A Flippant Decision Resulting in a Costly Outcome: What Employers Need to Know About Withdrawing a Job Offer

With several changes to employment law occurring this year, considering the financial implications of withdrawing a job offer after acceptance could easily slip through the net, and a recent case heard by the Employment Appeal Tribunal, Kankanalapalli v Loesche Energy Systems, acts as a timely reminder.

Background

In Kankanalapalli v Loesche Energy Systems, Mr Kankanalapalli (the Claimant) was offered the role of Project Manager, subject to the following conditions:

• Satisfactory references;
• A right to work check; and
• The successful completion of a six-month probationary period.

The offer letter included the key terms of the employment contract but was silent about a notice period. Following a discussion between the Claimant and Loesche Energy Systems (the Respondent), it was agreed that the Respondent would contribute £3,000 towards the Claimant’s relocation costs. The Claimant subsequently accepted the job offer and emailed a completed new starter form, his referee details and electronic copies of his right to work documentation, stating that he would provide originals on his start date.

Three weeks before the proposed start date, the Respondent informed the Claimant that, due to project delay, it was no longer able to offer the contract.

Employment Tribunal

The Claimant brought a claim against the Respondent in the Employment Tribunal (ET) for breach of contract. The Respondent argued that no contract had been formed and thus there had been no breach, as the job offer remained conditional when it was withdrawn. The ET agreed with the Respondent’s approach and subsequently, the Claimant’s claim was dismissed.

Employment Appeal Tribunal

The Claimant appealed to the Employment Appeal Tribunal (EAT). Judge Walker ruled that the condition of the successful completion of a six-month probationary period was clearly subsequent, as this can only occur after the contract has started. She explained in her reasons that, because there was no attempt to differentiate between the three conditions as either precedent or subsequent in the offer letter, all three were to be grouped together and interpreted as conditions subsequent. The effect of this was that a contract was found to have been formed, and therefore notice should have been given to terminate the contract when the offer was withdrawn. As the contract was silent on notice, reasonable notice was required to be given, which could be more than the statutory minimum of one week depending on the circumstances. In these particular circumstances, Judge Walker decided three months’ notice would be reasonable, given the Claimant’s seniority, the lengthy recruitment process and the Claimant’s international relocation. In failing to give reasonable notice, the Respondent had breached the contract, and it was therefore ordered to pay the Claimant a sum equivalent to his three months’ notice.

What does this mean for employers?

This case is an important reminder that a binding contract can be formed and therefore be enforceable once a job offer has been accepted, even before the employee’s start date. Breaching this contract can be costly and employers should be clear on their obligations when withdrawing a job offer after acceptance.

Where employment contracts or offer letters are silent on the amount of notice required to terminate the contract lawfully, employers should be mindful about what would be considered reasonable notice in the circumstances, rather than defaulting to the statutory minimum period of one week.  Not serving any notice, or the insufficient amount of notice to terminate the contract can be a costly mistake and give rise to a claim for damages.

Recommended steps

• Be sure to include clear wording in offer letters about whether conditions of someone’s employment are precedent or subsequent
• Include express notice clauses in offer letters and employment contracts and ensure that they are consistent with each other
• If you are considering withdrawing an offer of employment after it has been accepted, chances are you will have to give some notice to the other party. You should seek legal advice as to the correct amount of notice, and process to be followed, even if the employee has yet to start their employment

If you would like any guidance on this particular topic or would like to enquire about a review of your internal processes, please get in touch with us on 01904 437680.