There are many misconceptions about offer letters. However, before you read this post, please be aware that this is not intended to be legal advice. However, I want you to know what an offer letter is and is not.
Up until about 15 years ago, some of my candidates got offer letters, some did not. It made no difference. Today, it is a matter of course. In fact, most of my candidates will not resign from their existing company until they receive an offer letter. They are correct to wait for the letter. However, even if they have one and it has been signed by both parties, it is not a contract of employment. An offer letter merely spells out a company’s intention to hire, but it is not a guaranty of employment and it is not a contract.
Offer letters are always for the protection of the hiring company, not the employee.
However, a proper offer letter should contain a number of items. Among them:
- Start date
- Reporting structure
- Duties and responsibilities
- Eligibility for and timing of commencement of benefits.
- Other job perks
- Bonus eligibility and details
- Anything else discussed upon which the offer acceptance is based
According to Rick Kurnit, partner of the law firm, Frankfurt Kurnit Klein & Selz, one of advertising’s foremost legal experts, an offer letter becomes a contract only if it spells out severance. If one resigns based on reliance on the letter, the hiring company might be responsible for reasonable loses based on that reliance – for instance, if a candidate agrees to move, hires a moving company and pays a non-refundable deposit, it is possible that the hiring company might be responsible for that cost even if the offer is withdrawn. In my experience, when things like this happen, most companies are pretty reasonable.
In my non-legal opinion, if a person resigns based on reliance of the offer letter and the offer is rescinded and the previous employer refuses to rehire the departing employee, there could be recoverable damages.
Because most offer letters state that employees are “at will” (meaning that they can be terminated any time and for any reason) and do not contain severance, they really offer the new employee no commitment, even during the period between the time an offer is extended and the time a person starts work. (If there is a severance agreement as part of the offer letter, during the notice period between, the offer letter might possibly be a valid contract and, I suspect, the offer letter would only protect the new hire to the extent of the severance. One must consult an attorney to determine if that is so.). The catch 22 is that few companies give severance except to their most senior employees and sometimes not even then but, you might have to sue to recover the severance.
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The bigger issue then becomes that you may have to sue the hiring company and undoubtedly they have bigger resources than you do; especially the holding companies. And the truth is, they know it.
I have previously written about contracts. I cannot stress this enough: If, during interviewing and negotiating, there are agreements and understandings (e.g. salary reviews, promised raises, bonuses, promotions, anticipated career paths, etc.) and those agreements are not in the offer letter, they do not exist and are not part of the hiring agreement. I have candidates tell me tales of woe all the time, especially when a hiring manager leaves and no one has been told about agreements made prior to hiring.
As an aside, I find most offer letters cold and filled with legalese. Sometimes offer letters are formulaic and look as if written by a patent attorney. They are unnecessarily harsh documents. There is no reason why an offer letter cannot be welcoming, warm and exciting while and still containing all the necessary language. (If any of my readers would like to see samples of great offer letters, I would be happy to share them.)
Note: For more on offer letters see: