Introduction
The recent decision of the Employment Appeal Tribunal (“EAT”) in Kankanalapalli v Loesche Energy Systems Ltd is an important reminder to HR teams and recruiters who issue conditional offers of employment. Even offers which are stated to be “subject to” the fulfilment of certain conditions, can become binding sooner than you might expect, leading to potential breach of contract claims if the job offer is withdrawn.
The facts
- The employer (“Respondent”) offered the Claimant a project manager role in September 2022.
- The offer was expressed to be “subject to receipt of satisfactory references, a right to work check and a successful six month probation period”. The offer letter set out the key terms and proposed a start date of 1 November 2022, although it did not specify the length of the notice period.
- The Claimant accepted the offer by email.
- The next month (before the anticipated start date), the Respondent advised the Claimant that the project manager role was no longer required and the job offer was withdrawn.
- The Claimant brought a claim for breach of contract, arguing that the offer was withdrawn without appropriate notice. The Respondent argued that the conditions attached to the offer had not been satisfied by the time the offer was withdrawn, so there was no contract in the first place.
The Employment Tribunal (“ET”) found that the offer was subject to two conditions: (i) the receipt of satisfactory references, and (ii) the carrying out of a right to work check. It found that neither of the two conditions had been satisfied, so there was no binding contract between the parties when the offer was withdrawn.
The decision of the EAT
The Claimant appealed and the EAT overturned the decision of the ET.
The EAT found that the conditions specified in the offer letter were not precedent to the contract coming into existence. All those conditions, i.e. the right to work checks, the employment references and the 6-month probation period, were conditions subsequent. This means they were grounds to terminate the contract if those conditions were not satisfied, but they did not prevent the contract from coming into existence in the first place.
The court relied on the fact that the offer letter set out all the key terms of the contract: the start date, salary, hours of work, job description, holidays, bonus, and pension. Furthermore, the Respondent had taken steps for the Claimant’s employment to begin, including organising his security pass. In addition, all three conditions were grouped together, and one of them must have been a condition subsequent: the satisfactory conclusion of a probationary period, which can only occur after the contract has started. There was no attempt in the offer letter to differentiate the other two conditions as being conditions precedent.
For these reasons, the EAT concluded that a contract of employment had been formed, but it was one that could be terminated if any of the specified conditions were not satisfied. The court further held that in the absence of a defined notice period, a “reasonable” notice period of 3 months was implied into the contract, and the employer was therefore in breach of contract by failing to give (and pay for) such notice. A three-month notice period was considered reasonable bearing in mind factors such as the seniority of the role, the lengthy recruitment process and the fact that the Claimant was going to relocate from overseas for the job.
What does this mean for employers?
This decision sends a clear warning to employers that offers of employment cannot be withdrawn freely or without notice simply because they are expressed to be “subject to” conditions. Where an offer sets out the key terms of employment and it is accepted, a binding contract may be formed even if certain conditions have not yet been met. Furthermore, a reasonable notice term can be implied for withdrawal of an offer before employment has commenced if no notice period has yet been specified.
Employers should ensure that their offer letters:
- State clearly whether conditions are precedent to formation, or subsequent grounds for termination, of the contract.
- Set out when each condition must be satisfied and the effect of non-compliance.
- Include a notice period clause (which, in any event, is a requirement of a compliant contract of employment under section 1 of the Employment Rights Act 1996). If an employer wishes to give a shorter period of notice prior to commencement of work (or no notice at all, which is possible in the period up to one month’s continuous employment) then this should be stipulated separately from the notice period which applies once the employee has begun working.
