ADA Americans with Disabilites Act - ADA Claims and EmployersPersonnel Policy Service, Inc.

about us > hr management articles > Hiring > Offer Letter


HR Policy & Compliance Experts Since 1972

 

See How It Works

 

See how we help others like you access model policies, make confident HR decisions quickly, stay ahead of changing requirements easily and get answers to tough HR questions instantly. Learn more, click here

 
 

Why We are the HR Compliance Experts?

 

“I just got back from a 3-hour lunch meeting where I reviewed with a vice president all the changes in our benefits and services policies that will appear in the next iteration of our Employee Handbook. I could speak with knowledge, confidence and authority largely because of your Personnel Policy Manual with all of its supporting guidance and documentation. You are my #1 resource when it comes to policies. Keep up the good work!”
 
Don Jones
Director of Human Resources
Columbia International University
Columbia, SC

See how it works...

 
 

HR Policies & Labor Law Posters

· Attendance
· COBRA Requirements
· Dress Code
· Drugs/Narcotics/Alcohol
· Employee Classification
· FLSA Compliance
· FMLA Checklist
· Workplace Smoking
· Holiday
· Internet/Email Communication
· Layoff and Recall
· Military Leave
· Pay Procedures
· Rest Breaks
· Sexual Harassment
 

  HR Policies, Labor Law Posters FREE

 
 

Topics

· ADA
· Affirmative Action
· FLSA
· Sexual Harassment
· Wage and Hour
. Identity Theft Protection
 
   More HR topics? Visit our HR Forum
 

Contact Us

Email: info@ppspublishers.com
Sites: www.ppspublishers.com
          www.instanthrpolicies.com
          www.hrpolicyanswers.com
          www.hrmattersblog.com

Follow us on Twitter: @ppshrpolicies Twitter @ppshrpolicies

 


HR Matters Tools and Resource Center

Including
Personnel Policy Manual System


HR Answers and Updating Made Easy

Employment law: analysis, documentation, & support
HR Best Practices: solutions working in the field
Policy Writing and Revision: templates drafted for clarity

 Try A Free Preview Now or
call 800-437-3735

 

 

Offer Letter Stating Annual Salary Does Not Create Contract   |   Free Hiring Policy

Terminated Employee Claimed Breach of Contract
Offer Letter Language Must Show Intent to Limit At-Will Relationship
Five Tips for Drafting Offer Letters That Do Not Create Contracts

A written offer letter reassures a new employee because it makes the hiring process more formal and professional. But can the letter also create an employment contract if it is not worded properly? A circuit court decision gives employers guidance on drafting offer letters that won’t create contracts affecting the at-will relationship. Get your FREE access to this and 100's of FREE HR resources today.

[Creating HR Policies or Employee Handbook?]

Have you ever worried that if you describe an employee’s salary in an offer letter as "an annual rate" you could create a contract of employment for at least a year? Some employers are so concerned about this possibility that they make only verbal job offers in order to reduce the possibility the offers will be interpreted as contracts affecting their employee’s at-will status. Fortunately, it looks like this concern may be overstated. According to a decision by the Fifth Circuit Court of Appeals, in Hamilton v. Segue Software, Inc., No. 00-10541 (5th Cir. 11/20/00), the inclusion of an annual salary by itself is not enough to override the at-will relationship.

Terminated Employee Claimed Breach of Contract                                   [Download Free Policies]

In this case, the employer, a Texas software company, sent an offer letter to the employee stating "Your base salary will be at an annual rate of $125,000.00 paid semi-monthly." The letter also included a reference to an employment agreement and instructed the employee to sign and return both the letter and the agreement to accept the offer. The agreement, however, was not included with the letter so the employee sent back only the offer letter. He eventually signed the agreement five months after beginning employment. The contract included the terms and conditions for employment; rules governing conflicts of interest, confidentiality, and intellectual property; and an at-will statement indicating the employee could be terminated or quit at any time. The employee was then fired a month later. He sued the employer, claiming the offer letter had established a one-year contract under Texas law and that the employer breached the contract by terminating him after only six months. The district court ruled in favor of the employer, and the employee appealed to the Fifth Circuit Court of Appeals.

