Case update
A conditional job offer does not prevent a binding employment contract from being formed – and “reasonable notice” may be implied to terminate the contract
The Employment Appeal Tribunal (EAT) recently overturned a decision by the Employment Tribunal (ET) and found that a job offer expressed to be conditional nevertheless gave rise to a binding contract. The EAT implied a requirement for reasonable notice where no express pre‑start termination provision existed.
Employers who regularly make conditional offers and/or use of probationary periods should note our key takeaways section below.
Background
Mr Kankanalapalli (the Claimant) applied for the role of project manager with Loesche Energy Systems Limited (LES, the Respondent). Following an extensive interview process, the Claimant was offered the role on 23 September 2022.
The Claimant was sent an offer letter outlining a start date of 1 November 2022, which stated that the offer was 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 Claimant was also sent a referee form, as well as other new starter information. The offer letter did not provide any details about the notice period required to terminate the employment.
The Claimant accepted the offer of employment on 26 September 2022. However, owing to delays to the project, the Respondent withdrew the offer on 11 October 2022. The Claimant brought a claim before the ET for breach of contract, asserting that the offer was withdrawn without sufficient notice.
ET Decision
In dismissing the Claimant’s breach of contract claim, the ET held that, while the offer of employment had been accepted (albeit not in the format initially requested by the Respondent), it was subject to conditions precedent that had not been satisfied, namely the receipt of satisfactory references and the completion of the right to work check.
The ET concluded that, because the offer was conditional at the time of the Respondent’s withdrawal, there was no binding contract between the parties. Alternatively, if a valid contract had existed, the ET decided that it was an implied term that, as the Claimant had less than one month’s service, LES would not have been required to provide any notice.
EAT Decision
The EAT held that the ET had erred in finding that the conditions in the offer were precedent to a valid contract arising. Instead, it concluded that the conditions were subsequent – a binding contract had come into force but could be terminated if the conditions were not then satisfied. The EAT emphasised that an analysis of the conditions precedent / subsequent distinction would depend on the circumstances of each case. Nevertheless, on the facts, it found that the conditions were subsequent. In particular, the EAT noted that a document was sent to the Claimant preparing him for his first day of employment and arrangements had been made for his security pass. Furthermore, the referee form stated “I understand that my employment may be terminated without the provision of satisfactory references”, rather than suggesting that the existence of the contract was conditional on this point.
The EAT further acknowledged that the three conditions – receipt of satisfactory references, a right to work check and completion of a six-month probationary period – were grouped together in the offer letter; there was no attempt to differentiate between conditions precedent and subsequent, and it was clearly the case that satisfaction of a probationary period was a condition subsequent.
In relation to notice, there was no discussion about notice periods at the time the parties had entered into the contract. Consequently, the EAT deemed it necessary to imply a term of reasonable notice, which would depend on the circumstances of each case and would not merely equate to the minimum notice thresholds under s.86 Employment Rights Act 1996.
After considering the facts, the EAT concluded that a three-month notice period was reasonable. In reaching this decision, the EAT had due regard to the requirement for the Claimant to relocate for his new job, the seniority of the position, the prolonged interview process and the fact that the Respondent suggested the Claimant take on a 12-month rental. The EAT also rejected the significance of LES’s standard employment terms as evidence of the correct notice position – these terms had not been put before or agreed by the Claimant and, while the terms of another employee’s contract may be evidence of the Respondent’s practice, the EAT concluded that this did not amount to ‘custom and practice’ in justifying the implication of a term into an employment contract.
The EAT allowed the Claimant’s appeal and held that a breach of contract had occurred. The Claimant was awarded three months’ notice pay.
Practical takeaways
- An employer should clearly indicate which conditions in the employment offer are to be ‘precedent’ and which are to be ‘subsequent’. A key issue in this case was the indistinct grouping of the three conditions, one of which (the completion of a probationary period) was clearly subsequent.
- Once a candidate clearly accepts an offer of employment, a legally enforceable contract may arise immediately (where all the conditions are subsequent, rather than precedent, as in this case), even if the start date is several months in the future or if the full contract has not yet been issued or signed. It is notable that in this case, the Claimant was found to have accepted the offer, even though the Claimant had not accepted in the manner stipulated by the employer. In such circumstances, employers should treat any withdrawal after acceptance as termination of an employment contract.
- Onboarding steps, such as making practical arrangements for an employee’s first day, could evidence an employer’s intention to be legally bound, and that a contract of employment does exist.
- Employers should clearly communicate their position as to notice prior to the employee commencing employment or otherwise failing to complete a period of probation. The employment contract and offer letter should specify the notice required prior to (i) the start date (particularly if the start date is not in the near future) and (ii) the completion of a probationary period. See our article here which emphasises the need to review the length of probationary periods in light of changes to unfair dismissals laws in January 2027.
- In the absence of a clear provision on notice, a tribunal may imply a term of ‘reasonable notice.’ In doing so, an employer may not be able to rely on the positions in its standard employment contracts, particularly if such a contract has not been sent to the employee. An employer should also not assume that the notice position will be the same as the minimum thresholds under the Employment Rights Act 1996. Instead, a tribunal would look to imply a term of notice that is reasonable in the circumstances.
Disclaimer
This update should not be treated as legal advice and only provides general information on the issues discussed.
