To what extent does "getting it in writing" matter for at-will employment agreements?

Question

In evaluating job offers for start-ups and for firms that have different forms of compensation (equity, stock options, bonuses, etc.) it is often a thrown around phrase that you should "get it in writing" when you negotiate something about the terms of employment.

For example, you may try to negotiate that you receive unrestricted stock instead of stock options; for a start-up that requires you to take a pay cut to join the firm, you may try to negotiate that after the next round of funding, your salary will raise to the level before leaving your old job; you may try to negotiate that stock options will vest more quickly than the current company policy; one very important point is to negotiate that equity expressed as a percentage of ownership of the firm will not be diluted by subsequent funding rounds and share issuance (known as "refreshing"); lastly, you may try to negotiate percentage of time that will be spent on different kinds of projects (a personal open source software project that the firm is interested in, attendance at conferences, etc.)

In all of these cases and many others, endless blogs, books, and career advice columns suggest that you "get it in writing" but I am not convinced that this would materially increase the chances of a company honoring such agreements when they are part of an at-will employment agreement instead of a binding contract.

For example, it could be put in your terms of employment that you get to attend a swanky conference in Hawaii every year. But then the company faces tough financial times and cannot pay for it. So you effectively just lose the dollar-valued equivalent of the experience, knowledge, relaxation, and travel from the conference. It would be like directly paying you less money. But under an at-will agreement, to my knowledge you can do nothing except for quitting or raising the concern with a manager or the Human Resources department -- usually resulting in no help in situations like that.

Yes, the company risks it that you might quit if they take away promised items from an agreement. But they might just wait until they can confirm you are in a life position where, for reasons ostensibly totally unrelated to your job agreement or the firm's situation (such as mortgages, children, tuition, etc.) the firm knows or believes you can't afford to take any action if they simply do not follow through on the agreement. And it would be very hard to prove that this was the firm's reasoning, as firms have nearly limitless plausible deniability when it comes to explaining why they are doing something.

Are there any legal conditions surrounding at-will employment contracts that would prevent this kind of behavior?

Is it valuable in any kind of tangible sense (i.e. legal enforcement, rights to claim wrongful termination or hostile working environment) to have negotiated such things specifically in writing specifically when it is a an at-will agreement?

Answer 1

The primary benefit of getting things in writing when you're an at will employee isn't to prevent the company from intentionally weaseling out on promises. The primary benefit is to ensure that both parties agree on exactly what was discussed so that if and when an issue comes up in the future, there is a written document that both parties agreed to that can be referenced.

Companies are generally not in the business of promising the moon to potential employees with no reasonable intention of following through. Sure, it would be possible for the employer to hire a new at will employee at a salary of $x and then announce on the second day of employment that, unfortunately, the employee's salary had to be reduced to 0.5*$x. That's perfectly legal but it would seriously damage the company's reputation and make it very difficult for the company to recruit good candidates in the future.

Getting things in writing ensures that the company fully intends to honor the terms of the agreement. If you get an offer of $x in writing, that implies that everyone has signed off on that number, the number has been budgeted, and that the company fully intends to pay you that amount. Similarly, if you get written assurances that you'll get n hours per week to devote to improving some open source package, that's a pretty strong guarantee that everyone that needs to sign off on such a clause has signed off on it. Is it possible that in 6 months something will change and the project will no longer be something the company leverages or that the project will fork and the company will want you to focus on a fork that you might not prefer? Sure, that's possible. But you can at least be confident that on day 1, you and the company are on the same page about expectations.

Unfortunately, when people discuss contract terms without writing them down, it is very common for people to hear what they want to hear and for both parties to have a different understanding of the agreement. For example, your prospective manager might talk about being supportive about conferences that you'd like to attend. To that manager, that might mean something like giving you paid time off to attend local conferences. To you, that might mean the company footing the bill for a conference across the country plus airfare and hotel accommodations. Getting things in writing forces both sides to clarify their point of view and identifies where there are discrepancies. If the company is going to agree to, say, a $5000 budget for conference fees, hotels, flights, etc. then that has to be incorporated into the company budget. Written agreements are also much clearer when additional parties are involved-- if the person that hires you moves on and is no longer your manager, it's much easier for your new manager to refer to a written agreement than to try to figure out what you and someone else verbally agreed to.

Of course, it is possible that in the future things will change and the company will be unable to live up to some of the promises they made-- funding falls through, sales fail to materialize, etc. If a company is trying to decide between honoring commitments they made in writing to one employee or general verbal assurances it made to some other employee, though, the general verbal assurances are likely to be abandoned first.

Answer 2

I have to say 'getting it in writing' makes it legally binding, to the same extent that your salary in writing legally binds the company to pay you that rate for services rendered. It is part of a two way contract between you and your employer. The second part is of course, the employee handbook.

Anything in writing that the company doesn't adhere to puts them at risk for being sued for breach of contract. This is me referring to your mention above about benefits, salary, etc. Yes, if you sue them they'll probably terminate you, and if you're an 'at will employee' there probably isn't much you can do about that (insert positive union comment here), you could try a wrongful termination suit but one would have to consider if the trouble is worth the reward.

On the reverse, if you breach your contract as an employee, its easier (and maybe cheaper depending on the circumstances) for the company to let you go as opposed to sue you for 'breach of contract', as stated -- depending on the circumstance. They probably won't let you off so easy for multimillion dollar embezzlement, for example.

While searching the internet to back up my ravings I came across this article from americanbar.org, which confirms this practice of the courts looking at the employer-employee relationship as a contractual obligation, and when there is no definitive length of the contract it is considered 'at will', with either party able to abort the contract at any time.

Lastly, regarding Hawaii -- Most companies nowadays have lawyers to add the legalese where they'd NEVER guarantee a trip to Hawaii every year without a clause such as

as company standing permits.

Answer 3

Sometimes there are people in the interview process who don't fully understand the details of the compensation packages. "Of course anyone with your title automatically gets company stock after one year." They may mean well, but this could be a promise they can't keep.

Who can remember all the little promises made during a lengthy interview process? Contracts aren't guarantees, but they can offer clarity assuming both sides understand the wording and/or are trying do the right thing in the spirit of the contract and not use it as a tool to screw the other person over.

Answer 4

An employer can pretty much do whatever they find to be necessary, be it because they've fallen on hard times, or because you're not a good "fit." Just because it's part of a offer letter and they violate the terms, doesn't mean that you have any reasonable recourse. Suing a former employer when you are fresh out of a job is a difficult undertaking. They have all the cards, and the resources.

Getting things in writing does mean that the two of you have an understanding of the terms of your employment. It's a place to start discussions when things start to fall apart, not a guarantee.

I was one place where we used to monitor usage of the Xerox machines. When the business took a wrong turn, and had to renege on some promises, duplicating costs went up considerably. All those copies of resumes for people who took the hint, and decided it was time to move on.