An effective offer letter sets forth the material terms of an employee's employment and makes clear that no other "unwritten" terms are part of the agreement. This article highlights a few key terms that any offer letter should address:
Term Employment Versus At-Will Employment
An offer letter should set forth in clear terms whether the employment will be for a specified term or at will.
Employment is at will by default in Michigan, but including an express clause confirming that the employment is at will makes the intention of the employer and employee explicit. Employers may also wish to specify who is authorized to change that at-will arrangement—for example, if the employee's at-will status can be modified only in a writing signed by a specific company representative (e.g. CEO).
If the employment will be at will, the offer letter should clearly state that the employee is being hired as an at-will employee and that their employment may be terminated by either party, with or without notice, and with or without cause.
If the employment will be for a specified term, the offer letter should not only identify the duration of the term, but should also address the consequences of termination prior to the expiration of the term.
Compensation
An offer letter must clearly describe all compensation and how it is calculated.
Do not assume that salaried workers are ineligible for overtime. Review each position to determine if they qualify as exempt from overtime rules under both federal and state law.
For commissioned workers, the offer letter should either include all details of the commission plan or reference the employer's commission plan.
If the position is eligible for bonus compensation, the offer letter should state whether the bonus is discretionary or nondiscretionary, and the time frame for payment.
Benefits
Offer letters should summarize key employment benefits for which the employee may be eligible, but it should be clear that eligibility is subject to the terms of the benefit plans themselves, and that such benefits are subject to change.
Conditions of Offer
The offer letter should make any preconditions to employment clear, including whether the offer is conditioned upon the applicant's legal entitlement to work in the United States and the employer's satisfactory verification of any employment references.
Integration Clause
An offer letter should also include an integration clause that clarifies that the letter constitutes the entire agreement between the employer and the applicant (i.e. no oral/written "understandings" beyond what is written in the letter).