Warning: “Offer Letters” Are Employment Contracts!

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Offer letters employment contract Alabama Employment Law
Employers should exercise caution when providing new employees with offer letters

Many of my clients use “offer letters” to hire new employees.  Those letters generally inform a new employee about the job they are being offered and the salary they will be paid.  And, those letters ask the employee to sign that they accept the job.  Frequently, my clients are surprised when I tell them that their “offer letter” is a binding employment contract.  “It’s only a letter! We weren’t signing a contract!  There’s no details.”  But, one of the earliest lessons that law students learn is that a contract is created by “offer” and “acceptance.”  That’s exactly what an “offer letter” is.

The creation of an employment contract by an offer letter was one the key issues in Physiotherapy Associates, Inc. v. Deloach, No. 1:16-cv-02014-ACA, 0218 WL 4409349 (N.D. Ala. Sep. 17, 2018).  In that case, James Doug DeLoach signed an offer letter that contained extensive non-competition and non-solicitation requirements:  If DeLoach left his employer, he couldn’t compete or solicit employees.  But, the offer letter said that it was “not intended to create a contract of employment.”

Mr. DeLoach left his employment and went to work for a competitor.  When he was sued for breaching an employment contract, he argued that the offer letter meant what it said — it wasn’t an enforceable employment contract.  United States District court Judge Annemarie Carney Axon was not persuaded.  She found that the non-competition and non-solicitation provisions were enforceable.  Ultimately, Judge Axon ruled in Mr. DeLoach’s favor.  She essentially found that the non-competition and non-solicitation provisions were poorly-drafted.  And, Mr. DeLoach did not breach either of those provisions — as drafted.

Thus, the DeLoach case provides at least two lessons for Alabama employers.  First, if you use offer letters, I strongly recommend that you include language in the letter informing the employee that they will be an “at will” employee.  Otherwise, there is some potential to create an employment contract for a specific term.  Second, carefully review the language of your offer letters.  Don’t just assume that “form” language is going to apply to this employee.  If you have provisions that you want to enforce later, a reviewing Judge will hold your strictly to your own language.

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