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  • Lindsay Spiller

A Startup’s Guide to Offer Letters and Employment Agreements

Updated: Jan 14


An employment agreement
An Employment Agreement

OFFER LETTERS


Generally, California law does not require specific employment contract terms to be in writing unless the employee(s) are compensated by commission. Most startup workers are hired without formal employment contracts. However, an employee in California whose compensation includes commission must receive a written employment agreement stating the method for computing and paying the commission.


Moreover, California requires employers to communicate to their employees their rate of pay, regular payday, and other wage information at the time of hiring. Though this information need not be included in an offer letter or contract, startups should record the employment relationship by having the employee sign an offer letter including the key terms and conditions of employment, such as an employee’s:

  • Title or position

  • Reporting relationship

  • Start date

  • Term of employment (if applicable)

  • Rate and frequency of pay

  • Manner of pay (such as salary, wage, or commission, including whether the employee is exempt or nonexempt from California and federal minimum wage and overtime requirements)

  • Hours of work, including whether the employee will be working full-time or part-time and whether the employee can continue working with another employer during the initial stages of the startup

  • Eligibility for benefits (usually detailed in a separate policy or plan)

  • Conditions of employment, including:

  • Form I-9 compliance,

  • successful completion of background and reference checks (if used),

  • confirmation that their employment does not violate a non-compete or restrictive covenant with another employer, and

  • signing a confidentiality agreement

  • At-will confirmation

  • Job Description (if available)

  • Employee’s acceptance of offer letter terms and conditions


Other Rules for Employers to Consider Regarding Offer Letters:


  1. Employers generally may make prospective, unilateral changes to an at-will employee’s terms and conditions of employment, such as wages or bonus payments, unless it is a contract or collective bargaining agreement (CBA).

  2. If an employer makes a job offer to a current employee for a commissioned position, the employer must provide a written commission agreement.

  3. Employers must appropriately document independent contractor relationships in written agreements per California Labor Code §2776(a), which governs business-to-business contracting relationships.

  4. Startups must be aware that it is challenging to correctly classify an individual as an independent contractor under California law and the repercussions for misclassification are costly.


EMPLOYM