Employee Offer Letter and Arbitration

This article from Venture Hacks provides a detailed look at a sample employee offer letter, specifically focusing on the inclusion of an arbitration clause. The article highlights the importance of understanding such clauses, especially for employees who are starting their careers or seeking opportunities within startups.

The Importance of Arbitration Clauses

Arbitration clauses are common in employment contracts, and they specify that any disputes between the employee and the employer will be settled through arbitration rather than through traditional court proceedings.

• What is Arbitration? Arbitration is a process where a neutral third party, called an arbitrator, hears both sides of a dispute and then makes a binding decision.
• Pros and Cons of Arbitration: While arbitration can be faster and less expensive than litigation, there are concerns about fairness and transparency. It's crucial to understand the potential limitations of arbitration before signing an employment contract.

Key Points in the Sample Offer Letter

The article's sample offer letter addresses several key aspects of employment, including:

• Salary and Benefits: This section details the employee's compensation and any benefits they will receive.
• Stock Options: If applicable, the letter outlines the employee's stock option grant, including the number of shares, purchase price, and vesting schedule.
• Relocation Expenses: Some offer letters may include reimbursement for relocation costs, specifying the amount and types of expenses covered.
• At-Will Employment: This provision clarifies that the employment relationship is not guaranteed for a specific period and can be terminated by either party at any time.
• Background Checks: The offer letter often states that employment is contingent upon the successful completion of a background check.
• Immigration Compliance: Employees may be required to provide documentation to prove their identity and legal eligibility for employment in the United States.
• Confidentiality and Non-Compete: This section outlines the employee's obligations to protect confidential information and avoid conflicts of interest.
• Company Handbook and Rules: The letter requires employees to familiarize themselves with the company's policies and procedures.
• Arbitration Agreement: The offer letter typically includes a detailed arbitration agreement outlining the process for resolving disputes.

Key Provisions in the Arbitration Agreement

The arbitration agreement included in the sample offer letter highlights several important points:

• Binding Arbitration: Any disputes will be resolved through arbitration, and the arbitrator's decision is final.
• Waiver of Jury Trial: Employees agree to waive their right to a jury trial. This means they will have to rely on the arbitrator's judgment.
• Neutral Arbitrator: The arbitrator will be impartial and will issue a written decision.
• Discovery Process: The arbitration process will include provisions for gathering evidence and information.
• Arbitration Fees: The letter outlines how arbitration fees will be handled. In this case, the employer is responsible for most of the costs.

Understanding and Negotiating Offer Letters

The article stresses the importance of carefully reviewing all aspects of an offer letter, particularly the arbitration agreement. If you have concerns, consider:

• Seeking Legal Advice: Consulting with a lawyer who specializes in employment law can help you understand your rights and negotiate favorable terms.
• Negotiating with the Employer: It may be possible to negotiate the terms of the offer letter, including the arbitration clause. This might involve requesting changes to the arbitration process, such as allowing for a jury trial in specific circumstances.
• Understanding Your Options: You have the right to decline the offer letter if you are not comfortable with the terms.

Key Takeaways

This article provides a valuable resource for anyone involved in the hiring process, especially for startups and individuals seeking employment. The focus on arbitration clauses highlights the need for understanding legal documents and protecting one's rights.

Offer Letter Template

This is a sample offer letter from the article. Please note that it's for informational purposes only and does not constitute legal advice. It's essential to consult with an attorney before using any legal documents.

Company
[Company Letterhead]

[Click And Type Date]

[Click and Type Employee]
Dear [Click and Type Employee]:

I am pleased to offer you a position with COMPANY NAME (the “Company”), as its [Click And Type Position]. If you decide to join us, you will receive a monthly salary of $[Click And Type Amount], which will be paid semi monthly in accordance with the Company’s normal payroll procedures. As an employee, you will also be eligible to receive certain employee benefits including [list employee benefits here or “The details of these employee benefits are explained in Exhibit A.”] You should note that the Company may modify job titles, salaries and benefits from time to time as it deems necessary.

