A recent decision of the EAT (Employment Appeal Tribunal) provides a timely reminder that withdrawing a job offer is not always risk free, even where employment has not yet begun and the offer is expressed to be ‘conditional’.
The case in brief
In Kankanalapalli v Loesche Systems Limited, the EAT held that an employer breached an employment contract by withdrawing a job offer without notice for reasons unrelated to the stated conditions. Crucially, the Employment Tribunal had initially found that no binding contract existed because the offer was conditional. The EAT disagreed.
Mr Kankanalapalli was offered a project manager role in September 2022. The offer was subject to satisfactory references, a right to work check, and a six month probationary period, with a proposed start date of 1 November 2022. He accepted the offer, completed new starter documentation, and provided the necessary information to progress pre employment checks.
Before he commenced employment, Loesche informed him that the role was being withdrawn due to a delay in the relevant project. Mr Kankanalapalli brought a breach of contract claim, arguing that the offer could not be withdrawn without notice.
Conditions precedent or subsequent
The central issue was whether the conditions attached to the offer prevented a binding contract from coming into existence. The EAT reiterated that this depends on proper contractual construction. If conditions are precedent, no contract is formed until they are satisfied. If they are subsequent, a binding contract is created on acceptance, subject to termination if the conditions are not met.
In this case, the EAT concluded that the conditions were conditions subsequent. The grouping of all conditions together, and the fact that probation could only be assessed after employment commenced, supported that interpretation. As a result, a binding contract of employment existed as soon as Mr Kankanalapalli accepted the offer. While Loesche could have terminated the contract if the conditions were not fulfilled, it had no unrestricted right to withdraw the offer for unrelated business reasons.
Implied notice and financial consequences
The offer letter did not specify any notice period. As a result, the EAT implied a term requiring reasonable notice. Considering the seniority of the role, the length of the recruitment process, and the fact that Mr Kankanalapalli was relocating to the UK, the EAT held that three months’ notice was reasonable. Loesche was ordered to pay damages equivalent to three months’ pay.
Practical lessons for employers
This decision underlines that describing an offer as “subject to references” or “subject to right to work checks” does not, without more, prevent a binding contract from arising. If employers intend conditions to be conditions precedent, this must be made explicit.
It also highlights the importance of including clear notice provisions in offer letters, including any reduced notice during probation. Failing to do so risks a tribunal implying a longer period of ‘reasonable’ notice, with potentially costly consequences if an offer is withdrawn.
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