This guide is for an employer, or its counsel, preparing an employment offer letter for a hire in the United States. It covers what the letter can say about pay and overtime classification, where this guide has a drafting preference, and which records and agreements belong beside the letter rather than in it.
Can an offer letter make a job exempt from overtime pay?
An offer letter cannot make a job exempt from overtime pay, because exempt status depends on whether the employee's actual salary and duties meet the requirements of the applicable exemption. A job title alone does not establish exempt status. Under 29 C.F.R. § 541.600, the federal executive, administrative and professional exemptions generally require pay on a salary basis of at least $684 per week, with lower figures in some U.S. territories.
The employee cannot agree away overtime rights either. Brooklyn Savings Bank v. O'Neil reasoned that allowing waiver of statutory wages by agreement would nullify the purposes of the Fair Labor Standards Act (FLSA). Barrentine v. Arkansas-Best Freight System, Inc. restated the rule that FLSA rights cannot be abridged by contract or otherwise waived. A signed letter that calls the job exempt therefore settles nothing if the salary or the duties fall short.
California applies its own, stricter test to employees who work there. Its executive, administrative and professional exemptions require that the employee be primarily engaged in exempt duties and earn a monthly salary of at least two times the state minimum wage for full-time employment , and full-time employment means 40 hours per week. An employee paid less than the overtime the law requires can recover the unpaid balance notwithstanding any agreement to work for a lesser wage. In Ramirez v. Yosemite Water Co. , the California Supreme Court directed courts to consider first how the employee actually spends his or her time, and whether that practice diverges from the employer's realistic expectations. The same decision places the burden of proving the exemption on the employer.
Sources for this answer
29 C.F.R. § 541.2 requires exempt or nonexempt status to be determined by whether the employee's salary and duties meet the Part 541 requirements.
The exempt or nonexempt status of any particular employee must be determined on the basis of whether the employee's salary and duties meet the requirements of the regulations in this part.
See 29 C.F.R. § 541.2.
29 C.F.R. § 541.2 states that a job title alone is insufficient to establish exempt status.
A job title alone is insufficient to establish the exempt status of an employee.
See 29 C.F.R. § 541.2.
29 C.F.R. § 541.600(a) requires an exempt executive, administrative or professional employee to be paid on a salary basis of not less than $684 per week, with lower rates in listed U.S. territories.
To qualify as an exempt executive, administrative or professional employee under section 13(a)(1) of the Act, an employee must be compensated on a salary basis at a rate of not less than $684 per week (or $455 per week if employed in the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin Islands by employers other than the Federal Government, or $380 per week if employed in American Samoa by employers other than the Federal Government), exclusive of board, lodging or other facilities.
See 29 C.F.R. § 541.600(a).
The Supreme Court in Brooklyn Savings Bank v. O'Neil reasoned that allowing waiver of statutory wages by agreement would nullify the purposes of the Fair Labor Standards Act.
No one can doubt but that to allow waiver of statutory wages by agreement would nullify the purposes of the Act.
See Brooklyn Savings Bank v. O'Neil, 324 U.S. 697, 707 (1945).
The Supreme Court in Barrentine v. Arkansas-Best Freight System states that FLSA rights cannot be abridged by contract or otherwise waived.
Thus, we have held that FLSA rights cannot be abridged by contract or otherwise waived because this would “nullify the purposes” of the statute and thwart the legislative policies it was designed to effectuate.
See Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 740 (1981).
California Labor Code § 515(a) conditions the executive, administrative and professional exemptions on primarily exempt duties, discretion and independent judgment, and a monthly salary of at least two times the state minimum wage for full-time employment.
The Industrial Welfare Commission may establish exemptions from the requirement that an overtime rate of compensation be paid pursuant to Sections 510 and 511 for executive, administrative, and professional employees, if the employee is primarily engaged in the duties that meet the test of the exemption, customarily and regularly exercises discretion and independent judgment in performing those duties, and earns a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.
See Cal. Lab. Code § 515(a).
California Labor Code § 515(c) defines full-time employment, for the salary test, as employment for 40 hours per week.
For the purposes of subdivision (a), “full-time employment” means employment in which an employee is employed for 40 hours per week.
See Cal. Lab. Code § 515(c).
California Labor Code § 1194(a) lets an employee paid less than legal overtime recover the unpaid balance notwithstanding any agreement to work for a lesser wage.
Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney’s fees, and costs of suit.
See Cal. Lab. Code § 1194(a).
The California Supreme Court in Ramirez v. Yosemite Water Co. directs courts assessing an exemption to consider first and foremost how the employee actually spends his or her time.
In so doing, the court should consider, first and foremost, how the employee actually spends his or her time.
See Ramirez v. Yosemite Water Co., 20 Cal. 4th 785 (1999).
The California Supreme Court in Ramirez v. Yosemite Water Co. directs courts to consider whether the employee's practice diverges from the employer's realistic expectations.
But the trial court should also consider whether the employee’s practice diverges from the employer’s realistic expectations, whether there was any concrete expression of employer displeasure over an employee’s substandard performance, and whether these expressions were themselves realistic given the actual overall requirements of the job.
See Ramirez v. Yosemite Water Co., 20 Cal. 4th 785 (1999).
The California Supreme Court in Ramirez v. Yosemite Water Co. states that the employer bears the burden of proving an employee's exemption from the overtime laws.
Moreover, the assertion of an exemption from the overtime laws is considered to be an affirmative defense, and therefore the employer bears the burden of proving the *795 employee’s exemption.
See Ramirez v. Yosemite Water Co., 20 Cal. 4th 785, 794–795 (1999).
Should an offer letter say the job is exempt from overtime?
A statement in an offer letter that the job is exempt adds no protection when the job's salary and duties do not support the exemption. A title or label cannot establish exempt status on its own. Some filed offer letters do state the classification. This guide's drafting preference is to leave the label out, document the classification analysis internally, and give any wage notice a state requires separately; in New York, that notice must state the regular and overtime rates for an employee who is not exempt.
Leaving the label out is this guide's drafting choice, and the caution below sets out the risks it avoids.
An exempt entry beside the title or salary in the OpenAgreements Employment Offer Letter may later conflict with the company's own reclassification or with the duties the job comes to involve. Set beside a salary below the applicable threshold, the label documents the shortfall on one page. And if the company later reclassifies the job, it has to walk back an expectation the letter itself created.
Sources for this answer
The Zura Bio offer letter states that the position is exempt and that the executive is not eligible for overtime.
This is an exempt position, which means you are paid on a salary basis for the job you perform, not by the hour, and you are not eligible for overtime.
See Zura Bio Ltd., Chief Executive Officer Offer Letter (Jan. 21, 2026), filed as Exhibit 10.2.
The Lantronix offer letter amendment states that the officer will be classified as an exempt employee.
You will be classified as an exempt employee, and your salary will be paid on a salary basis and is intended to compensate you for all hours that you work.
See Lantronix, Inc., Amendment to Offer Letter (Jan. 1, 2026), filed as Exhibit 10.1.
29 C.F.R. § 541.2 states that a job title alone is insufficient to establish exempt status.
A job title alone is insufficient to establish the exempt status of an employee.
See 29 C.F.R. § 541.2.
29 C.F.R. § 541.2 requires exempt or nonexempt status to be determined by whether the employee's salary and duties meet the Part 541 requirements.
The exempt or nonexempt status of any particular employee must be determined on the basis of whether the employee's salary and duties meet the requirements of the regulations in this part.
See 29 C.F.R. § 541.2.
29 C.F.R. § 541.600(a) requires an exempt executive, administrative or professional employee to be paid on a salary basis of not less than $684 per week, with lower rates in listed U.S. territories.
To qualify as an exempt executive, administrative or professional employee under section 13(a)(1) of the Act, an employee must be compensated on a salary basis at a rate of not less than $684 per week (or $455 per week if employed in the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin Islands by employers other than the Federal Government, or $380 per week if employed in American Samoa by employers other than the Federal Government), exclusive of board, lodging or other facilities.
See 29 C.F.R. § 541.600(a).
New York Labor Law § 195(1)(a) requires the pay notice for an employee who is not exempt from overtime to state the regular hourly rate and overtime rate of pay.
For all employees who are not exempt from overtime compensation as established in the commissioner's minimum wage orders or otherwise provided by New York state law or regulation, the notice must state the regular hourly rate and overtime rate of pay; (b) The commissioner shall prepare templates that comply with the requirements of paragraph (a) of this subdivision.
See N.Y. Lab. Law § 195(1)(a).
How should an offer letter describe pay for a job treated as exempt from overtime?