Offer Letter Language Must Show Intent to Limit At-Will Relationship

As a matter of background, in most states (including Texas), employees who do not have contracts guaranteeing employment for a specific period of time (such as one year) are considered to be at-will employees. Under the at-will doctrine, employers have the right to terminate employees without contracts at any time and for any legally permissible reason. Employees have a similar right to resign whenever they want.

Since contracts are interpreted by applying state law requirements, the Fifth Circuit looked at whether the offer letter language created a definite contract of employment for a one-year period under Texas contract law. The court began its analysis by pointing out that Texas law presumes the employment relationship is "at will" unless an employment contract directly limits "in a meaningful and special way" the employer’s right to terminate an employee without cause. The court looked to a Texas Supreme Court decision which found that in order to overrule the at-will presumption, an employee must demonstrate that the employer had an "unequivocal" and definite intent not to create an at-will relationship. In other words, the employer must expressly state its intent to terminate the employee only under clearly specified circumstances.

Applying this standard, the Fifth Circuit determined that the employee’s offer letter stating the salary on an annualized basis was not either unequivocal or definite about the length of employment. According to the court, the reference to an annual amount did not provide a guarantee of employment, but instead "merely provide[d] a benchmark to evaluate one’s pay." Since the written offer letter did not specifically limit the employer’s right to terminate, the Fifth Circuit agreed that the employee was employed at will and could be terminated at any time; and, therefore, there was no contract to breach.

Five Tips for Drafting Offer Letters That Do Not Create Contracts

Since this court decision interpreted a dispute involving Texas state law, it only applies directly to Texas employers. However, every state except Montana recognizes the at-will employment relationship, so it is possible that other state courts may use its findings to interpret their own at-will requirements. Even if it is not followed in other states, the case illustrates the potential problems an offer letter can create and underscores that employers should pay special attention to the language of each offer letter. A poorly written letter may land you in court, while a carefully drafted one can be an effective employee relations tool by making the offer more formal, tangible, and professional. Furthermore, a written record outlining acceptance of the offer, starting date, starting salary, and other pertinent information helps prevent misunderstandings about the conditions of employment.

Here are a few simple guidelines to limit the chances your offer letters will create contracts:

1. Do not include any statements creating an expectation that employment is for a specific period of time or that termination will be only for specific reasons. For example, using the term "probationary period" to describe the first few months of employment or discussing bonuses the employee "will" receive at the end of the year can form the basis that the employee has a contract to work for a specific period. Similarly, references to job security or to specific disciplinary procedures can be interpreted to mean the employee can only be terminated in limited circumstances.

2. Do not describe the employee’s pay only on the basis of an annual rate. Use references to a weekly, biweekly, or monthly rate and also include the phrase "equivalent to $XXX on an annual basis."

3. Use phrases such as "generally" and "typically" when referring to terms and conditions of employment, such as benefits and company policies. These generalized descriptions are less likely to be misinterpreted as binding promises.

4. Include a specific at-will statement so the employee understands that either party may terminate the relationship at any time.

5. As a final precaution, have your legal counsel review the standard wording you use in offer letters for any statements that may jeopardize the at-will employment relationship.

Get your FREE access to this and 100's of FREE HR resources today. Create a free account for the Personnel Policy Manual System.

Handbook/Policy Writing, HR Best Practices, Legal Compliance try the Personnel Policy Manual System.

 

This article is not intended as legal advice. Readers are encouraged to seek appropriate legal or other professional advice.

 
Try a Free No-Risk 30-Day Trial Review Now
Personnel Policy Manual Service
Your HR policy solution for writing, revision, and legal compliance
Available in Print or CD

You get all the resources you need for easy policy writing and employment law compliance. Our comprehensive time-and-money saving service helps you:

  • Create, revise, and update your HR policies;

  • Plug into the best HR practices and trends;
  • Stay on top of employment laws, regulations, and court cases;
  • Avoid unnecessary legal exposure; and
  • Build policy and compliance expertise.

