Many employers assume that withdrawing a job offer before someone starts work is a low-risk decision.
A recent Employment Appeal Tribunal ruling suggests otherwise. It held that the withdrawal of a conditional job offer amounted to a breach of contract, even though the employee had not actually started work, and that the financial consequences can be significant.
The case of Kankanalapalli v Loesche Energy Systems Ltd is a timely reminder that a job offer, even one labelled “conditional”, can amount to a binding contract the moment a candidate accepts it.
What happened?
A candidate was offered a role as a project manager, subject to satisfactory references, a right to work check, and successful completion of a six-month probationary period. The offer letter referred to key terms such as salary and a start date, but it did not mention a notice period. The employer also agreed to contribute towards relocation costs.
The candidate accepted the offer by email and completed the new-starter paperwork, including providing referee details and the required right to work documents.
A few weeks later, the employer withdrew the job offer because of delays in the project. The candidate brought a claim for breach of contract, citing the withdrawal of the offer and failure to pay any notice pay.
What did the Employment Tribunal and EAT decide?
The Employment Tribunal dismissed the claim. It held that the job offer was conditional and that the employer had not yet received references or completed the right to work checks (which required original documents). The contract had therefore not been formed.
The EAT disagreed. The key question was the nature of the conditions attached to the offer and whether they were:
“Conditions precedent”, that is, conditions that must be satisfied before any contract is formed) or
“Conditions subsequent”: whereby acceptance of an offer gives rise to a binding contract, but if the conditions are not satisfied, the contract terminates.
The conditions were grouped together in the offer letter, and one (passing the probationary period) could only be satisfied after employment began. As there had been no attempt to differentiate between the different conditions, this prevented the EAT from finding that they could be conditions precedent.
The offer letter included the key terms, both parties had treated the contract as binding, and the employer had started the onboarding process. Consequently, the employer did not have an unrestricted right to withdraw the offer for reasons unrelated to the conditions subsequent.
Finally, as the offer letter was silent on notice, the EAT had to imply a reasonable notice period. Taking into account the role’s seniority, the relocation requirement, and the lengthy interview process, it was concluded that three months’ notice would be a reasonable period, which the employer was required to pay.
What does this mean for your business?
The case highlights several practical steps employers should take when making job offers:
Labelling an offer “conditional” is not enough on its own and will not prevent a binding contract from forming or a breach of contract if the job offer is withdrawn. If you intend certain conditions to be met before a contract exists, those conditions need to be clearly spelled out, with pre-contract conditions listed separately from post-start conditions, such as probation.
Always include a notice period in the offer letter, covering both the probationary period and the post-probation standard notice period after probation has been successfully completed. If you don’t, the Employment Tribunal will imply one, and it may be longer than you’d expect.
Before withdrawing any offer, take legal advice to ascertain whether the job offer was conditional or unconditional. Depending on the seniority of the role and the implied or stated notice period, a successful breach of contract claim can mean significant compensation as well as considerable management time.
Finally, it’s worth reviewing your current offer letter templates to ensure key terms are included and that the conditional nature of any offer is clearly and correctly expressed.
A little extra care at the offer stage is far less costly than defending a claim if a job offer is withdrawn.
Read more:
Withdrawing a job offer can cost you more than you think