For a job the company treats as exempt, pay wording is consistent with the federal salary-basis test when it describes a predetermined amount paid each pay period, weekly or less often, that is not reduced because of variations in the quality or quantity of the work. The test is the general pay rule for the executive, administrative and professional exemptions, but administrative and professional employees may instead be paid on a fee basis , certain computer employees may instead be paid hourly at a regulatory minimum rate , and the pay requirements do not apply to teachers, licensed lawyers and doctors actually practicing their profession, or medical interns and residents. The test looks at what the employee regularly receives, so the company's actual pay practices must meet it too. Subject to listed exceptions, an exempt employee must receive the full salary for any week in which the employee performs any work, whatever the number of days or hours worked. Deductions for absences caused by the employer or by the operating requirements of the business, or for time when work is not available, take the pay off a salary basis.
An offer letter reused from an hourly hire may state pay only as an hourly or daily rate, with no guaranteed weekly salary, or reserve the right to reduce pay for slow weeks. For a job treated as exempt under an exemption that requires a salary basis, either term puts the claimed exemption at risk under the salary-basis test, whatever the job's duties.
Sources for this answer
29 C.F.R. § 541.600(a) requires pay on a salary basis for the executive, administrative and professional exemptions, and lets administrative and professional employees be paid on a fee basis instead.
To qualify as an exempt executive, administrative or professional employee under section 13(a)(1) of the Act, an employee must be compensated on a salary basis at a rate of not less than $684 per week (or $455 per week if employed in the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin Islands by employers other than the Federal Government, or $380 per week if employed in American Samoa by employers other than the Federal Government), exclusive of board, lodging or other facilities. Administrative and professional employees may also be paid on a fee basis, as defined in § 541.605.
See 29 C.F.R. § 541.600(a).
29 C.F.R. § 541.600(d) lets the compensation requirement for computer employees be met by hourly pay of at least $27.63 an hour.
In the case of computer employees, the compensation requirement also may be met by compensation on an hourly basis at a rate not less than $27.63 an hour, as provided in § 541.400(b).
See 29 C.F.R. § 541.600(d).
29 C.F.R. § 541.600(e) lifts the compensation requirements for teachers, for licensed practitioners of law or medicine actually engaged in that practice, and for medical interns and residents.
In the case of professional employees, the compensation requirements in this section shall not apply to employees engaged as teachers (see § 541.303); employees who hold a valid license or certificate permitting the practice of law or medicine or any of their branches and are actually engaged in the practice thereof (see § 541.304); or to employees who hold the requisite academic degree for the general practice of medicine and are engaged in an internship or resident program pursuant to the practice of the profession (see § 541.304).
See 29 C.F.R. § 541.600(e).
29 C.F.R. § 541.602(a) defines pay on a salary basis as a predetermined amount received each pay period, weekly or less often, that is not reduced because of variations in the quality or quantity of the work performed.
An employee will be considered to be paid on a “salary basis” within the meaning of this part if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee's compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.
See 29 C.F.R. § 541.602(a).
29 C.F.R. § 541.602(a)(1) requires an exempt employee to receive the full salary for any week in which the employee performs any work, subject to the exceptions in paragraph (b).
Subject to the exceptions provided in paragraph (b) of this section, an exempt employee must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked.
See 29 C.F.R. § 541.602(a)(1).
29 C.F.R. § 541.602(a)(2) states that deductions for absences caused by the employer or the operating requirements of the business, or for time when work is not available, mean the employee is not paid on a salary basis.
An employee is not paid on a salary basis if deductions from the employee's predetermined compensation are made for absences occasioned by the employer or by the operating requirements of the business. If the employee is ready, willing and able to work, deductions may not be made for time when work is not available.
See 29 C.F.R. § 541.602(a)(2).
Can an offer letter reserve the employer's right to reclassify the job later?
An offer letter can reserve the employer's right to reclassify the job going forward, although the reservation does not decide whether the job is exempt. This guide recommends the reservation. Exempt status turns on whether the job's salary and duties meet the applicable exemption's requirements. The reservation is drafted so the employer can change its classification decision and the job's pay terms for later pay periods. The reservation also cannot erase overtime already owed, because the FLSA exposes an employer that violates the overtime requirement to liability for the unpaid overtime and an additional equal amount as liquidated damages. California likewise lets the employee recover unpaid overtime notwithstanding any agreement to work for a lesser wage.
