Employment Offer: Federal
Authors: Stefani C Schwartz and Nicholas D. Bliablias, Schwartz Simon Edelstein & Celso, LLC
- Once an employer selects the top candidate for a position, it should communicate the offer of employment verbally and in writing detailing the terms of the employment. See Making an Employment Offer.
- An employer may condition a job offer on the completion of certain requirements, such as a background check, drug test or medical exam. See Conditional Job Offers.
- If an employer decides to withdraw an offer of employment due to the applicant's failure to successfully complete any conditions for employment, it must ensure compliance with any applicable federal and state laws. See Withdrawing an Employment Offer.
Making an Employment Offer
After the recruiting and interview process is complete, an employer takes the next step and makes a job offer to the selected candidate. The job offer should clearly identify the employee's role in the organization and describe the terms of the employment relationship.
The way in which an employment offer is communicated to a new hire is as important as making a good hiring decision. After an employer completes the interview process and decides to hire a candidate, it should make a verbal offer of employment to the candidate.
An employer's verbal job offer should provide basic information, such as the start date, salary and any preconditions to the commencement of employment (e.g., a successful background check and the signing of any contracts or restrictive covenants). If a candidate is being hired as an at-will employee, the employer should be careful not to make statements about job security. Statements such as "you have a job for life!" may alter the terms of the at-will employment relationship and create an implied employment contract. In addition, an employer must make the offer in good faith and disclose all pertinent facts related to the job that it knows about at the time.
For detailed information regarding implied contracts, see Exceptions to the At-Will Relationship.
An employer should confirm a verbal job offer in a written letter that includes all the terms and conditions that were verbally stated. Offer letters should be clear, unambiguous and concise.
To avoid any confusion about the expected employment relationship, an offer letter should also refer to the employee as an at-will employee, or refer to any employment contract that will govern the employment relationship. If the new hire will be an at-will employee, the letter must contain language specifically explaining that the offer letter is not an employment contract. For example:
"This offer letter is not a contract of employment with Acme Trucking. Employment with Acme Trucking is at-will. This means that either you or Acme Trucking may terminate the employment relationship at any time with or without cause, without prior notice. Other than the management of Acme Trucking, no person has the authority to enter into a contract of employment with you for any specified period or to make any promises or commitments contrary to the foregoing."
If an employer's intent is an at-will employment relationship, the offer letter should not state any length of time for which a salary will be paid or promise any future compensation. Otherwise, it may alter the employment relationship.
Sally receives a job offer from Acme Electronics to work as a sales representative. Before Sally begins working, Acme asks her to sign a written employment offer. The letter contains her salary and specifies that it is for the next five years. However, the next sentence identifies her as an at-will employee.
This offer letter is contradictory and may cause Acme problems in the future because it guarantees Sally a five-year salary, but considers her to be employed at-will.
After three years of employment with Acme Publishing, John is terminated in January. He received his annual bonus every March. John's offer letter said that he was to receive an annual bonus. Acme may be forced to pay John's bonus since the letter did not contain the word "discretionary" or state that John must be an employee at the time bonuses are paid.
If an employment relationship is governed by an employment agreement, the agreement should be attached to the written offer so the new hire can sign it. In addition, if an employee is subject to a collective bargaining agreement (CBA), the CBA should be referred to in the offer letter because it governs the terms and conditions of employment.
If an offer is contingent upon the occurrence of another event, such as the job candidate signing a restrictive covenant (e.g., a noncompete or nonsolicitation agreement), confidentiality agreement or preemployment medical test, these issues should be explained in the interview process and when the verbal employment offer is made. If the job candidate is required to sign any such documents, a copy of them should be attached to the written offer letter. Some states have specific requirements regarding the timing in which the restrictive covenant must be provided to the job candidate.
Contents of offer letter. An offer letter should include the following information:
- Employee's name;
- Employer's name;
- Job title;
- Job description;
- Compensation (in general terms);
- Benefits (in general terms), such as medical benefits, life insurance and 401(k) plan;
- Start date;
- Working hours;
- Work location (e.g., office location and/or telecommuting option);
- Reference to other key documents (e.g., employer handbook);
- Preconditions to hiring (i.e., drug testing, motor vehicle or criminal background check);
- Post-employment restrictions (i.e., noncompetition or nonsolicitation restrictions);
- Relocation expenses, if applicable; and
- Signature line for the candidate to accept the offer.
