FINAL MATCH

HRM 542
FACULTY OF BUSINESS MANAGEMENT
Employment Contracts

Requirements for enforceable contract

Parties to the contract
Form of the contract
Disclaimers
Contingencies
Other employment contract sources
Unfulfilled promises

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Requirements for enforceable
contract
Offer
The offer is usually made by the employer.
The terms must be clear and specific to be acted on by the offer receiver.
Acceptance
The offer must be accepted on the terms as offered.
No counteroffer.
Consideration
Involves an exchange of promises.
Employer offers/ promise to provide compensation to offer receiver in
exchange for labor
Offer receiver promises to provide labor to the employer in exchange for
compensation.
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Parties to the Contract
Employee or Independent Contractor
The organization should be clear in its offer whether the
relationship being sought is that of employer-employee or
employer-independent contractor.
Misclassification can result in substantial tax and other
legal liability problem
Third Parties
Someone other than the employer or the offer receiver
speaks on their behalf in the establishment or
modification of employment contracts.
Served as agent for the employer and the offer receiver
i.e: Employment agencies, Executive recruiter
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 Form of the Contract
Written Contracts
The law favors written contracts over oral ones.
i.e: Internal job posting, email, employee handbook, offer letter.
Unintended problems (interpreted as enforceable contracts even though
that was not their intent) perhaps the intent was merely information
Oral Contracts
The first exception is the one-year rule, which comes about in what is
known as the statute of frauds.
Under this rule, a contract that cannot be performed or fulfilled
within a one-year interval is not enforceable unless it is in writing
The second exception involves the concept of parole evidence, which
pertains to oral promises made about the employment relationship.
Any oral contract may not be used to enforce a contract if its is
inconsistent with the terms of a written agreement.
E.g., work on weekend.

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Disclaimers

Oral or written statement explicitly limiting an

employee right and reserving that right for employer.
Often used in letters of appointment, job application
blanks, and employee handbooks.
There should be a statement of consent by the
applicant for the organization to check provided
references, along with a waiver of the right to make
claims against them for anything they said.
E.g.,Check personal data in CITOS.

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Contingencies

Extending a job offer contingent on certain

conditions being fulfilled by offer receiver.
Passage of a particular test,
Passage of a medical exam, including alcohol /
drug/screening tests,
Satisfactory background and reference checks.

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Other employment contract
sources

Employee handbooks
The employer must consider whether statements
in them are legally enforceable or merely
informational
Oral statements made by employer representatives
With oral statements, there is a constant need to
be careful regarding the messages being delivered
to employees, as well as who delivers those
messages.
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 Unfulfilled promises
It is important for the organization to
Not make promises unwilling to keep
Be sure promises made are kept

Three types of Potential legal claims

Breach of contract
For both written and oral promises.

Promissory estoppel
Even if there is no enforceable oral contract, employees may claim that
they relied on promises made by the organization, to their subsequent
detriment (loss), since the actual or presumed job offer was withdrawn
(fail to honor promise).
E.g. of detrimental effects: A person resigning from ones current
employer, passing up other job opportunities, relocating geographically
and incurring expenses associated with the job offer.
Fraud
E.g., Employee claims the organization made promises it had no
intention of keeping.
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Job Offers

Strategic Approach to Job Offers

Job offer content

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Strategic Approach to Job
Offers
Organization should carefully crafting job offers and think
strategically as to job offer content.
Will has a better possibility of serving the interest of both the
organization and finalist and not locking them into a contract
that will come to regret.
EVP is the total package of extrinsic and intrinsic reward in
offered job but technically intrinsic reward cannot be write in
in the job offer letter.
The major thrust and purpose of job offer is to convey to the
finalist the nature of the rewards deal being promised if the
offer is accepted.
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Exhibit 12.1 Strategic Approach to
Job Offers
Job Offer Content
Starting date
Duration of contract
Fixed term
Indeterminate term (have
no definite ending date)
Compensation
Starting pay
Flat vs. differential
rates
Ex. 12.2: Example of
Starting Pay Policies
Variable pay
Short term : Allowance
Long term : Stock option
Benefits Health insurance,
retirement and work life plan.
Hours
Affect staffing flexibility and cost
Special hiring inducements
Hiring bonuses
Relocation assistance
Hot skill premiums-temporary
Severance packages-upper
manager. (earned vacation and
holiday pay, extended health
insurance)
Restrictions on employees
Confidentiality
Non-compete agreement
Golden handshake or payback
agreement
Acceptance terms
Counteroffer is not an acceptance
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Job Offer Process
Formulation of the Job Offer
Presentation of the Job Offer
Timing of the Offer
Organizations want to deliver the offer
as quickly as possible after a final
decision has been reached
Job Offer Acceptance and Rejection
Reneging (fail to honor)

