations, certification and/or training requirements, and safety requirements. Employers who are requiring employees to provide proof that they are vaccinated against COVID-19 should also include this requirement in the offer letter.

Offer letters, with the exception of update letters, should also include a provision stating that the offer letter sets forth the entire agreement and understanding between the employer and employee. However, if the individual will also be asked to sign a separate agreement, such as a confidentiality or non-competition/non-solicitation agreement, the offer letter should cross-reference that separate agreement so that the employee is aware of the requirement. (Note that an increasing number of states – including Massachusetts – have enacted legislation setting specific requirements governing the content of non-compete agreements and when they must be provided to employees.)

Other Considerations

Regardless of the format used, employers should require all employees to sign and return their offer letters, thereby acknowledging that they understand the terms of the offer and that their employment is on an at-will basis.

Employers should also ensure that their offer letters are consistent with their personnel policies, practices, and documents, such as employee handbooks, job application forms and job descriptions.

Finally, as a best practice and for compliance with applicable law, employers should keep copies of all signed offer and update letters in employees’ personnel files. These letters should be maintained in employees’ personnel files for at least the minimum time period required by applicable state law.

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If you have any questions about employment offer letters or would like our assistance with reviewing and updating your practices in this area, please contact one of our experienced labor and employment attorneys.