Other terms to include. An offer letter should also contain any information that would prevent delay or confusion in the offer process, such as:
- Deadline for acceptance or rejection of the offer;
- Mode of communicating acceptance or rejection of the offer;
- Statement that the employer has the right to withdraw the offer before the candidate accepts it;
- Signature line for the candidate to sign and accept the offer; and
- Name of an HR representative or contact person within the organization.
For more step-by-step guidance on preparing a job offer, see How to Make an Employment Offer.
Offering Relocation Expenses to Attract Employees
Many employers provide relocation expenses to new hires as a tax incentive. If a new hire must relocate for the job, he or she may be able to deduct the reasonable cost of moving expenses on a tax return. To do so, the Internal Revenue Service (IRS) requires that the move meet all of the following conditions:
- The new workplace must be at least 50 miles farther from the employee's home than the employee's previous work location. (If the employee was not previously employed, the new work location must be at least 50 miles from the candidate's prior home);
- The employee must work full-time for at least 39 weeks during the first 12 months immediately following his or her arrival in the general area of the new work location; and
- The move must generally occur within one year after employment begins.
Because relocation expenses can encompass a variety of expenses, an employer should specify in the offer letter exactly what is included. Examples of relocation expenses include:
- Travel expenses for the employee and his or her family;
- Transportation costs;
- Shipment costs for household goods and/or personal effects;
- Temporary storage and housing costs; and
- Any miscellaneous costs.
An employer may choose to pay for such expenses up front or reimburse the employee for them. Either way, the offer letter, or a separate letter, should specify which method the employer will use. The letter should also state that this will be a one-time payment or reimbursement.
Conditional Job Offers
An employer has the right to condition a job offer on a candidate's completion of certain additional requirements based on the nature of the position. For example, a job offer may be contingent on the successful completion of a:
- Medical examination;
- Drug test; or
- Background check (including a reference check).
Although an employer may request such information, and can refuse to hire an individual who does not meet the contingencies, federal and state laws prohibit employers from discriminating against or treating one candidate differently than another based upon protected characteristics. Accordingly, an employer should ensure that the conditions required are consistent for all candidates applying for the same position.
Medical Examinations and Questions
An employer should keep in mind the differences between permitted pre-offer versus post-offer medical examinations and questions.
Pre-offer. In the pre-offer stage, the Americans with Disabilities Act (ADA) prevents an employer from asking candidates whether they are disabled or about the degree to which they are disabled. In fact, an employer is not allowed to ask any medical questions of the candidates prior to extending a job offer. However, an employer may ask candidates about their ability to perform essential aspects of the job. An employer must be cautious not to phrase questions in the context of a disability.
Robert, the manager of Acme Store, is interviewing John for a stock room position. During the interview, Robert asks John the following questions:
- The job requires lifting 25-pound boxes. Are you able to do that?
- The job requires climbing 30 flights of stairs each day. Are you able to do that?
These questions are appropriate since they are tailored to John's ability to perform the job. Acme Store must ask the same questions for all candidates. If John discloses during the interview that he has a disability, Acme cannot ask any disability related questions, such as:
- Does your disability prevent you from lifting 25-pound boxes or climbing stairs?
An employer is also prohibited from requiring candidates to submit to a medical examination unless it is job-related and consistent with business necessity.
Post-offer. After making a job offer, but prior to the start date, an employer may condition the job offer on the candidate responding to certain medical questions and/or successfully passing a medical exam. The ADA requires employers to ask identical questions of its new employees who are in the same job category. Similarly, if an employer requires that the candidate take a post-offer medical exam, it must require that all individuals in the same type of position also take a medical examination. Medical exams must also be related to the job and consistent with business necessity.
