Job Offer Letter vs Employment Contract

An applicant can receive a job offer in a variety of ways. Some employers will provide a "job offer letter" outlining the basic terms, followed by an employment contract outlining the finer points. 

For some, there is no "job offer letter," and the candidate is simply asked to sign an employment contract. In some cases, the document is referred to as a "job offer letter," yet it contains specific provisions similar to a contract.

Leaving aside labels, what matters is whether a legally binding employment relationship has been established or not. 

What happens when an employee signs a job offer letter, begins work and then is handed a contract with different terms?

One example is the case of Tadjul Maulud bin Zoor v CRSM Construction (M) Sdn Bhd. 

The case

The Claimant was offered the post of Project Architect at the Company following an interview. The Claimant requested that a Letter of Offer be issued to him so he might be released from his former job earlier.

The Company sent him a Letter of Offer, which he signed on January 13, 2020. The Letter of Offer only stated the basic details of his job, such as his start date, starting salary, and position.

The Claimant began work, but in July 2020, the Company issued him an Employment Contract, which will replace and supersede the Letter of Offer.

The conditions of the Employment Contract were not acceptable to the Claimant. According to the Employment Contract:

• The Claimant's employment was for a particular construction project (Ampang 3rd Avenue) and for a set period (1 year).

• If the construction project is finished early or construction is halted, the employment will be terminated automatically.

The employee declined to sign the employment contract.

The Claimant's employment was then terminated with one month's notice by the Company. The reason given in the termination notification was that the parties could not reach an agreement on the Employment Contract.

The Claimant claimed he was fired unfairly.

The court's decision

A job offer letter is an employment offer from an employer to a prospective employee that does not constitute the start of employment. The employment contract will take precedence over the job offer letter if it is issued after the job offer letter.

Parties may purposefully agree to exclude or contradict what was contained in the job offer letter in the new employment contract. 

It is presumed that the employment contract considers what was already provided in the job offer letter if it does not mention some of what was agreed in the job offer letter unless the employment contract specifies that it intends to cancel everything agreed upon between the parties.

According to the evidence, the Company's standard operating procedure was to issue employment contracts with detailed terms first, rather than an offer letter. However, the Claimant requested for the Letter of Offer to be produced so that he might get an early release. To acquire employment with the Company, the Claimant was always aware that he would need to sign an Employment Contract first.

The Court determined that the Letter of Offer was never intended to be a full agreement as it only outlined the key clauses. Other significant terms agreed upon by the parties during the interview were to be formalised via an Employment Contract.

The Letter of Offer did not address many employment terms, such as yearly and medical leave, bonuses, etc. As a result, the Letter of Offer cannot stand alone. As a result, it was reasonable that the Letter of Offer should be followed by an Employment Contract that included all essential contractual elements.

According to witness testimony, the Claimant was fully aware of the contested terms during the interview. For example, he was aware that he would be assigned to the Ampang 3rd Avenue development project for the Company. 

During the interview, the Claimant was also informed that the nature of the Company's business was entirely dependent on projects given by the Malaysian government, and his employment would be on a fixed-term basis and/or depending on the completion of the project. This was true for all employees in the Company, not just the Claimant.

The Claimant's unwillingness to sign the Employment Contract supported the Company's decision to fire him. Accordingly, the Court denied the Claimant's allegation of wrongful termination.

What can we learn from this case?

This disagreement occurred due to an alleged contradiction between the Employment Contract and the Letter of Offer. In this case, the Claimant claimed that material provisions (for example, the nature of his employment as a fixed-term contract) was not indicated in the Letter of Offer but were unexpectedly incorporated in the Employment Contract.

The evidence established that the Company informed him of these provisions during the interview. It also said that the Letter of Offer was always intended to be brief as it was only supplied to allow the Claimant to ask for an early release.

Employers who use a "two-document" recruitment procedure (i.e., a Letter of Offer followed by an Employment Contract) should be aware that inconsistencies between the two papers can lead to disputes. If a two-document approach is employed, employers should guarantee that both documents are supplied to employees before starting employment. 

This way, any issues concerning the terms can be settled before the candidate begins employment. Employers are spared the unpleasant predicament of an employee who has already started work but refuses to sign an employment contract.

Employers should also examine if having two documents to reflect the employee's terms of employment is even necessary. It is appropriate to simply deliver the employment contract to the candidate after making a job offer rather than preparing a separate "offer letter" with summarised terms first.

Source: Donovan & Ho