The reservation still has a job to do. It tells the employee at hire that the classification may change if the duties or the law change or the original classification proves wrong, so a later move to hourly pay with overtime reads as the letter operating as written rather than as a departure from it.
A reclassification clause drafted to reach back, by recomputing earlier weeks at the new hourly rate or treating the employee's acceptance of the new rate as settling them, does not reduce what is owed for those weeks: the overtime already earned stays recoverable despite the clause , and the clause adds a term the company cannot enforce.
Sources for this answer
29 C.F.R. § 541.2 requires exempt or nonexempt status to be determined by whether the employee's salary and duties meet the Part 541 requirements.
The exempt or nonexempt status of any particular employee must be determined on the basis of whether the employee's salary and duties meet the requirements of the regulations in this part.
See 29 C.F.R. § 541.2.
29 U.S.C. § 216(b) makes an employer that violates the FLSA overtime requirement liable for the unpaid overtime compensation and an additional equal amount as liquidated damages.
Any employer who violates the provisions of section 206 or section 207 of this title shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages.
See 29 U.S.C. § 216(b).
California Labor Code § 1194(a) lets an employee paid less than legal overtime recover the unpaid balance notwithstanding any agreement to work for a lesser wage.
Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney’s fees, and costs of suit.
See Cal. Lab. Code § 1194(a).
The Supreme Court in Barrentine v. Arkansas-Best Freight System states that FLSA rights cannot be abridged by contract or otherwise waived.
Thus, we have held that FLSA rights cannot be abridged by contract or otherwise waived because this would “nullify the purposes” of the statute and thwart the legislative policies it was designed to effectuate.
See Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 740 (1981).
Which classification documents sit outside the offer letter?
This guide recommends checking three documents outside the offer letter: an internal duties and salary analysis, a written policy against improper salary deductions, and any wage notice a state requires at hire. Of the three, only the wage notice is required by statute, and only where a state requires one. The analysis is the company's record that the job's salary and duties meet the applicable exemption's requirements, which is the test federal regulations apply.
The deduction policy protects the exemption against payroll mistakes. Under the federal safe harbor, an employer with a clearly communicated policy that prohibits improper deductions, includes a complaint mechanism, reimburses improper deductions and commits in good faith to comply does not lose the exemption unless it willfully keeps making improper deductions after employee complaints. The regulation names a written policy distributed before any improper deduction, for example at hire or in an employee handbook, as the best evidence of a clearly communicated policy.
State wage notices have their own content rules, and delivering the notice as its own document, apart from the offer letter, is the recommended drafting approach rather than a statutory requirement. In New York, the pay notice given at hiring, in English and the employee's primary language, must state the rate or rates of pay and their basis and any allowances claimed toward the minimum wage , and the employer must obtain a signed and dated acknowledgment and keep it for six years. Where the commissioner has no template in the employee's identified primary language, an English-language notice and acknowledgment satisfy the requirement. For an employee who is not exempt from overtime, the notice must also state the regular hourly rate and the overtime rate. The New York wage notice for overtime-exempt employees is a companion form for an exempt New York hire.
California requires a written notice at the time of hiring stating the rate or rates of pay and their basis, including any overtime rates. The statute excludes an employee who is exempt from overtime by statute or wage order. That exclusion follows the classification: a hire treated as exempt whose job does not in fact qualify was owed the notice as well.
Sources for this answer
29 C.F.R. § 541.2 requires exempt or nonexempt status to be determined by whether the employee's salary and duties meet the Part 541 requirements.
The exempt or nonexempt status of any particular employee must be determined on the basis of whether the employee's salary and duties meet the requirements of the regulations in this part.
See 29 C.F.R. § 541.2.
29 C.F.R. § 541.603(d) provides that an employer with a clearly communicated policy prohibiting improper deductions, a complaint mechanism, reimbursement and a good-faith commitment to comply does not lose the exemption unless it willfully violates the policy after employee complaints.
If an employer has a clearly communicated policy that prohibits the improper pay deductions specified in § 541.602(a) and includes a complaint mechanism, reimburses employees for any improper deductions and makes a good faith commitment to comply in the future, such employer will not lose the exemption for any employees unless the employer willfully violates the policy by continuing to make improper deductions after receiving employee complaints.
See 29 C.F.R. § 541.603(d).
29 C.F.R. § 541.603(d) names a written policy distributed before the improper deductions, for example at hire or in an employee handbook, as the best evidence of a clearly communicated policy.