***Optional—Vesting Schedule May Differ Too***In addition, if you decide to join the Company, it will be recommended at the first meeting of the Company’s Board of Directors following your start date that the Company grant you an option to purchase [Click And Type Amount] shares of the Company’s Common Stock at a price per share equal to the fair market value per share of the Common Stock on the date of grant, as determined by the Company’s Board of Directors. [Confirm Vesting Schedule] 25% of the shares subject to the option shall vest 12 months after the date your vesting begins subject to your continuing employment with the Company, and no shares shall vest before such date. The remaining shares shall vest monthly over the next 36 months in equal monthly amounts subject to your continuing employment with the Company. This option grant shall be subject to the terms and conditions of the Company’s Stock Option Plan and Stock Option Agreement, including vesting requirements. No right to any stock is earned or accrued until such time that vesting occurs, nor does the grant confer any right to continue vesting or employment.

***Optional***Also, we are offering you reimbursement of relocation expenses for your move from ____________ to ________________, up to a maximum reimbursement of $[amount]. The items for which we offer reimbursement are __________, __________, and __________. (Example: one trip for you and your spouse to do a home search, shipment of household goods, etc.) We will only reimburse for reasonable expenditures which are supported by valid receipts provided promptly to the Company.

The Company is excited about your joining and looks forward to a beneficial and productive relationship. Nevertheless, you should be aware that your employment with the Company is for no specified period and constitutes at-will employment. As a result, you are free to resign at any time, for any reason or for no reason. Similarly, the Company is free to conclude its employment relationship with you at any time, with or without cause, and with or without notice. We request that, in the event of resignation, you give the Company at least two weeks notice.

The Company reserves the right to conduct background investigations and/or reference checks on all of its potential employees. Your job offer, therefore, is contingent upon a clearance of such a background investigation and/or reference check, if any.

For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be terminated.

We also ask that, if you have not already done so, you disclose to the Company any and all agreements relating to your prior employment that may affect your eligibility to be employed by the Company or limit the manner in which you may be employed. It is the Company’s understanding that any such agreements will not prevent you from performing the duties of your position and you represent that such is the case. Moreover, you agree that, during the term of your employment with the Company, you will not engage in any other employment, occupation, consulting or other business activity directly related to the business in which the Company is now involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the Company. Similarly, you agree not to bring any third party confidential information to the Company, including that of your former employer, and that in performing your duties for the Company you will not in any way utilize any such information.

As a Company employee, you will be expected to abide by the Company’s rules and standards. Specifically, you will be required to sign an acknowledgment that you have read and that you understand the Company’s rules of conduct which are included in the Company Handbook. [If Handbook has not yet been adopted add “which the Company will soon complete and distribute.”]

As a condition of your employment, you are also required to sign and comply with an At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement which requires, among other provisions, the assignment of patent rights to any invention made during your employment at the Company, and non disclosure of Company proprietary information. In the event of any dispute or claim relating to or arising out of our employment relationship, you and the Company agree that (i) any and all disputes between you and the Company shall be fully and finally resolved by binding arbitration, (ii) you are waiving any and all rights to a jury trial but all court remedies will be available in arbitration, (iii) all disputes shall be resolved by a neutral arbitrator who shall issue a written opinion, (iv) the arbitration shall provide for adequate discovery, and (v) the Company shall pay all but the first $125 of the arbitration fees. Please note that we must receive your signed Agreement before your first day of employment.

To accept the Company’s offer, please sign and date this letter in the space provided below. A duplicate original is enclosed for your records. If you accept our offer, your first day of employment will be [Click And Type Date]. This letter, along with any agreements relating to proprietary rights between you and the Company, set forth the terms of your employment with the Company and supersede any prior representations or agreements including, but not limited to, any representations made during your recruitment, interviews or pre employment negotiations, whether written or oral. This letter, including, but not limited to, its at-will employment provision, may not be modified or amended except by a written agreement signed by the President of the Company and you. This offer of employment will terminate if it is not accepted, signed and returned by [Click And Type Date].

We look forward to your favorable reply and to working with you at COMPANY.

Sincerely,

___________________________
[Click And Type Name]
[Click And Type Title]

Agreed to and accepted:

Signature: ______________________________
Printed Name: ___________________________
Date: __________________________________

Enclosures
Duplicate Original Letter
At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement