On August 14, 2020, an arbitrator for the American Arbitration Association issued an Interim Award for the firm’s client, for over $376,000. The arbitrator subsequently increased the award to over $425,000 for attorney fees and costs. The firm’s client is a former VP for Revolution Insurance Technologies, Inc., an Austin-based insurance tech company. Then-company president […]Read More
A lot of people think their offer letter from a company is a contract. It sort of is, but it is better to think of it as a series of promises made by the employer for an indeterminate length of time. In other words, it’s a promise by the employer until the employer changes it, which the employer can do at any time typically by simply notifying you of a change to your employment terms going forward.
An offer letter typically shows the general terms of employment – pay, benefits, perhaps a bonus or commission plan, and a start date. A typical offer letter will also remind the employee that they are still an at-will employee, subject to termination at any time. But even if it doesn’t, you’re still an at-will employee. A promise to be employed for a specific length of time has to be explicitly stated – otherwise you are at-will by default.
A “Contract for Employment” or “Employment Contract” is typically something with more extensive terms, language, and details, and – this is important – promises you that you WILL be employed for a certain length of time, or that you can only be terminated under certain circumstances. Employment Contracts will often state that you can only be terminated for cause, or something to that effect, and won’t describe you as an at-will employee. They usually begin with some language such as “This Agreement is entered into between Employee and Employer on this date…”
So when it comes to offer letters (“Dear Jill”), it is best to think of an offer letter as a series of promises made by the employer for an indeterminate length of time. For instance, if the offer letter says that you will be paid at a salary rate of $80,000 per year, there is nothing in the law that prohibits the employer from changing that pay rate at any time in the future. They simply can’t change it retroactively – for work already performed. And if you are made aware of the salary change and continue to work under the new salary rate, Texas law deems you to have accepted the new salary rate. You can’t simply say “I don’t accept this!” but keep working, and expect to sue later for the difference in pay. It doesn’t currently work like that under Texas law.
So typically, the promises in the offer letter are only enforceable if you’ve already performed what is required. If the offer letter says that you will get 15% of your closed sales as a commission, with no other terms stated, then you are typically owed 15% of your closed sales already completed, before the employer perhaps changes the plan. But again, the employer can change or even eliminate the commission promise for future sales at any time. It doesn’t mean they will – I don’t want to turn you paranoid – but it just means that under the law, they can.
What this means is that if you discuss something with your employer about the terms of your potential position, and there’s an agreement on that, make sure it’s in the offer letter. For instance, if the hiring individual says that you will get a car allowance of $300 per month, but it’s not in the benefits description in the offer letter, you can try to make sure that it is put in there or that you otherwise get that promise in writing (even just by email), so that there’s no dispute or confusion later.
At the same time, the specific words of the offer letter matter, so get clarification on something if it’s important. For instance, an offer letter I recently reviewed promised severance pay of “up to three months’ salary” if the person is terminated without cause. When the employee was upset that they were only offered 1 month of severance pay after a no-cause termination, I had to point to the specific language that he was only promised “up to” 3 months. Had I reviewed that offer letter when it was issued years ago, I would have said “You might want to get clarification on that, because it essentially means very little.” Sure, the employer can’t pay you $1 and say they complied, but anything above zero that is a meaningful amount of money would probably comply, leaving you with a lot less severance than you thought you would get.
Our firm has done hundreds of one-time consultations to review offer letters and proposed employment agreements, usually for a flat fee of around one hour of the attorney’s time. At it can certainly be worth it, if for no other reason than piece-of-mind that you are signing something or agreeing to something that is in your best interests, with no hidden strings attached. Like in the case above, the words “up to” meant a loss of thousands of dollars to that person, that could have been resolved at the outset of employment. Contact the O’Brien Law Firm today if you need some guidance.
– Kerry O’Brien
On January 6, 2020, the O’Brien Law Firm represented an H-1B visa worker from India, who was being sued by Texas-based company Software Global, in a trial in Travis County Court-at-Law No. 2. It appears that Software Global has been engaging in a pattern of promising a job in the United States to Indian workers, […]Read More