What Should an Offer Letter Include?

What should an offer letter include? There will be jobs that just provide an offer letter with no employment agreement to follow. Then there will be other jobs where they will send the offer letter, expect the professional to sign it, essentially agreeing to the terms of the offer letter, and then they’ll provide an employment agreement with the details of the employment relationship.

What is in an Offer letter?

What is normally in an offer letter? An obvious thing, So, compensation, bonus structure, benefits offered if it’s a healthcare position, the malpractice insurance obligations, maybe some language about the restrictive covenants such as non-compete and non-solicitation agreement, how long the contract lasts, and how it can be terminated, but in a very brief, like one sentence “this is what’s going to be” manner.

If you’re okay with what’s listed in the offer letter, most people would sign it, send it back, and then the employer would work on getting an employment agreement together and then send it off to the professional for review. If you sign an offer letter, it doesn’t mean you’re stuck with everything you agreed to if, in a review of the employment agreement, things substantially have changed, meaning the fine print may not look as great as it looked in the offer letter. So, if you’ve signed an offer letter, unless it states it’s somehow binding in some way, which almost none of them ever are, you’re still free to negotiate after you’ve signed the offer letter. Now, the employer may take umbrage with this and say, well, look, you’ve already agreed to these terms. But look, if they say your base comp is 150,000, but when you start reading it, it’s maybe partially based upon production or fully based on production after a certain period, it can change your outlook on the position.

Paying for the Insurance

The same thing goes if they’re paying for your insurance if you’re a healthcare provider. They’re going to pay your underlying premium, but maybe you must pay for tail insurance after the contract ends, which can be a significant expense for some. Now, if you’re in a position where you’re just signing the offer letter, and there’s no contract to follow, I know for most lawyers, almost no lawyer signs an employment agreement. It’s all based on, they send you an offer letter, this is how much you’re going to make, and then that’s it. Then you start the job, and that’s what you’re going off is that offer letter.

Negotiate in Advance

So, you certainly want to negotiate in advance. However, if you have signed the offer letter and you’re still getting an employment agreement, you’re not stuck. You can still negotiate. And then, ultimately, if you decide not to sign the employment agreement, they can’t force you to start work. You just move on. And that’s just how business goes. Once again, the things you want in the offer letter are the things that are important to you. The compensation, the benefits, which are like time off, health, vision, dental, life, and disability, are they going to pay for your licensing dues and fees? That type of thing. How long the contract lasts, how you can get out of it, and how much notice you have to provide. And then the restrictive covenants like the non-compete, non-solicit, non-disparagement, and the terms of that.

If you want to know about the non-compete, the briefest way possible is one year, five miles from your primary practice location, or something like that. And then, the employment agreement will have the actual details of it. You should never sign a non-compete that is extraordinarily brief. It has to be spelled out. It normally would take up at least a page of a contract to get the details correct. So, that’s what should go in an offer letter.

What Happens After You Sign an Offer Letter?

There are two main distinctions. A professional could receive an offer letter, and that’s it. No employment contract follows. It’s just you agree to the terms of the offer letter, and then you start the job. And then, the second way would be the employer asking the potential employee to sign an offer letter, agreeing to basic terms. And then, they’ll incorporate those terms into an employment agreement and offer the employment agreement to the prospective employee. Then that person must decide if they want to sign the employment agreement and move forward with the relationship. 

Let’s first go with if you begin an offer letter with no employment agreement to follow. In that scenario, you’re most likely in an at-will employment relationship. This means that the agreement or the employment relationship may terminate at any time, for any reason. This is with no notice unless specifically stated in the offer letter. For the most part, there wouldn’t be any restrictive covenants that follow when the employment relationship ends. Restrictive covenants could include a non-solicitation agreement and a non-compete. 

Those are the two most common or the two that matter the most for most employees. They provide you with an offer letter that goes through basic things if you negotiate. Such as compensation, benefits, and start date, and that’s about it. I would say most licensed professionals usually would sign employment agreements. Attorneys don’t, for the most part, but almost anyone in healthcare, physicians, nurse practitioners, PAs, vets, chiropractors, and dentists, always sign employment agreements.

Not Required to Take on an Offer You Signed 

Let’s say you’re in another situation where they give you an offer letter, and you agree to the terms. Then they’ll follow up on the employment agreement. Many people ask, alright, what if I’ve signed the offer letter? But when they give me the employment agreement, it doesn’t look great. Do I have to go through with the job? The answer is no. Unless there’s strange language in the offer letter that states it’s binding, which would seldom happen if they follow up with an employment agreement. You can still negotiate terms. 

