If you get an offer letter when you are getting ready to start a new job, read it carefully. It is a critical document. Employers do not always consider offer letters to be employment contracts (especially when the letters state that you are an “at-will” employee), but these letters can give you some contractual rights. For example, if the offer letter states that you will get a guaranteed bonus of a specific amount and the employer doesn’t pay it, you can bring a claim for breach of contract.
1. Basic job information. Title, job responsibilities, reporting structure, and starting date.
2. Salary. The job’s salary and the employer’s policy on raises — e.g., do they review salaries annually? Is there a lock-step ladder for raises?
3. Guaranteed bonuses. The amount and payment date(s) of any guaranteed bonus, including a signing bonus. The nature of the guarantee should also be spelled out: it might promise a minimum with the possibility for a higher payout, a maximum, or an exact amount.
4. Discretionary bonuses. Whether discretionary bonuses are paid every year, when they are distributed, and what they are based on. Common standards for awarding discretionary bonuses include the performance of the company, your team, or you individually.
5. Deferred compensation. Details about deferred compensation like stock option programs and how you can get copies of the program plans.
6. Other benefits. Fringe benefits like health insurance, long- and short-term disability insurance, life insurance, profit sharing, and expense reimbursements. As with deferred compensation plans, there should be documentation available with information about what these perks will cost you, their value.
7. Mandatory arbitration. Be careful – employers slip these in. They waive your right to a jury in the event that you have a future dispute with your employer and lock you into a private, truncated dispute resolution process. While arbitration tends to be quicker and less expensive than court litigation, it also can prevent you from collecting and presenting as much evidence as you could in court, and there is no right to appeal, just limited grounds to contest an arbitration ruling against you.
8. Non-compete. Be careful – employers slip these in too. Any prohibition against competing with your employer after your job ends should apply only for a limited time in a specific geographic area. The enforceability of non-compete (and non-solicit) provisions varies from state to state.
9. Non-solicit. Be careful – like non-competes, a non-solicit provision (which is a prohibition against soliciting other workers, clients, or customers to leave the employer and follow you to your new employer) should end after a reasonable time.
To make sure you understand the terms of your employment and to protect your rights and interests, it’s a good idea to consult an attorney with any questions about an offer letter. You may also be able to negotiate terms at the outset that will impact you many years later.
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