The best evidence of a clearly communicated policy is a written policy that was distributed to employees prior to the improper pay deductions by, for example, providing a copy of the policy to employees at the time of hire, publishing the policy in an employee handbook or publishing the policy on the employer's Intranet.
See 29 C.F.R. § 541.603(d).
New York Labor Law § 195(1)(a) requires every employer to give employees, at the time of hiring, a written notice in English and the employee's primary language stating the rate or rates of pay and their basis and any allowances claimed as part of the minimum wage.
provide his or her employees, in writing in English and in the language identified by each employee as the primary language of such employee, at the time of hiring, a notice containing the following information: the rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission, or other; allowances, if any, claimed as part of the minimum wage, including tip, meal, or lodging allowances; the benefit portion of the minimum rate of home care aide total compensation as defined in section thirty-six hundred fourteen-c of the public health law
See N.Y. Lab. Law § 195(1)(a).
New York Labor Law § 195(1)(a) requires the employer to obtain a signed and dated acknowledgment of the pay notice and keep it for six years.
Each time the employer provides such notice to an employee, the employer shall obtain from the employee a signed and dated written acknowledgement, in English and in the primary language of the employee, of receipt of this notice, which the employer shall preserve and maintain for six years.
See N.Y. Lab. Law § 195(1)(a).
New York Labor Law § 195(1)(b) leaves the choice of template languages to the commissioner, and § 195(1)(c) lets the employer comply with an English-language notice or acknowledgment when no commissioner template exists in the employee's identified primary language.
The commissioner shall determine, in his or her discretion, which languages to provide in addition to English, based on the size of the New York state population that speaks each language and any other factor that the commissioner shall deem relevant. All such templates shall be made available to employers in such manner as determined by the commissioner; (c) When an employee identifies as his or her primary language a language for which a template is not available from the commissioner, the employer shall comply with this subdivision by providing that employee an English-language notice or acknowledgment
See N.Y. Lab. Law § 195(1)(b)–(c).
New York Labor Law § 195(1)(a) requires the pay notice for an employee who is not exempt from overtime to state the regular hourly rate and overtime rate of pay.
For all employees who are not exempt from overtime compensation as established in the commissioner's minimum wage orders or otherwise provided by New York state law or regulation, the notice must state the regular hourly rate and overtime rate of pay; (b) The commissioner shall prepare templates that comply with the requirements of paragraph (a) of this subdivision.
See N.Y. Lab. Law § 195(1)(a).
California Labor Code § 2810.5(a)(1) requires an employer to give each employee at the time of hiring a written notice stating the rate or rates of pay and their basis, including any overtime rates.
At the time of hiring, an employer shall provide to each employee a written notice, in the language the employer normally uses to communicate employment-related information to the employee, containing the following information: (A) The rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission, or otherwise, including any rates for overtime, as applicable.
See Cal. Lab. Code § 2810.5(a)(1).
California Labor Code § 2810.5(c)(2) excludes from the hiring-notice requirement an employee who is exempt from overtime by statute or Industrial Welfare Commission wage order.
(c) For purposes of this section, “employee” does not include any of the following: (1) An employee directly employed by the state or any political subdivision thereof, including any city, county, city and county, or special district. (2) An employee who is exempt from the payment of overtime wages by statute or the wage orders of the Industrial Welfare Commission.
See Cal. Lab. Code § 2810.5(c)(2).
Should an employer use a separate arbitration agreement with a class action waiver?
An employment agreement requiring individual arbitration is generally enforceable under the Federal Arbitration Act (FAA), except for the transportation workers the Act excludes and subject to the other statutory and California limits described below. As a drafting preference, this guide recommends a separate arbitration agreement rather than an arbitration clause in the offer letter. An agreement that includes an enforceable class and collective action waiver can require individual proceedings for covered claims. That waiver reaches the exposure the FLSA creates, because the statute lets employees sue on behalf of themselves and other employees similarly situated.
The FAA does not reach every worker. It excludes contracts of employment of seamen, railroad employees, and any other class of workers engaged in foreign or interstate commerce. In New Prime Inc. v. Oliveira , the Supreme Court read that exclusion to cover agreements requiring independent contractors to perform work, not only agreements with employees. In Southwest Airlines Co. v. Saxon , the Court defined the class of workers by the work the worker does, not by what the employer does generally. For a worker in an excluded class, the employer cannot rely on the FAA to compel individual arbitration.