Let me give you an example. Let’s say the offer letter states there’s a non-compete, but it doesn’t have any details. So, you get the contract and then look in the non-compete, and it’s five years and covers an entire state. Like you will have to move out of the state if you want to continue in your profession. Well, that’s not a reasonable non-compete. But that could make a job that may have looked great at a hundred thousand a year be only worth 200,000 a year. That is if you accept that terrible non-compete. 

Provide Context for Disputing Job Offer

Even if you’ve accepted the terms of the offer letter, it doesn’t mean you have to go through and execute the employment agreement. The employer will probably talk about you agreeing to the terms, and now you’re returning to us. So, it is most effective if you provide some context as to why it looked good initially. Still, after reading the actual details of the employment agreement, it’s not so good.

I think most smart employers can understand that and appreciate that. If you just come back at them and say, no, now I want to double the salary, the bonus, or whatever. Without providing context, I assume the employer will not be pleased with that and may even pull the offer. So, what happens when you sign an offer letter? First, an employment agreement will likely follow, and then you’ll have to determine if you want to go through with that, or they’ll give you the offer letter. It’s an at-will relationship; you can leave at any time, and there likely aren’t any strings attached.

Can Offer Letters be Revoked?

I’m going to talk about a scenario where an employer would say. I need you to sign this offer letter.” Once we have the signed offer letter, we will follow up with an employment agreement. It is not a scenario where they give you an offer letter, and that’s it. There are some industries, I mean, I’m a lawyer. I know in most law firm environments, none of us sign employment contracts. Almost all of us are just at-will employees, and we get an offer letter that goes through the terms, and that’s it. You will have an employment contract in many other industries, especially healthcare and sales. It states how the employment relationship will be handled with compensation, benefits, termination, malpractice insurance, and restrictive covenants. It details the kind of the relationship’s nuts and bolts.

A Rescinded Job Offer is Exceedingly Rare

Today, it’s just when you get an offer letter, and then they follow up on the employment contract. In short, can an offer letter be rescinded? Yes, it can depend on extremely rare occasions. An offer letter would have language that states it’s binding in some way. It is just exceedingly rare. I usually see it only in academia, where they don’t have employment agreements. It’s more like a longer offer letter that refers to a bunch of policies and procedures. Still, in a normal work environment, they will say, alright, let’s come to terms on the basic outline of the employment relationship. 

We’ll both sign the offer letter and follow up with an employment agreement that goes into detail. It gets into the nuts and bolts of, for instance, if they say there’s a non-compete, how long is it? What’s the geographic restriction? How many points does it entail? Is it specific to the profession or the specialty of the professional in the situation? You’re not going to get details like that in the offer letter. 

Let’s give an example. Let’s say you’re in sales, they say, alright, let’s come to terms. You’re good on the comp, on the benefits, on the bonus structure, on the non-compete, and you sign the offer letter. And then, three weeks later, you still haven’t received the employment contract and have not looked for any other positions because of this, relying upon that job. But then the employer states, you know what, we’re not going to be able to go through with it currently. And then they take the offer letter away. Well, they can do that. That’s just an unfortunate part of doing business. 

In the Same Way, You Can Back Out From the Written Job Offer

Think of it from both perspectives. Suppose you signed an offer letter and decide to back out of a better job, moving, family concerns, whatever it is. In that case, you also want the opportunity to get out of that offer letter. And it’s going to go both ways. Either party can already decide to back out of the offer letter, assuming there’s no binding language, which, as I said before, is exceedingly rare. So, yes, an offer letter can be withdrawn. You don’t have to go through with it. You don’t have to offer an employment agreement if you’re the employer. If you’re an employee, it’s bad form to sign an offer letter and decide not to go through with a job. Still, I would never recommend someone sign an employment agreement they’re uncomfortable with. And the terms of an offer letter can look great on the surface.

And then, when you get into the details of the employment agreement, it can change how it looks. It may state the terms of the bonus. You’ll get this much per year. But it may not say, but if you terminate the contract, you won’t get any of the bonus that you earned that year or some.” You know, there are details you can’t find in the offer letter. Once you see them in the employment agreement, they can change the context of the situation. The offer letter can be rescinded but you also don’t have to go through with it. If you’re an employee, it works both ways. And that’s just how the professional arena goes, as far as the offer letter or letter of intent is concerned.