When it comes to signing a job offer letter, your legal rights could be at stake.
Let's say you interview with a company and everything goes perfectly. The next day you receive an offer letter. Nice! That's a great accomplishment — but don't pop the champagne and start celebrating right away. Before you sign, it's important to read the offer letter carefully. There may be clauses that should be red flags about the company or role.
Of course, finding a red flag in an offer letter doesn't automatically mean you should turn down the job. Instead, these warning signs indicate you need to do more research. Your legal rights can be impacted by what's in the letter, so it's important that you understand what could happen — before you sign the dotted line. Here are 10 common things to look out for.
1. Unclear salary and compensation information
An offer letter should lay out the terms of your employment. That means providing information on your salary, benefits, and total compensation. But what if the offer letter does not clearly state your salary and benefits? If you sign anyway, you may be agreeing to work for a lower salary than you expected, or even lose out on certain benefits completely.
An offer letter with unclear salary and compensation information should be a warning sign of a company that either doesn't respect their employees, is disorganized, or both. By the time an organization makes a job offer, it should come with clear details on the salary, including the bonus structure.
Remember, you can always negotiate salary and benefits, even after receiving an offer letter. Doing so can mean a higher base salary, more vacation days, or other employment benefits.
2. A lower salary than you discussed
What if the offer letter clearly lists the salary, but it's less than what the hiring manager mentioned during your interview? That could be a major red flag. If you discussed a salary of $60,000 during your interview but the offer letter lists a salary of $50,000, it could be a simple mistake — or it could be a sign that the company is not dealing with you in good faith. A company that tries to trick you out of compensation during the hiring process may continue similar bad-faith actions during your employment.
If the offer letter lists a salary only slightly lower than discussed, you might feel tempted to sign anyway. However, leaving any money on the table is never in your best interest. It may seem minor in the moment, but losing out on money when you start at a company can mean lower bonuses and raises throughout your career.
In any case, where the salary listed in the offer letter is lower than discussed, it's important to follow up with the organization, either to correct an error or get more information about the offer.
3. Mandatory arbitration clauses
Many employers include mandatory arbitration clauses in their offer letters. What is a mandatory arbitration clause? It waives your right to a trial by jury if you have a legal dispute with your employer. Instead, employees must use the arbitration process to resolve any employment disputes.
In practice, that means you won't be able to file a workplace discrimination lawsuit against your employer if they violate your rights. In some states, like New York, state laws have banned forced arbitration agreements for sexual harassment or discrimination claims. However, federal courts have found these laws inconsistent with federal law, and it remains unclear whether states truly can waive arbitration agreements for certain lawsuits.
Would an employer agree to take out a mandatory arbitration clause? Almost certainly not. A growing number of employers use mandatory arbitration to limit the legal remedies available to their employees. However, it's important to understand what rights you're giving up when you sign a mandatory arbitration agreement.
4. Class action waivers
In addition to mandatory arbitration agreements, many employers include class action waivers in their offer letters. This waiver means that if the company violates the rights of multiple employees, those employees cannot file class action lawsuits. Take, for example, a class action lawsuit for wage theft against a restaurant, where underpaid servers joined forces to receive unpaid tips. If they'd signed a class action waiver, each server would need to file their own lawsuit (or enter arbitration individually) rather than working together. This makes it harder for employees to address employment violations.
A class action waiver means employers cannot address extensive employment violations with collective legal action. Like a mandatory arbitration clause, the class action waiver is almost certainly not up for negotiation.
5. Non-compete clauses
Non-compete clauses have become more standard in offer letters; these limit your ability to work for competitors after the job ends. That said, a non-compete clause should only appear in your offer letter if your position provides you with access to your employer's confidential information or trade secrets. This can include marketing plans, customer lists, or business strategies. If you won't see confidential strategies or trade secrets in your position, consider negotiating on the need for a non-compete clause.
If your role does call for a non-compete clause, the wording matters, as an overly broad non-compete clause may make it hard to work anywhere else. Before signing the offer letter, carefully review the non-compete clause — it should include provisions that narrow the scope. For example, it should not apply nationally for a period of several years.
