ACTUAL CASE HISTORY: In his Welcome Aboard letter at a large securities firm, Lou was promised a base salary of $100,000 and a “minimum guaranteed” bonus of at least $250,000 after his first year on his new job. After his first year ended, he was told he would be receiving a bonus of only $100,000. When he asked his boss about the “obvious mistake,” he was referred to Human Resources. When Lou brought the “obvious mistake” to HR’s attention, they referred him to his written acknowledgement of having received a copy of the Employee Handbook. His HR rep then opened the Employee Handbook to its page 57, and to the paragraph that said, “Notwithstanding anything to the contrary, bonuses are within the sole and absolute discretion of the company.” When Lou protested, he was terminated. At his exit interview he was offered severance of only $50,000, and no bonus whatsoever, and – without charge – given the advice that he now was entitled to no bonus at all, because he was no longer an employee. Lou was angry, confused and exhausted, and wondered just what had happened to him.
LESSONS TO LEARN: It’s increasingly common for employers to send their new employees a “Welcome Aboard” letter. These letters are, in essence, a type of employment contract because they describe the agreed terms of the relation. The letter’s purpose is to set the record straight regarding the terms and conditions of the new employment relation. On Wall Street, especially for traders and analysts, this has been standard practice for many years. There’s a reason many employers do this, and that more and more employers are doing so: simply, it’s in their interests. And, in turn, it’s likely to be against your interests.
You need to read Welcome Aboard letters very carefully, and several times, to make sure you understand the way they set things up. And it’s important, too, that you be prepared and unafraid to ask that clarifications and modifications be made to more clearly state, and better secure, your own rights and interests.
Certain “Welcome Aboard” terms are especially critical:
1. How Long Will You Be Employed For? Almost without question, the Welcome Aboard letter will be quite clear about one thing: that your employment will last only so long as your employer wants it to. That’s usually referred to as an “at will” employment relation. That’s a concern, especially if you’re leaving a good job in order to come to this one: you could be asked to leave this job just one week later, for any or no reason at all. That would surely be a career and financial mis-step.
2. Just How “Guaranteed” is Your Bonus? It’s also quite common to see employees “promised” a bonus when coming on board, and even see the word “guaranteed” used in the Welcome Aboard letter. But a careful reading of the Welcome Aboard letter also frequently finds words that say something like “Regardless of anything else, you must be employed on the day bonuses are handed out in order to be entitled to a bonus.” Since your employment relation is “at will” (see Number 1, above), you can be asked to leave employment, even a day or week “before bonus-day” and thus lose out on a full year’s effort. Don’t say “That can’t happen,” because I’ve seen it happen many, many times.
3. Your Job Duties are … What? If there’s one area of Welcome Aboard letters that’s underestimated as a cause of difficulties it’s the description of duties and responsibilities. Often, it just says that the employee will do “as directed by senior management.” What job you’re actually being hired for is a very important matter, and shouldn’t be left to chance or whim.
4. Watch Out for “Refer to the Handbook.” Many Welcome Aboard letters contain more provisions – and some dangerous ones — than are written in the letter, itself. That’s because they often have language that say something like “Refer to the Employee Handbook; its terms are considered incorporated into this document.” Sometimes we see non-compete agreements, give-backs of stock and stock options, and implied resignations “creep and crawl” into Welcome Board letters in this way.
5. Make Sure All Pre-Conditions Are Met. Most Welcome Aboard letters are expressly conditioned on the completion of “background checks” and related investigations, such as pre-employment physicals. It is a very risky practice – an error of prudence – to either give your present employer “notice” or to actually leave your present employer, because one or more of your background checks may be found unacceptable. And that will leave you unemployed, NOT what you expected.
WHAT YOU SHOULD DO: There are certain things you can do to reduce your “job transition risk”:
1. Term: Ask that you be given either (a) a guaranteed period of employment; (b) if not, then a minimum period of pre-layoff notice, perhaps three months; (c) if not, then at least your salary and benefits to continue after termination, for a period of time, perhaps six months, similar to a severance package, and that any guarantees be spelled out in the Welcome Aboard letter;
2. Bonus: Ask that you be guaranteed, in all events, (a) the bonus that you are leaving “on the table” in coming over to your new employer, (b) an “absolutely” unconditionally guaranteed bonus of a fixed amount if you’re laid off, or (c) a pro-rata bonus for the time you’re actually on the new job, and that any promises be spelled out in the Welcome Aboard letter;
3. Duties and Lines: Ask that your job responsibilities, authorities and reporting lines be clearly spelled out in your Welcome Aboard letter. Otherwise, you may find yourself with a job you didn’t expect and don’t want.
4. Gather Info: In your interviewing, consider asking for a copy of the company’s employee handbook, and carefully review any and all of its pages.
5. Conditions Complete?: Insist on receipt of word that all pre-employment blood tests, background reviews, reference checks and the like are complete and acceptable before you resign your present employment, and that such conditions are not in your Welcome Aboard letter.
6. Complete the Deal First: Perhaps MOST IMPORTANT OF ALL, consider ASKING ABOUT THESE THINGS IN YOUR INTERVIEWS, WHEN YOU’RE IN THE EARLY STAGES, AND LONG BEFORE YOU RESIGN your present employment.
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