The EAT held in Kankanalapalli v Loesche Energy Systems that an employer’s withdrawal of a ‘conditional’ job offer was a breach of contract entitling the applicant to notice pay.
The particular circumstances in the case meant that the conditions set out in the offer letter (satisfactory references, right to work checks, and the completion of a probationary period) applied after the contract began, rather than before the contract could come into existence. As a legally binding contract had already been formed, the job applicant was entitled to notice pay when the offer was withdrawn.
What happened?
The claimant, Mr. K, applied to the employer for the post of project manager. He was offered the job on 23 September 2022 following an interview process. The offer letter, sent by email, proposed 1 November as the start date, and included the following wording:
"I am pleased to offer you the position of project manager for Loesche Systems Limited. This is subject to receipt of satisfactory references, a right to work check and a successful six-month probation period which will commence on your start date. The contract of employment will be forwarded to you before your first day."
Following some discussion regarding relocation arrangements and expenses, Mr. K emailed the employer on 26 September stating ‘Please take it that I accept the offer’, and the employer acknowledged this in positive terms the following day.
As requested by the employer, Mr. K. completed and returned paperwork sent alongside the offer letter, specifically a ‘new starter information form’ and a form containing reference contact details. The employer acknowledged receipt of these documents on 6 October 2022, reminding Mr. K to email documents confirming his right to work in the UK, and that they would need to see the original documents on his first day at work. The claimant emailed the documents that day. He was also asked to return a signed copy of the offer letter but did not do so.
On the following day, 7 October, the employer advised Mr. K that ‘notice to proceed’ on the project had been delayed, and the project manager role would not now be available until January 2023. Mr. K had already made arrangements to relocate in advance of the original anticipated start date and brought a claim in the employment tribunal for breach of contract.
In the employment tribunal
The employment tribunal that first heard the case dismissed Mr. K’s breach of contract claim.
It held that Mr. K. had effectively accepted the offer by e-mail. It did not matter that he had not returned a signed copy of the offer letter.
However, the employment tribunal held that the job offer remained conditional when it was withdrawn, as the employer had not yet followed up on the reference contacts Mr. K had provided, or fully completed the right to work checks which required sight of original documents. The employer was therefore entitled to withdraw the job offer without any obligations towards Mr. K.
The EAT decision
Mr. K. appealed to the Employment Appeal Tribunal (EAT) which overturned the employment tribunal’s decision and upheld his claim for breach of contract.
The EAT disagreed with the employment tribunal’s view that the right to work checks and receipt of references were ‘conditions precedent’ to the contract (that is, events that must necessarily take place before a contract is formed). On the facts of this case, and in the context of the correspondence between Mr. K and the employer, they were both in reality ‘conditions subsequent’ to the contract. In other words, a contract had already been formed, even though these conditions had not yet been fully satisfied.
In the EAT’s view, it was relevant that Mr. K. had completed all the steps required of him (by returning the reference form and providing his right to work documents by email). The employer had effectively agreed with him that the final step in the ‘right to work’ process (the provision of hard copy documents) could be completed once his employment had begun.
It was also relevant that these two conditions had been ‘grouped together’ with a third requirement to complete ‘a successful six-month probationary period’ which was clearly a ‘condition subsequent’ to the contract, as it could only happen once employment had begun. The employer had not attempted to distinguish this condition in any way from the requirement to provide references or complete a ‘right to work’ check.
As there was a contract of employment in existence that was effectively being terminated by withdrawal, Mr. K was entitled to notice. The offer letter did not specify a notice period, but the EAT decided that, given the seniority of the role K had applied for and the fact that he was relocating internationally, reasonable notice would have been three months. A term was therefore implied into the contract to that effect, and Mr. K. was entitled to three months’ notice pay.
Comment
This decision is a reminder that it is possible for a binding contract of employment to be formed before the candidate has started work, and even before all relevant onboarding steps have been completed.
Expressing a job offer as ‘subject to’ a particular condition, such as the receipt of references, will not automatically mean that no contract has been formed. That will be a matter of ‘construction’ (interpretation of exactly how the terms are laid out) in each case.
If it is considered essential that a particular condition is met before a contract of employment can be formed, it is best to expressly state this in the offer letter.
This case also highlights that where an offer letter is sent, with a full contract of employment to follow, it is helpful to specify in the offer letter the notice period that applies to the role, and any shorter notice that might apply during a probationary period. Because that information was missing in this case, the EAT chose to imply a notice period of 3 months, which was longer than the employer’s standard practice.
If an employer needs to withdraw a job offer, for a reason unrelated to any conditions the candidate has been asked to meet, timely legal advice will help to establish whether there is a contract of employment in place, and whether payment of notice may be required.
For guidance on any aspects of employment contracts, please contact our expert employment law solicitors.
