Published on March 29th, 2016 by Alan L. Sklover
“ If you do not actively attack the risks,
they will actively attack you.”
– Tom Gib
ACTUAL CASE HISTORY: Wilhelma was a senior investment banker in the energy and power sectors employed by a Wall Street firm. She was recruited to work for a boutique investment management firm specializing in the same sectors. Most intriguing to Wilmelma was the new employer’s offer of both a sizable ownership interest in the firm, and carried interest in its major investment fund.
When presented with an Offer Letter that included all of the items agreed upon, including her new employer “making her whole” for the losses due to departing with unvested stock, Wilhelma quickly signed it. Due to an existing 90-day “garden leave” agreement, Wilhemina had the new employer insert into her Offer Letter a “start date” that was 95 days away. The plan was simple: Wilhemina would sign the offer letter, submit her resignation, and then start her new job 95 days later.
Just before the place for her to sign, her Offer Letter contained an extremely common clause, often referred to as a “Background Check Contingency.”
“This offer is contingent upon satisfactory (a) drug test screening, (b) fingerprinting, (c) background check, and (d) confirmation of your ability to work in the United States.”
No problem there, as Wilhemina was not a drug user, had no prior bad acts, no lawsuits or bankruptcies, and was a U.S. citizen. She went to work to complete her pending projects before her departure, and gave little attention to the “Background Check Contingency.”
However, just three weeks before her start date, a problem did arise and a very serious one, at that. After a steep downtrend in credit markets, especially affecting oil and gas projects, her sector just sort of “froze up.” Many projects were cancelled, others that were planned never got off the ground.
Wilhemina then received a letter from her new employer advising her that “We are sorry to advise you that the required background and eligibility investigations were not returned satisfactorily, and thus your job offer has been rescinded.” Not only had Wilhemina resigned and given up her job, but now she had lost her new position, as well, including its promise to “make her whole” regarding her forfeited stock.
LESSON TO LEARN: What happened to Wilhelmina does not happen often, but it does happen too often. And if it happens to you, even once, it surely is too often.
An Offer Letter is a kind of contract. A condition in any contract – including an Offer Letter – is a kind of risk because it makes the Offer Letter less certain, and a bit “up in the air” until the condition has been satisfied. It is like “almost making a deal.” Risk is part of life, but it is surely wise to try to reduce risk, or avoid risk, whenever you can. Smartly navigating the risk represented by your Offer Letter “Background-Check Contingencies” provision should be part of your Offer Letter response.
Bear in mind these eight salient points:
1. Every now and then a true “deficiency” may arise in your “background check,” perhaps one that you did not know about, such as an unpaid judgment against you due to unknown, and thus unpaid, parking tickets.
2. Every now and then a person with a similar name to yours – perhaps a cousin with your exact name – may do something that is incorrectly viewed to be a “black mark” on your own character and reputation.
3. Background-checking firms are not infallible; like everyone else, they sometimes make mistakes, and big ones, too.
4. You might even one day become a victim of identity theft without even having known it, and have debts, lawsuits and collection actions pending against you.
5. Words like “satisfactory” and “acceptable” are quite subjective, and could mean different things to different people. What is an “acceptable” character reference? What is a “sufficient” credit rating? What is a “satisfactory” background check report? Darned if I know.
6. These days, the internet includes many false allegations about people; you might be among them.
7. When employers need an excuse to take back an outstanding job offer, for examples, if a preferred candidate becomes available, a market collapses, or a reconsideration of business plans takes place – “open contract contingencies” are the first thing resorted to, and commonly used, to do so.
8. Experience shows us that, once Offer Letter contingencies are satisfied, the incidence of employers withdrawing Offer Letters, for any reason, is significantly reduced.
In employment, as in life in general, risks always need to be (a) identified, (b) assessed, and – to the extent possible – avoided. Regarding this particular risk, here’s what to do.
WHAT YOU CAN DO: If you receive a Job Offer letter containing the common “Background- Check Contingencies” clause, consider taking these four steps:
1. You might ask that the Offer Letter be amended to provide that any “background-check” concerns that might arise be promptly shared with you. A simple yet effective cautionary step is to request that the “Background-Check Contingency” provision be amended so that any seemingly unsatisfactory information that may be derived in the process be promptly shared with you to provide you the opportunity to explain or refute the issue. If your name is George Smith, more than one George Smith may have lived at a former address of yours. It just might happen that someone transposed two digits of your Social Security Number.
If problems or concerns do arise in the background-check process, you need to know what they are. If given the chance, you may be able to address and eliminate them. In all fairness, you should be given both the information of concern, and an opportunity to refute it.
