Once you’ve decided to hire someone, what’s the best way to tell them?
Nothing requires employers to put a job offer in writing, but a verbal offer can lead to disputes later on, and these days, many new hires request written offers. For most employers, that means an offer letter, but it’s not as simple as just saying, “You got the job.”
“A lot of employees expect offer letters. They’re nervous about committing to this job and they want to know, from you, in black and white, that you’re equally committed to them,” according to Laura Link of the law firm Archer Law (formerly Archer & Greiner).
Speaking at NJBIA’s recent Employee Lifecycle seminar, Link said offer letters are generally a good idea, but employers should take care drafting them so they don’t accidentally create a contractual obligation.
She advises including these four items:
- The “at-will” disclaimer. Just as you would in an employee handbook, you want to make clear that the job you are offering is for at-will employment, i.e. you have the right to terminate the employment relationship at any time for any lawful reason, and likewise, the employee has the opportunity to quit.
- State compensation in weekly or monthly terms, not annual ones. “You don’t want to create an implication that you are going to keep that employee around for a full year,” Link explained. You can put what the annual amount would be in parenthesis if you want.
- Confirmation that the new employee is not under any restrictive covenants with a prior employer. You want to make sure they are not under a non-compete clause because if it comes to litigation, the former employer may try to assert that you were complicit in violating the agreement.
- Specify any contingencies or conditions of hiring. These would include criminal background checks, references check, satisfactory completion of medical exam or drug test, and/or proof that they are eligible to work in the U.S.
In some cases, businesses may want to do a formal written contract instead.
“If you’re looking for sophisticated talent, if you’re looking to fill your executive positions, they’re going to expect a contract where you’re committing to them certain benefits,” Link said.
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Naturally, using a contract has pros and cons.
On the plus side, it’s good for recruitment. It shows you are serious about getting a top-notch employee and that the compensation will reflect that.
You also get to control the means of exit of that employee to a certain degree. Because it’s for a certain time period (one or two years for instance), you can provide incentives for, say, a 60-day notice before terminating an agreement.
“Especially for your higher-level employees, that gives you the opportunity for a smooth transition, so you don’t have one of your key employees walking out the door and all of the sudden you’re stuck,” Link said.
On the downside, you as the employer are bound by its terms as well. While the policies in an employee handbook can be altered and updated whenever necessary, the terms in the contract are set.
So what should be in the contract?
A non-disclosure agreement: Prohibits disclosure of your confidential information, your trade secrets and your proprietary information.
Non-compete agreements: Prohibits the employee from competing with you for a set period after they leave your company.
Non-solicit agreements: Prohibits the employee from soliciting your clients or prospective clients for a set period after leaving and states that they will not solicit any of your employees to come to work for them.
Most of the time, an employer will want a non-disclosure agreement, Link said.
“Most employees are going to have access to some sort of confidential information,” she said, like say, an ice cream parlor’s recipe for pumpkin-spice ice cream.
Non-compete and non-solicit agreements are not as broad. These restrictions are for those employees with intimate knowledge about your company, your finances, your clients and your way of doing business that they can take to a competitor.
“Judges don’t want to tell people they can’t work, so it’s very hard to have an arrangement where a non-compete agreement is enforceable in court,” Link said.
The information in this article is provided for informational purposes only, specific to New Jersey-based employers. The article does not constitute legal advice, nor has it been written or reviewed by an attorney.