Many employers follow this hiring process: send a brief offer letter outlining the basics of the position, receive the candidate’s acceptance, then follow up with a comprehensive employment agreement. 

It seems like a logical process, but it can create significant legal risk. 

Once a candidate accepts an offer that includes the essential terms of employment, there may already be a binding employment agreement in place. If an employer then asks the employee to sign a more detailed contract with no new consideration, then that may not be enforceable. 

Why this matters 

A legally binding contract is generally formed when there is an offer, acceptance, and consideration. If your offer letter includes key details like the position, compensation, start date, and other fundamental terms, the employment relationship may already be established once the candidate accepts. 

At that point, the employment agreement you’re sending isn’t creating the contract. It’s attempting to change one that already exists. 

That can create several legal issues, including: 

• Whether the employee received new consideration for signing the new agreement. 

• Whether the new agreement contains terms that differ from the original offer. 

• Whether important protections, such as termination clauses, confidentiality provisions, or restrictive covenants, can actually be enforced. 

• Whether the employee could argue the employer attempted to fundamentally alter the employment relationship. 

Ironically, the clauses employers are often most concerned about protecting are the very ones that may become vulnerable. 

A better approach 

Rather than treating the offer letter and employment agreement as two separate documents, consider making your employment agreement the offer itself. 

This doesn’t mean your hiring documents need to become overly lengthy or intimidating. A well-drafted employment agreement can still be welcoming while clearly setting out all of the important terms before the candidate accepts. 

By doing so, employers can: 

• Ensure all terms are agreed upon from the outset. 

• Reduce the risk of later disputes over conflicting documents. 

• Strengthen the enforceability of important contractual provisions. 

• Simplify the hiring process by eliminating unnecessary steps. 

Rethink your process 

Many organizations continue to use an “offer first, contract later” hiring process because it’s the way it’s always been done. However, recent court decisions are a reminder that this approach can create unnecessary legal risk. 

If your organization still sends a short offer letter or email before a comprehensive employment agreement, it may be time to review your hiring process. Presenting one complete employment agreement from the outset is often the cleaner, simpler, and legally stronger approach for both employers and employees.

 

Michelle MacFadgen, CPHR, is the Director, Client Engagement at uptreeHR, an outsourced Human Resource department for small to medium-sized businesses. Michelle and the team are based in Halifax, Nova Scotia.

To book a complimentary 30-minute consult with Michelle, click here.