Updating your Offer Letters

It is very exciting to have found a new candidate to add to your team.  It is often a long search to find the right person and once you do there can be a real push to get them started as quickly as possible.  Before you make a verbal offer, make sure that you take the time to craft an appropriate offer letter.  It is that written document that should be used to offer employment to your new candidate.

The offer letter is your opportunity to set out in writing the terms and conditions of the employment that you are offering. When the parties don’t have a clear understanding of the terms that are offered, it increases the likelihood of a difficult ending to the employment. It is this lack of clarity that leads to disputes when employment ends and those disputes can be costly.  Not only is it costly to pay legal fees to deal with the case, but the lack of clarity can also result in having to pay significant damages that you did not contemplate at the outset of the employment relationship.  A properly prepared offer letter can provide you with certainty and reduce your exposure to costly legal actions.

If a verbal offer of employment is made, it should be simply that you will provide a written document outlining the terms and conditions that you will be offering.  No job offer should be accepted until the terms are detailed in writing. Inquiring as to whether an individual may be interested in exploring an offer is acceptable however it should be made clear that what is being offered will be put in writing and the potential employee will be provided with the opportunity to consider the terms that are being offered and to accept or decline those terms prior to beginning work.

The offer letter itself serves as the legal basis for employment.  Once signed, the offer letter defines the contractual requirements between the parties and details the responsibilities and expectations of both.  Employment contracts are different than regular commercial contracts and those differences effect the way that our courts interpret contracts.  Specifically:

• Equality of bargaining power is not presumed in an employment contract and for this reason employment contracts are viewed as a special type of contract with an inherent power imbalance that results in the employee being in a vulnerable position.  This power imbalance affects how our courts interpret employment contracts, make it easier for an employee to argue that the terms are unconscionable and should not be enforced, or to argue that any ambiguity must be interpreted in favor of the employee.

• Generally, there will be additional contractual duties that are not specified in the contract itself, but rather are implied into the contract.  As well, additional terms of the employment contract may arise because of oral agreements.

• The terms of the employment contract can change as the relationship between the employer and employee evolve over time.

• Courts generally take a more flexible approach to determining the parties’ intention in an employment contract as it is generally more dynamic than commercial contracts.

Because of these differences, it is very important that your offer letter is carefully written to clearly define responsibilities and to determine in advance what will occur at the time that the employment is terminated.  A written employment agreement is the best way to achieve certainty in the terms of the employment contract and to control potential liabilities.  Key considerations for your employment offer include:

1. Whether the requirements of contract formation have been met – has there been offer and acceptance?  Has consideration been provided?  Is there certainty of the terms?
2. Whether the employment relationship will be for a fixed term or an indefinite term.
3. Whether the employer will have the right to temporarily lay off the employee.
4. How much notice the employer or employee will have to provide to the other to terminate the employment relationship.
5. Are the terms set out in the agreement compliant with the minimums required by Employment Standards legislation?

It is good practice to have an offer letter template and it is important to review that template at least annually to ensure compliance with employment standards legislation and whether the agreement continues to satisfy your purposes despite the evolution of law.  Recent developments in the law should be considered to ensure that clauses such as termination clauses continue to be enforceable.  Changes to employment standards legislation should be considered to ensure that your template remains compliant.  Your template should always be reviewed and assessed when putting forward an offer to a candidate to ensure that the template itself is offering the terms that you intend to be offered to the individual.

This update was authored by Rose Keith. Have questions regarding the topic discussed? Contact Rose at [email protected] or anyone else listed on the authors page.