2. Ask, too, that all Background Check Contingencies be initiated promptly, and completed within a specified period of time. There is simply no good reason for employers not to commence a background check immediately upon the presentation of the Offer Letter, and to complete the background check investigation in a reasonable time period, such as 14 calendar days or less. In only a very few rare exceptions – such as national security matters and job applications to the FBI – should it require more.
By securing a definite date for the completion of your background check, you are decreasing the odds that you will – like Wilhelmina – find out you have a major background-check problem when it is too late to address it.
Use our Model Response to Offer Letter; Seeking Improvements, including the changes suggested in this blog post. It shows you “What to Say, and How to Say It.™” To obtain a copy for your use, just [click here.] Delivered by Email – Instantly!
3. Set up your job-transition timing such that, if at all possible, you do not resign until all Background Check Contingencies have been completed. These days, when employees often have more than one of (a) a required resignation notice period of 30 days or more, (b) so-called Garden Leave requirements of up to six months, (c) restrictions on when you can begin working for a competitor of up to 18 months, and/or (d) restrictions on when you can solicit clients, customers and/or colleagues, of up to 12 months, job-transition timing is necessary, and can be can be nerve-wracking.
There is nothing wrong and everything right with sharing your intention not to resign until all background check contingencies have been successfully completed, and that you have received a written notice to that effect. This is the essential way of protecting yourself form “falling into the abyss” between one job and the next due to a background-check concern.
Negotiating a New Job? We offer a 152-Point Master Checklist of Employment Negotiation Items to help you “remember everything and not forget anything else.” To obtain a copy, just [click here.] Delivered by Email – Instantly!
4. It is our experience that, once Background-Check Contingencies are completed, the incidence of Job Offer Rescission, for any reason, Is reduced. Job Offers can be rescinded for many reasons – by both employer and employee. Sometimes there is strong legal reason to do so. But both employers and employees fear negative repercussions from doing so.
It is our experience that, after Background Checks are completed, the incidence of Job Offer rescission is reduced. This may be a result of having one less reason to do so. It may also be the result of employers feeling a clear and more definite commitment has been made, which commitment must be honored. Whatever the reason might be, removal of risk by paying attention to Background-Check Contingencies is always a wise step to take.
P.S.: Resignations can be tricky – and treacherous. We offer a 100-Point Master Pre-Resignation Checklist. All you need to know and remember. To obtain your copy, just [click here.] Delivered by Email – Instantly!
Help Yourself With These and Other
|New Job 3:||Confirming Basic Terms of New Job Offer|
|New Job 5:||Model Response to Receiving a New Job Offer|
|New Job 7:||Checklist of New Job Items to Consider Requesting/Negotiating|
|New Job 13:||Six Important Elements to Request Be In Your Expected Job Offer|
|New Job 15:||Model Request for Sign-On Bonus|
|New Job 16:||Two Model Memos to Protect Your Book Of Business ("B.O.B.")|
|Job Issues 5:||Model Response to Request That You Sign a Non-Compete|
SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work. Negotiation and navigation of work and career issues requires that you think “out of the box,” and build value and avoid risks at every point in your career. We strive to help you understand what is commonly before you – traps and pitfalls, included – and to avoid the likely bumps in the road. For those engaged in compliance efforts, you have more to consider, and more at stake, in your daily efforts.
Always be proactive. Always be creative. Always be persistent. Always be vigilant. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment “rewards” and eliminate or reduce employment “risks.” Paying careful attention to the risks that Offer Letter Background–Check Contingencies pose, is one way to do just that. Learning the “tricks of the trade” is what SkloverWorkingWisdom™ is all about.
*A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.
Please Note: This Email Newsletter is not legal advice, but only an effort to provide generalized information about important topics related to employment and the law. Legal advice can only be rendered after formal retention of counsel, and must take into account the facts and circumstances of a particular case. Those in need of legal advice, counsel or representation should retain competent legal counsel licensed to practice law in their locale.
Sklover Working Wisdom™ is a trademarked newsletter publication of Alan L. Sklover, of Sklover & Company, LLC, a law firm dedicated to the counsel and representation of employees in matters of their employment, compensation and severance. Nothing expressed in this material constitutes legal advice. Please note that Mr. Sklover is admitted to practice in the state of New York, only. When assisting clients in other jurisdictions, he retains the assistance of local counsel and/or obtains permission of local Courts to appear. Copying, use and/or reproduction of this material in any form or media without prior written permission is strictly prohibited. All rights reserved. For further information, contact Sklover & Company, LLC, One Rockefeller Plaza, New York, New York 10020 (212) 757-5000.
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