Two further limits shape how the separate agreement is drafted. The first is California's Private Attorneys General Act (PAGA). In Viking River Cruises, Inc. v. Moriana , the U.S. Supreme Court held that the FAA preempts California's rule against dividing PAGA actions into individual and non-individual claims through an arbitration agreement. In Adolph v. Uber Technologies, Inc. , the California Supreme Court then held that an order compelling arbitration of the individual claims does not strip the employee of standing to litigate the non-individual claims in court.
The second limit is federal. At the election of the person alleging a sexual harassment or sexual assault dispute, a predispute arbitration agreement or joint-action waiver is not valid or enforceable for a case relating to that dispute.
Individual arbitration also has its own cost. Commentary warns that a mass filing of individual arbitration claims can commit an employer to more than US$12 million in filing fees alone.
Sources for this answer
The Supreme Court in Epic Systems Corp. v. Lewis held that the Federal Arbitration Act requires courts to enforce employment arbitration agreements according to their terms, including terms providing for individualized proceedings.
In the Federal Arbitration Act, Congress has instructed federal courts to enforce arbitration agreements according to their terms—including terms providing for individualized pro- ceedings.
See Epic Systems Corp. v. Lewis, 584 U.S. 497 (2018).
Section 1 of the Federal Arbitration Act defines commerce and excludes from the Act contracts of employment of seamen, railroad employees, and any other class of workers engaged in foreign or interstate commerce.
“commerce”, as herein defined, means commerce among the several States or with foreign nations, or in any Territory of the United States or in the District of Columbia, or between any such Territory and another, or between any such Territory and any State or foreign nation, or between the District of Columbia and any State or Territory or foreign nation, but nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.
See 9 U.S.C. § 1.
The Supreme Court in New Prime Inc. v. Oliveira held that the § 1 exclusion for contracts of employment reaches agreements requiring independent contractors to perform work, not only agreements between employers and employees.
As a result, most people then would have understood §1 to exclude not only agreements between employers and employees but also agreements that require independent contractors to perform work.
See New Prime Inc. v. Oliveira, 586 U.S. 105 (2019).
The Supreme Court in Southwest Airlines Co. v. Saxon defined the § 1 class of workers by the work the worker performs, not by the employer's business generally.
Saxon is therefore a member of a “class of workers” based on what she does at Southwest, not what Southwest does generally.
See Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022).
29 U.S.C. § 216(b) permits one or more employees to sue for FLSA liability on behalf of themselves and other employees similarly situated.
An action to recover the liability prescribed in the preceding sentences may be maintained against any employer (including a public agency) in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated.
See 29 U.S.C. § 216(b).
The Supreme Court in Viking River Cruises, Inc. v. Moriana held that the FAA preempts California's Iskanian rule insofar as it precludes dividing PAGA actions into individual and non-individual claims through an arbitration agreement.
We hold that the FAA preempts the rule of Iskanian in- sofar as it precludes division of PAGA actions into individ- ual and non-individual claims through an agreement to ar- bitrate.
See Viking River Cruises, Inc. v. Moriana, 596 U.S. 639 (2022).
The California Supreme Court in Adolph v. Uber Technologies, Inc. held that an order compelling arbitration of a PAGA plaintiff's individual claims does not strip the plaintiff of standing to litigate the non-individual claims in court.
In sum, where a plaintiff has filed a PAGA action comprised of individual and non-individual claims, an order compelling arbitration of individual claims does not strip the plaintiff of standing to litigate non-individual claims in court.
See Adolph v. Uber Technologies, Inc., 14 Cal. 5th 1104 (2023).
9 U.S.C. § 402(a) makes a predispute arbitration agreement or joint-action waiver invalid and unenforceable, at the election of the person alleging a sexual harassment or sexual assault dispute, for a case relating to that dispute.
Notwithstanding any other provision of this title, at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct, no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.
See 9 U.S.C. § 402(a).
K&L Gates commentary warns that a mass filing of individual arbitration claims can commit an employer to more than US$12 million in filing fees.
In some cases, this mass filing of arbitration claims can commit an employer to paying more than US$12 million in filing fees alone.
See K&L Gates, Mass Arbitration, Más Problems: Class-Action Procedures May Guide Solutions to Issues in Mass Arbitrations (June 24, 2020).
