For businesses it’s a best practice to use offer letters when hiring entry level and other non-executive employees, rather than more formal employment contracts. This is true whether you’re a Seattle startup or an established Washington business.
Tip: Formal employment contracts, if used at all by startups and small businesses, are usually saved for senior executives and upper management.
With an offer letter, you’re setting out the key terms of the relationship between your new employee and your business, but without going into exhaustive detail. After all, this is a non-executive employee, and so the idea is to make the hiring process as seamless as possible.
Related: Independent Contractors vs. Employees In Washington State
Today’s post takes a look at some of the common terms that are included in offer letters, as well as some potential traps for the unwary. Which is to say, traps for the person who downloads and uses the first free offer letter they can find in a Google search. Please please don’t do this!
Related: Questions You Can’t Ask Job Applicants In Washington
OK, deep breath, and let’s begin.
Start With The Basics
Your standard offer letter template should start by conveying basic information about the job being offered, including the following:
- Job title
- Full time/part time status
- Job duties
- Employee’s manager
- Salary or hourly rate of compensation
Address Wage & Hour Issues
Some employees are subject to minimum wage (nonexempt) and overtime compensation rules, and some are not (exempt). You should identify whether the employee’s position is exempt or nonexempt in the offer letter.
Tip: In general, employees with greater rates of pay and responsibility tend to qualify for exempt status, whereas employees who are paid a low hourly wage and have minimal responsibility are usually nonexempt. You should consult your attorney or another qualified professional if you have doubts about the status of a new hire.
Once you’ve identified whether the new hire is subject to minimum wage and overtime rules, you should specify their rate and frequency of compensation. For instance, you might pay your employees every two weeks.
In any event, make sure you’re paying employees at least once per month, as this is required by Washington law.
Highlight At-Will Employment Relationship
Washington is an at-will employment state. This means that, in general, employment may be terminated by the employee or the employer at any time and for any reason. At-will employment is usually desirable for employees, as it gives them maximum flexibility to terminate employees.
To ensure that a new hire is considered an at-will employee, it’s important to make clear in the offer letter that employment is at-will and that either party may terminate the employment at any time and for any reason.
In fact, it’s a best practice to use boldface type to call attention to the at-will disclaimer. Doing this will make it difficult for the employee to subsequently argue that a for-cause employment relationship was implied in the offer letter or offered orally. You may also consider reiterating several times throughout the offer letter that employment is at-will.
Unintentionally entering into a for-cause employment relationship can be a disaster for an employer.
Reference Employee Handbook
If you have an employee handbook, it’s a good idea to state in the offer letter that the employee will be subject to the handbook, as well as other employment policies set out elsewhere.
In addition, you should make sure to provide the employee with a copy of the handbook (and any other employment policies) for their review and acknowledgment. That way you educate your employees on the business’ policies while creating a record of their receipt, review, and understanding of the policies. If, in the future, an employee fails to observe company policy, they won’t be heard to claim they were unaware of the policy.
Clarify That Offer Is Contingent
Your employment offer should be made expressly contingent on certain events happening, though the specific events vary by employer. However, one thing is a requirement for all employers—verifying an employee’s right to work in the U.S. (using Form I-9).
Examples of other things employers may make the offer of employment contingent upon include the below:
Reserve Right To Change Terms
It’s generally a good practice to include a proviso in your offer letter reserving the right to modify or rescind the terms of employment. This provides the employer maximum flexibility down the road if circumstances change and the nature of the employment needs to be modified.
At the start of this post, I chastised the free contract template plug-and-play crowd. If you’ve thought of doing that, I hope you now have a better sense of why it’s important to put a bit of time and thought into creating your own custom offer letter that fits your business, especially to make clear that the employment relationship is at-will, not for-cause.
Remember that the advice in this post is general in nature and won’t be applicable for every business, so work with your employment lawyer to create a custom offer letter. The great thing is that once you’ve worked with a lawyer to create a good offer letter template, you can re-use the template as needed with subsequent non-executive hires. The most you’ll need to do is change names, dates, pay, and other basic details.