When hiring employees in California, a well-drafted offer letter or employment agreement sets clear expectations and protects both parties. This guide covers the essential elements and California-specific requirements.
Offer Letter vs. Employment Agreement
| Offer Letter | Employment Agreement |
|---|---|
| 1-3 pages typical | 5-20+ pages |
| Key terms only | Comprehensive terms |
| Standard for most hires | Executives, key employees |
| Usually at-will | May include term/severance |
Essential Offer Letter Terms
1. Position and Start Date
- Job title
- Department/reporting structure
- Start date
- Full-time/part-time status
- Exempt or non-exempt classification
2. Compensation
- Base salary or hourly rate
- Pay frequency (bi-weekly, semi-monthly)
- Bonus eligibility (if any)
- Commission structure (if applicable - must be in writing)
- Equity grants (stock options, RSUs)
3. Benefits
- Health insurance eligibility
- 401(k) or retirement plans
- PTO/vacation policy
- Paid sick leave (required in California)
- Other benefits
At-Will Employment
California At-Will Doctrine
California is an at-will employment state, meaning either party can end the employment relationship at any time, with or without cause or notice.
Recommended Language: "Your employment with [Company] is at-will. This means that either you or the Company may terminate the employment relationship at any time, with or without cause or notice."
California-Specific Requirements
Non-Compete Agreements
Generally unenforceable in California. Business & Professions Code Section 16600 voids most non-compete agreements. Exceptions are very limited (sale of business, dissolution of partnership).
Non-Solicitation Agreements
Employee non-solicitation provisions are also restricted in California and largely unenforceable as of 2024 legislative changes.
Confidentiality/NDA
Confidentiality agreements ARE enforceable for protecting genuine trade secrets and confidential information, but cannot restrict employee mobility.
Invention Assignment
Labor Code Section 2870 requires exclusion of inventions developed entirely on employee's own time without company resources that don't relate to company's business.
Arbitration Clauses
Mandatory arbitration agreements for employment disputes are allowed but have requirements:
- Must be knowing and voluntary
- Cannot waive non-waivable statutory rights
- Employer typically pays arbitration costs
- Must allow adequate discovery
- Must provide for written decision
- Consider PAGA carve-outs (complex area)
Required Notices and Forms
At hire, California employers must provide:
- Wage Theft Prevention Act notice (DLSE Notice to Employee)
- Workers' compensation pamphlet
- Sexual harassment prevention policy
- Paid sick leave notice
- EDD pamphlets (UI, SDI, PFL)
- CFRA/FMLA rights notice