Jay Sands seemed like a perfect fit for your VP of Sales opening. He
had all the necessary qualifications. He impressed everyone he met.
At one point during the interview process, you remarked to Jay that
he was in an excellent position to take advantage of a great career
opportunity. You may have even said something like, “If you’re
as successful as I think you can be, you can earn over $350 thousand
within three years.”
Unfortunately, Jay didn’t work out. After eight months of watching
your sales plummet, you decided to let him go.
And now Jay Sands is suing you, claiming that you promised him $350
thousand for his business contributions. You didn’t make that promise,
and there’s certainly nothing in writing, so this should be laughed
out of court, right? Maybe not. While this case is fictitious, others
like it are being heard throughout the country.
Job offers are tricky things. You want to present your offer positively,
but you have to make sure you don’t misrepresent the terms of employment.
The fact that these misrepresentations may be verbal or unintentional
is irrelevant. How can you prevent such misunderstandings and the costly
lawsuits that can result? First, you have to recognize and avoid major
job offer pitfalls. Second, you have to learn to prepare offer letters
carefully so they protect rather than harm you.
THREE DANGER AREAS
Careless job offers get companies into trouble in one of three ways:
The offer letter is regarded as a contract.
According to the Smart Workplace Practices newsletter, “Letters
determined to contain a contractual agreement and letters containing
no contractual agreement are for the most part indistinguishable.”
(There are some good offer letter writing tips described later in this
article.)
The offer letter makes unintentional promises.
In one case, an employee’s letter promised that the company would
pay one-half of his relocation expenses immediately and the remainder
after one year of employment. When he was terminated before his year
anniversary, he sued the company, claiming the offer letter implied
his employment contract was intended to last at least a year. He won
the suit.
The lesson is this: never make implicit or explicit promises
that you may not keep. Statements that merely allude to job security
or bonus assurances can be interpreted as contractual obligations by
the courts
The offer letter contains information that conflicts with statements
made during the interview.
Your words can be interpreted as implied promises, even if you never
put them in writing. These seemingly harmless statements have gotten
companies into trouble:
- You’ll be with us as long as you can do your job.
- This is a company where you can stay and grow.
- You won’t be fired without just cause.
The problem can become especially troublesome when more than one of
your employees interviews a candidate. While Bob might not have mentioned
quarterly bonuses, perhaps Gail did. That’s why it’s critical
to make sure anything discussed is fully explained in your offer letter.
PREPARING AN OFFER LETTER
The following suggestions can help you prepare a clear cover letter,
which may avoid costly problems in the future:
Stick to specifics.
Include information such as position offered, location and working hours,
salary, benefits, and starting date. Whenever possible, refer the candidate
to official reference material (e.g., employee handbooks, health plan
handbooks, stock option vesting requirements).
Write exactly what you mean.
Unclear writing is open to interpretation, and that’s when lawsuits
arise. For example, if the employee can earn quarterly bonuses, describe
all eligibility requirements. Better yet, refer him or her to the official
document outlining the bonus process.
Make sure company documents agree.
Trouble can occur when the offer letter states something different from
other company literature, like your employee handbook or your job description.
Indicate the offer is conditional.
Avoid phrases like “permanent position” or “direct employment.”
And clearly indicate those factors upon which the job offer is contingent
(e.g., drug test, skills test, reference check, background investigation).
Avoid dangerous terminology.
Most troublesome is language implying job security—phrases like
“stable working environment,” “company family,”
or “lack of layoffs within our organization.”
Watch what you call the letter.
A Letter of Employment sounds a lot like a legal contract. Instead,
call it a Letter of Understanding.
Stress employment-at-will rights.
Most states have employment-at-will laws that allow you wide latitude
when you must fire an employee. To protect yourself, include a statement
that reaffirms your right and the employee’s right to terminate
the employment at will. Further indicate that you or the employee can
terminate employment for any reason—just cause should never be
a condition.
Ask someone to review the letter.
It helps to have a fresh pair of eyes read the letter and look for potential
problems. Preferably, this person should not be directly involved in
the hiring process.
Of course, the suggestions above should not be misconstrued as legal
advice. It’s always a good idea to allow your attorney to review
employment documents.
PROTECT YOURSELF
Don’t let a sloppy job offer cost you time, legal expense, or your
good name. With up-front preparation, your offers can clarify conditions
of employment, persuade candidates to join your company, and protect
you from trouble down the road. Well-designed offers are a prudent—and
much less costly—alternative.