Keep in mind that an overly broad non-compete clause may not actually be legally enforceable. The enforceability of non-compete clauses varies by state, so you should learn more about the non-compete laws in your state before signing.
6. A probationary period
Many job offers come with a probationary period where the employer offers additional training and supervision. But while these probationary periods aren't unusual, you should understand how they affect your legal rights. For instance, some employees assume a probationary period guarantees employment until the end of the stated period. However, an employer can fire you at any time, including during a probationary period. Similarly, completing a probationary period does not guarantee you a job.
This is all because American employees work at-will, even during the probationary period, which means your employer can fire you at any time. Your employer doesn't even need to provide a reason for letting you go. Of course, though at-will employment allows your employer to fire you for a bad reason, there are restrictions. Your employer cannot fire you for discriminatory reasons, such as your age, gender, or race. You also cannot be fired as an act of retaliation for complaining of such violations or, in certain circumstances and states, for acting as a whistleblower. These exceptions to at-will employment qualify as wrongful termination.
Before signing an offer letter, it's important to understand the meaning of at-will employment means and its exceptions.
7. A long waiting period for benefits
Many employers include a waiting period to qualify for benefits. However, an unusually long waiting period to receive benefits, like health insurance, can be a red flag. Some companies, for example, extend the waiting period to save on costs at your expense. An extended waiting period can also indicate that a company has high turnover rates — companies where new employees quit or face firing within the waiting period pay nothing in benefit costs.
But what counts as a long waiting period? Some employers grant benefits on the first day of employment, but others use a 30-day, 60-day, or 90-day waiting period to qualify. Under a 2014 federal rule, employers cannot extend the waiting period beyond 90 days. If your offer letter includes a long waiting period like 90 days, you may be able to negotiate for the company to cover your COBRA costs or other health insurance costs until you do start receiving your benefits.
8. Non-disclosure agreements
A non-disclosure agreement, or NDA, states the consequences for sharing sensitive information. In many industries, an NDA is a standard part of an offer letter. However, you should carefully read the agreement to understand your legal rights. Pay close attention to what the NDA covers: Does it apply only to proprietary designs, or does it also cover financial information? What are the penalties for violating the NDA, i.e., can your company sue you?
Before signing the offer letter, you can negotiate on what the NDA covers. For example, you can ask for exemptions from the NDA for information in the public domain, information you already knew prior to employment, or information you are required by law to disclose.
Always ask for more information if the offer letter doesn't clearly spell out your legal responsibilities under an NDA.
9. Non-solicit agreements
In addition to NDAs, some offer letters include a non-solicit agreement. Similar to a non-compete clause, a non-solicit agreement bans employees from taking clients to a competitor after leaving their job. The non-solicit clause also protects the employer from former employees starting their own businesses by soliciting the company's clients and customers.
Like an NDA, read the non-solicit agreement closely before signing an offer letter. Can you retain clients you brought with you to your new employer? How long does it last for? What are the legal implications if you violate the agreement?
10. Ownership of work product clause
Depending on your industry, the offer letter may include a section about ownership of work product. This section applies to any inventions, discoveries, materials, and even ideas that you develop while working for the company. In tech, that can include code you wrote for software. In the sciences, it can include a method you developed or something you invented. It can also apply to research, designs, or even recipes.
An ownership of work product clause can mean your employer owns the copyright or intellectual property rights for anything you conceive of at work — or even on your own time. However, you can negotiate exemptions to the ownership of work product section. For example, you can ask the employer to add language to your offer that exempts work product you developed before starting your job and work product you developed outside the scope of your job.
If you find a red flag in your offer letter, consider your options carefully. For some issues, you can negotiate. Most employers expect new hires to negotiate on issues like salary or benefits, anyway. In other cases, you cannot negotiate. Employers almost certainly will not remove a mandatory arbitration agreement or a class action waiver during the hiring process. No matter what, it's important that you understand the legal implications of what is in your offer letter so you can protect your rights.
Finally, remember that you can always turn down an offer letter if you spot warning signs that are too concerning to look past. It's hard to walk away from a job, but the resume writers at TopResume can help speed up your job-search process so you can get another, better offer in the works.
Need to reject an offer and get back to searching for a job? A free resume review will help you make sure you're on the right track.