Medical exams may include the following tests or procedures:
- Vision tests by an ophthalmologist or optometrist;
- Blood, urine and breath analyses to check for alcohol use;
- Blood, urine, saliva and hair analyses to detect disease or genetic markers (e.g., sickle cell trait, breast cancer, Huntington's disease);
- Blood pressure screening and cholesterol testing;
- Nerve conduction tests (i.e., tests for nerve damage and susceptibility to injury, such as carpal tunnel syndrome);
- Range of motion tests that measure muscle strength and motor function;
- Pulmonary function tests (i.e., tests that measure the capacity of the lungs to hold air and to move air in and out);
- Psychological tests to identify a mental disorder or impairment; and
- Diagnostic procedures, such as X-rays, CAT scans and MRIs.
Other procedures that are generally not considered to be medical examinations include:
- Tests to determine the current illegal use of drugs;
- Physical agility tests, which measure an employee's ability to perform actual or simulated job tasks, and physical fitness tests, which measure an employee's performance of physical tasks, such as running or lifting, as long as these tests do not include examinations that could be considered medical (e.g., measuring heart rate or blood pressure);
- Tests that evaluate an employee's ability to read labels or distinguish objects as part of a demonstration of the ability to perform actual job functions;
- Psychological tests that measure personality traits such as honesty, preferences and habits; and
- Polygraph examinations.
Although a job offer can be conditioned on the results of a medical examination, if the candidate is not hired due to a disability - the existence of which is demonstrated by the medical examination - the employer must show that the reason for not hiring the candidate is job-related and consistent with business necessity. An employer must also show that there was no reasonable accommodation that would have permitted the individual to perform the essential job functions.
An employer is permitted to ask specific individuals for more medical information after it has obtained basic medical information from all individuals who have been given conditional job offers in a particular job category. However, an employer may do so only if the follow-up examinations or questions are medically related to the previously obtained medical information.
After job offers have been tendered, Acme Pharmacy asks the candidates if they have hip injuries. Acme discovers that some of the candidates do. Acme may require those candidates with previous hip injuries to submit to medical examinations designed to clarify the nature of the hip injury, as long as the examinations are medically related to the prior injuries.
Genetic information. The Genetic Information Nondiscrimination Act (GINA) prevents an employer from requesting or requiring an applicant or employee to provide genetic information, or the genetic information of a relative, either in writing or verbally. As a result, an employer must ensure that it does not ask questions that would elicit medical information from the prospective new hire that may be protected under GINA, and should also eliminate any questions requesting any information regarding the individual's family medical history.
For step-by-step guidance, see How to Comply With GINA.
An employer does not have to demonstrate that a test for illegal drug use is job-related. Under the ADA, an employer is allowed to test applicants or employees for illegal drug use because the ADA does not consider it to be a medical examination. +42 U.S.C. § 12114(a), (d) (1).
Medical marijuana. The ADA does not address medical marijuana use. However, many states have legalized marijuana use for medical purposes. Several states require employers to accommodate medical marijuana use, despite the fact that its use is illegal under the Controlled Substances Act. Most state laws still allow employers to discipline employees for testing positive for drugs, even if they are permitted to use marijuana for medical purposes.
Fair credit reporting. An employer must comply with the Fair Credit Reporting Act (FCRA) if it conditions a job offer on a background check and hires a third party to perform the check.
Prior to obtaining a background check under FCRA, an employer must inform the candidate, in a separate written document, that it may be doing so and obtain the candidate's consent.
Before making any employment decision with respect to the results of the background check, the employer must provide the individual with a pre-adverse action notice that includes a copy of his or her:
- Credit report; and
- Rights under FCRA.
In addition, effective September 21, 2018, whenever an individual is required to receive a Summary of Your Rights Under the Fair Credit Reporting Act, an employer must also provide a notice of an individual's rights regarding the right to obtain a security freeze on his or her credit report. The security freeze prohibits consumer reporting agencies from releasing information in the credit report subject to various exceptions. +15 USCS § 1681c-1.
Under the interim final rule issued by the Consumer Financial Protection Bureau, an employer may use its new model notice, which incorporates the new required security freeze notice of rights, or a combination of the 2012 forms along with a separate page that contains a summary of the security freeze rights that is provided in the same transmittal. The comment period for the final rule regarding the model notice closes on November 19, 2018.