Request a 30-day risk-free review now. See first hand how the Personnel Policy Manual service will become your most trusted HR business advisor.

Price: $457 (Free Shipping)

Risk-Free: You pay nothing unless totally satisfied. At the end of 30 days, either pay the invoice to continue your subscription, or simply return the manual and owe nothing.

To request your 30-day free trial online, just fill in the form below and submit. Otherwise, just call our friendly customer service department at 1-800-437-3735 (9:00-5:00 Eastern Time). We’ll be happy to process your request or answer any questions you might have.

Fill out this form and submit:
* indicates required fields

Your Subscription Includes:

* 800-page HR Policy Manual
   (print/CD)
*
Monthly updates
*
Monthly HR Matters newsletter
*
HR Matters E-Tips

 

View Sample HR Policy

 

100% Money Back
Guarantee of Satisfaction
Good for a FULL YEAR!

 

Less than 15 employees? OR
Outside US? Click here

 

Format:
Print
Online
Both Print and Online
First:
Last:
Title:
Business or Organization:
Street Address:
Street Address 2:
City:
State:
Zip Code:
Country:
Business Phone:
Business Fax:
Email:
Number of Employees:
 

 

 
 



Benefits for Tough Times

 

(FMLA Leave Solution)
Solve Your FMLA Headaches With
Leaves of Absence

Model Policy and 85-Page HR Total Support Package. Learn more.

 

Easy Employee Handbook & HR Policies

Do You manage Key Employee Issues? Less than 15 employees? OR Outside US? Click here. Use our topic list below to easily locate the right HR policy product.

* Absence
* Benefits
* Conduct
* Employment
* Pay Practices

* Personnel Responsibilities
* Reimbursement
* Work Areas
* Miscellaneous

 

Get your employee handbook Now!

 
 

Download HR Policies Now

Absence
Attendance and Punctuality
Short-Term Absences
Leaves of Absence
Rest Breaks
Meal Breaks
Benefits
Disclosure of Benefits
Vacations
Holidays
Lunch Facilities
Educational Assistance
Employee Counseling
Recognition Awards
Company Products
Relocation
Athletics and Recreation
Conduct
Behavior of Employees
Appearance of Employees
Finances of Employees
Customer Relations
Use of Communications
Conflicts of Interest
Confidentiality
Disciplinary Procedure
Drugs, Narcotics, Alcohol
Employment
Equal Employment Opportunity
Sexual Harassment
Hiring
Employment Agreements
Orientation and Training
Medical Procedures
Serious Diseases
Introductory Period
Transfer
Promotion
Hours of Work
Outside Employment
Employee Classifications
Layoff and Recall
Termination
Retirement
Miscellaneous
Personnel Records
Community Participation
Suggestion Program
Dispute Resolution
Pay Practices
Salary Administration
Performance Appraisals
Severance Pay
Job Evaluation
Pay Procedures
Personnel Responsibilities
Model Cover
President’s Letter
Functions of this Manual
Employee Supervision
Personnel Manager
Employer-Employee Relations
Employment-At-Will
Reimbursement
Travel
Automobile Usage
Business Entertaining
Meal Reimbursement
Clubs and Civic Organizations
Trade and Professional Associations
Work Areas
Employee Safety
Maintenance of Work Areas
Personal Property
Solicitation
Parking
Security
Smoking
Special Reports
New FLSA Regulations: Understanding the Issues

 

 Search      Advanced Search

 
 
 
 
     

Personnel Policies | Employee  Manual | HR Matters newsletter | HR Compliance Tips | Employee Manual (CD-ROM)
Easy to Create Employee Handbook | Management & Compliance  Tips| Human Resource Management | Web sources | Employment Law

Company Policy | Employee handbook | Hr Policy | Download HR Policies  | Corporate Employee Handbooks | Download Employee Handbook