Is an Offer Letter the Whole Show or Just a Preview of Coming Attractions?


If an employer has the foresight to address all meaningful terms of the employment relationship in offer letters to candidates, the employer may be satisfied to rely on those offer letters as binding contracts. But most of the time, offer letters don't cover all the material subjects. The employer sometimes forgets. And the employer might worry that a candidate won't sign up if all the nitty-gritty terms are laid out in the offer letter. So, after an offer has been accepted, new hires are sometimes asked (i.e., required) to sign lengthier and more formal documents, which can create confusion about the intended meaning of all the documents. 

A recent case before the Pennsylvania Supreme Court illustrated how an employer should make clear in an offer letter that it is not the final contract between the parties, if the employer expects a new hire to sign a more comprehensive employment agreement before starting work. Pulse Technologies Inc. v. Notaro, No. 6-MAP 2012 (Pa. May 29, 2013).

In Pulse Technologies, a Swiss Screw engineer who had been hired by the company after an elaborate search quit after five years' employment, to take an equivalent position with a competitor. His previous employer sought an injunction to bar this new employment, as it would violate a non-compete covenant in an employment contract he signed on the first day of work. The former employee argued that he was under no restrictive covenant because he had received and signed an offer letter that described his position, duties, salary, benefits and other employment terms, but did not mention any restrictive covenant. 

After two conflicting decisions from lower courts, the Pennsylvania Supreme Court ruled that the offer letter was not the governing contract, but was basically part of the negotiation process. Thankfully for the employer, it had warned in the offer letter that the employee would be required to "sign an employment agreement with definitive terms and conditions outlining the offer terms and conditions contained herein." Consistent with that notice, the employee - without objection - signed a comprehensive employment agreement with the non-compete covenant on the first day of work.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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