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Formulation of the Job Offer
Knowledge of competitors
Labor demand issues
Who are the competitors?
What terms and conditions are they offering for
the job for which the hiring organization is staffing?
Labor supply issues
Offers need to attract number of staff required
Offersneed to consider KSAOs of each offer receiver
and the worth of the KSAOs

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Formulation of Job Offer
(continued)
Applicant truthfulness
Minimal evidence exists on degree of applicant
truthfulness
To combat deceit, organizations are pursuing
verification of all applicant information
Likely reactions of offer receivers
Approaches to assess reactions to offers
Gather information about various preferences from
offer receiver during recruitment/selection process
Conduct research on why offer receivers accept or
decline job offers
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Policies on negotiations & initial
offers
Before making job offers, the organization should decide whether it
will negotiate on them.
Consider costs of job offer being rejected by candidate
Candidates may be receiving counteroffers from current employer
Currently employed candidates incur costs for leaving and expect a
make whole offer
Candidates are sophisticated in presenting their demands e.g. salary.

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Formulation of Job Offer
(continued)
Strategies for presenting initial offer
Lowball
offering the lower bounds of terms and
conditions to the receiver
Competitive
an offer that is on the market, neither
too high nor too low
Best shot
gives a high offer, one right at the upper
bounds of feasible terms and conditions
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Presentation of Job Offer
Two approaches

Mechanical approach
Simple one-way communication from the
organization to the offer receiver

Sales approach
Treat the job offer as a product that must be
developed and sold to the customer (job
receiver)
There is active interaction between the
organization and the receiver as the terms
and conditions are developed and
incorporated into an offer package. 12-19
Job Offer Process:
Acceptance, Rejection, Reneging
Acceptance
When the offer receiver accepts a job offer, the organization should do 2
important things:
The organization should check the receivers actual acceptance to
ensure that it has been accepted as required in the offer (should not
come in the form of a counteroffer or with any other contingencies
attached to it).
The organization must maintain contact with the new hire.

Rejection
By organization (should be done promptly and courteously)
By offer receiver (records should be kept of these rejections)

Reneging (fail to honor) may be due to sudden downturn

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New Employee Orientation and
Socialization
Orientation
An effective orientation program will foster an
understanding of the organizations culture and
values, help the new employee understand his or
her role and how he or she fits into the total
organization and help the new employee achieve
objectives and shorten the learning curve.
Exh.12.7: New Employee Orientation Program
Suggestions

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New Employee Orientation
and Socialization
Socialization
Natural extension of orientation activities.
Aims to achieve effective person/job and person/organization
matches.
To increase new employees role clarity, self-efficacy and social
acceptance.
Orientation focus on the initial and immediate aspects of newcomer
adaptation, socialization emphasizes helping the newcomer fit into
the job and organization over time.

Content (page 615)

People
Performance proficiency
Organization goals and values
Politics
Language
History
Delivery
The newcomers supervisor should be personally responsible for
socializing the newcomer, particularly in terms of performance
proficiency and organization goals and values.
Peers in the newcomers work unit or team are promising
candidates for assisting in socialization.
To provide a more formal information and support system to the
newcomer, but one outside a chain of command, a mentor or
sponsor may be assigned to (or chosen by) the newcomer.
Given the advances in computer technology and the increasing
geographic dispersion of an organizations employees,
organizations might be tempted to conduct their orientation
programs online.
The HR department can be very useful to the socialization process.

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