Does an employer have to reimburse a new hire's work expenses?
In some states, including California, the employer must reimburse necessary work expenses whatever the offer letter says. California requires the employer to indemnify the employee for all necessary expenditures or losses incurred in direct consequence of the discharge of the employee's duties. Illinois requires reimbursement of necessary expenditures or losses within the scope of employment and directly related to services performed for the employer , but only where the employer authorized or required the expense or failed to follow its own written reimbursement policy.
Illinois lets a written expense policy shape the duty. An employee who fails to comply with the employer's established written expense reimbursement policy is not entitled to reimbursement under the statute.
Sources for this answer
California Labor Code § 2802(a) requires an employer to indemnify an employee for all necessary expenditures or losses incurred in direct consequence of the discharge of the employee's duties.
An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.
See Cal. Lab. Code § 2802(a).
820 ILCS 115/9.5(a) requires an Illinois employer to reimburse all necessary expenditures or losses incurred within the scope of employment and directly related to services performed for the employer.
An employer shall reimburse an employee for all necessary expenditures or losses incurred by the employee within the employee's scope of employment and directly related to services performed for the employer.
See 820 ILCS 115/9.5(a).
820 ILCS 115/9.5(b) limits Illinois employer liability to expenses the employer authorized or required, or cases where it failed to follow its own written reimbursement policy.
An employer is not liable under this Section unless the employer authorized or required the employee to incur the necessary expenditure or the employer failed to comply with its own written expense reimbursement policy.
See 820 ILCS 115/9.5(b).
820 ILCS 115/9.5(b) denies reimbursement to an employee who failed to comply with the employer's established written expense reimbursement policy.
An employee is not entitled to reimbursement under this Section if (i) the employer has an established written expense reimbursement policy and (ii) the employee failed to comply with the written expense reimbursement policy.
See 820 ILCS 115/9.5(b).
Should an offer letter spell out a stock option grant's terms?
A promise in an offer letter to grant a stock option does not itself grant the option. Commentary therefore recommends making any promised grant subject to any required corporate approvals and the terms of the equity plan.
A letter that restates the terms in its own words can create a second, competing version of them. In Maples v. SolarWinds, Inc. , a single federal trial-court decision about an advisor's letter agreement rather than an employee's offer letter, the letter stated its own deadlines for exercising the options, and the court found them inconsistent with the terms the letter incorporated by reference from the stock option agreement. The court read the conflicting expiration terms as an ambiguity construed against the company.
The equity line of an offer letter is where a hurried drafter types a share count, strike price, vesting schedule or acceleration term into the letter itself. A letter term that conflicts with the grant documents can be read against the company.
Sources for this answer
Cooley GO commentary explains that a promise in an offer letter to grant an option does not itself grant a stock option but may give rise to a claim if the option is not granted.
A promise to grant an option in an offer letter, employment agreement, or a consulting agreement, even if signed by the company, does not actually grant a stock option, though it may give rise to a claim by the employee or consultant if the option is not granted.
See Cooley GO, Five Common Mistakes Companies Make When Issuing Stock Options to US Service Providers (last reviewed June 13, 2025).
Poyner Spruill commentary recommends that any mention of incentive compensation grants be expressly subject to the plan and any required corporate approvals.
Any mention of incentive compensation grants should be expressly subject to the terms of the plan and any required corporate approvals.
See Poyner Spruill LLP, Practical Advice for the Business Owner: Avoiding common mistakes when making incentive compensation grants to employees (Apr. 21, 2016).
The federal district court in Maples v. SolarWinds, Inc. found that the advisor letter agreement stated explicit option-exercise deadlines inconsistent with those incorporated by reference from the stock option agreement.
However, the Advisor Agreement is not silent, and, in fact, provides explicit criteria and deadlines governing the exercise of the options which are inconsistent with those purportedly incorporated by reference from the Stock Option Agreement.
See Maples v. SolarWinds, Inc., 50 F. Supp. 3d 1221 (N.D. Cal. 2014).
The federal district court in Maples v. SolarWinds, Inc. held that conflicting option-expiration provisions in the letter agreement and the option documents created an ambiguity construed against the company.
At the very least, these conflicting expiration provisions create an ambiguity which is construed against Solar-Winds.
See Maples v. SolarWinds, Inc., 50 F. Supp. 3d 1221, 1230 (N.D. Cal. 2014).