In addition to FCRA, an employer must also comply with any applicable state and municipal credit check laws.
Reference checks. An employer should verify the information on an applicant's resume and/or job application, including the applicant's education and work history. Employment reference checks should be conducted for all similarly situated job applicants at the same stage of consideration in the hiring process.
Ban the Box. Several states and municipalities have adopted "Ban the Box" laws, which require an employer to remove the box from job applications that asks applicants if they have been convicted of a crime. Some of these laws prohibit an employer from conducting criminal background checks until after a conditional offer of employment has been extended and have specific requirements for employment offer withdrawals.
Withdrawing an Employment Offer
An employer may want to withdraw an offer of employment in certain situations, such as if the background check reveals that the employee may pose a potential threat, supplied false information on the job application, or if the new hire failed a drug test. If an employer decides to withdraw the job offer as a result of the applicant's failure to successfully meet the conditions for employment, it must ensure compliance with any applicable federal, state or local laws.
Applicant Fails to Satisfy Conditional Requirements
Medical examination. Under the ADA, if the results of a medical examination reveal that an employee is unable to perform the essential job functions with or without a reasonable accommodation, a job offer may be withdrawn.
FCRA. If an employer withdraws an offer of employment due to the results of a consumer credit report under FCRA, the employer must send an adverse action letter. The letter must include:
- A statement that the adverse action is being taken because of the contents of a credit report or consumer report;
- The name, address, and telephone number (toll-free) of the consumer reporting agency that furnished the report;
- A statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the individual the specific reasons why the adverse action was taken;
- A statement that the individual has the right to obtain a free copy of the report; and
- A statement that the individual has the right to dispute the accuracy of the report.
Criminal history. Before withdrawing an employment offer based on an individual's criminal history, an employer should consider the following factors included in the Equal Employment Opportunity Commission's (EEOC) guidance:
- The nature of the job sought;
- The nature and seriousness of the offense; and
- The temporal proximity between the offense and the job application.
The EEOC warns against employers having a blanket "no criminal record" policy, which could lead to a discrimination claim if the employer treats criminal history information differently for different applicants or employees based on their race or national origin. However, employers in certain industries (e.g. child care) must comply with any federal or state laws that prohibit the employment of individuals with certain criminal histories.
An employer should also comply with any state or local requirements when withdrawing a job offer, including any ban the box laws.
Drug testing. Prior to withdrawing a job offer based on drug test results, an employer should confirm the accuracy of any drug-testing program, including chain-of-custody procedures and tampering safeguards, before taking any employment actions. An employer must also first comply with any state requirements mandating that it give an applicant an opportunity to contest the test results.
If a new employee has accepted and relied on a job offer, the employer may be liable for damages if it withdraws the job offer. For example, in relying on a job offer a new employee may have:
- Given notice to his or her former employer;
- Already been replaced by his or her former employer; or
- Has already relocated for the new position.
Any act that a new employee has taken in reliance upon a job offer, especially if the act taken is to his or her detriment, may potentially expose the employer to liability if the job offer is ultimately withdrawn after acceptance.
Acme Company induces Gary to accept a job offer with assurances that management-level employees have never been fired and that he has a job for life. Relying on these assurances, Gary rejects another offer of employment and remains with Acme Company. Notwithstanding Acme Company's promises, Gary is terminated five months later. Acme Company may be liable if there is evidence of any other opportunity that Gary has abandoned or forgone in reliance on any statements allegedly made by Acme Company.
Since employees may rely on statements made by an employer's representatives, an employee's at-will status or employment contract must be clear and unambiguous.
Guidance for Employers
An employer that wants to withdraw a job offer should take the following steps in order to protect itself:
- Withdraw the job offer in writing as soon as possible to avoid potential claims of detrimental reliance.
- Comply with the terms of any applicable employment contract. Failure to do so could subject the employer to liability and the obligation to compensate the employee for the remainder of his or her salary for the term of the contract.
- Document the entire hiring process in writing.
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