Employment Essentials: Key Risks Of Conditional Employment Offers

The recent Employment Tribunal Appeal (EAT) decision in Kankanalapalli v Loesche Energy Systems Ltd is a reminder that once an offer of employment is accepted, both the employer and employee are bound by the terms with a contract of employment being fully formed and enforceable even before the employee starts to work.

In this case, the EAT overturned a tribunal's decision to reject a breach of contract claim brought by an individual who accepted a project manager role, but whose job offer was withdrawn shortly before the scheduled start date due to project delays.

Following the decision, we highlight five key takeaways for HR teams to consider.

1. An accepted job offer creates a binding contract, even before the start date

Once a candidate accepts an offer of employment, a binding contract of employment is formed and is enforceable even before the employee's first day of work. In Kankanalapalli, the claimant's email stating "Please take it that I accept the offer" was sufficient to create an enforceable contract, and the employer's enthusiastic response, "that is excellent news and we look forward to you joining us", reinforced this. This means that once acceptance has occurred, any decision to rescind the offer must be treated as a termination of the contract on proper notice.

2. Standard pre-employment checks are typically conditions subsequent, not conditions precedent

The case considered directly whether typical pre-employment conditions such as satisfactory references, right to work checks and probationary periods are conditions precedent or conditions subsequent. This is a crucial distinction. Conditions precedent prevent the contract from forming until they are met; conditions subsequent mean a binding contract already exists but may be terminated if the conditions are not fulfilled. The EAT found that, on the facts, these standard conditions were conditions subsequent, meaning the employer was already contractually bound from the point of acceptance. The EAT placed particular weight on the fact that the offer letter set out the key contractual terms, that documentation was prepared for the claimant's first day (including arrangements for a security pass), and that the referee form used the wording "my employment may be terminated without…satisfactory references" — language that presupposed the existence of a contract, rather than stating there was no contract until references were received.

HR professionals should not assume that including standard pre-employment conditions in an offer letter will prevent a binding contract from arising.

3. Clear drafting is essential to make employment conditional on pre-employment checks

If an employer genuinely wishes to prevent a contract from forming until certain conditions are satisfied, clear and unambiguous wording is required. Simply listing conditions in an offer letter as being "subject to" various requirements will not necessarily achieve this, as the Kankanalapalli case demonstrates. The EAT noted that the three conditions in the offer letter were grouped together with no distinction between conditions precedent and subsequent.

To avoid ambiguity, the offer letter should explicitly state that no binding contract of employment will come into existence until the specified conditions have been met. Additionally, HR teams should consider whether the start date itself should be made conditional — for example, in project-based roles, making the start date conditional on the finalised project contract date could have provided valuable protection for the employer in this case.

4. Consider including an express notice clause in the offer letter

The absence of a notice clause in the offer letter was a significant pitfall in Kankanalapalli. Because there was no discussion of notice when the contract was formed and nothing in the documents addressed it, the common law requirement of reasonable notice had to be implied. Crucially, this implied reasonable notice period can exceed the statutory minimum under the Employment Rights Act 1996.

The EAT held that the tribunal had erred in looking at the employer's standard employment terms disclosed only during the litigation, because the proper focus should be on the position of both parties at the time of contract formation. Taking into account the seniority of the role, the international relocation requirement, the length of the recruitment process, and the employer's own suggestion that the claimant secure a 12-month rental, the EAT concluded that a three-month notice period was reasonable.

HR should review their template offer letters and employment contracts and consider including an express notice clause specifying the notice period required from both parties. Without one, a tribunal may imply a period of reasonable notice that is considerably longer and more costly than the employer anticipated.

5. Conduct during the recruitment process can increase your exposure

The facts in Kankanalapalli illustrate how an employer's own conduct can shape the contractual position and the extent of its financial liability. The employer encouraged the claimant to relocate internationally, offered £3,000 in relocation expenses, and suggested he secure a 12-month rental. The claimant booked flights for himself and his wife on the strength of these assurances. All of these factors were taken into account by the EAT in determining that a three-month notice period was reasonable.

HR teams should be conscious that representations made during the recruitment process, particularly those encouraging relocation, financial commitments, or long-term planning, can significantly increase the implied notice period and, consequently, the employer's potential damages liability if it later seeks to withdraw or terminate the arrangement without adequate notice.

Read the original article on GowlingWLG.com