In this case, the EAT held that an employer had breached an employee's contract by withdrawing a conditional job offer without notice for reasons unrelated to the conditions, even though the employee had not yet started work. As the contractual documentation was silent on notice, a term of reasonable notice (three months) had to be implied into the contract. The employer was therefore required to pay damages equivalent to three months' notice pay.
Facts
Mr Kankanalapalli was offered a project manager role with Loesche Systems Limited (Loesche) in September 2022. The offer was expressed to be subject to receipt of satisfactory references, a right to work check, and a six month probationary period. The offer letter proposed a start date of 1 November 2022, and set out key terms, including salary, hours, benefits and a job description.
Having accepted the offer by email, Mr Kankanalapalli completed new‑starter paperwork, including providing referee details and electronic right‑to‑work documents. However, in October 2022, Loesche informed Mr Kankanalapalli that due to a delay to the commencement of the project, it was no longer able to offer him the role.
Mr Kankanalapalli claimed that Loesche's withdrawal of the offer without notice amounted to a breach of contract. An employment tribunal dismissed his claim, holding that at the time it was withdrawn, the offer remained conditional so there was no binding contract in place.
The EAT upheld Mr Kankanalapalli's appeal, holding that where an offer is expressed to be subject to conditions, whether its acceptance creates a binding contract depends on the proper construction of the offer. If the conditions are conditions precedent, then a binding contract will not be formed until those conditions are satisfied. If they are conditions subsequent, then acceptance of the offer will give rise to a binding contract which can be terminated if any of the conditions is not met.
In this case, the offer had been accepted and the conditions - of satisfactory references, a right to work check, and a successful probationary period - were all conditions subsequent. (The fact that all three conditions were grouped together in the offer letter, and the probation condition could only be satisfied after employment began, supported this interpretation.) A binding contract of employment was therefore in existence. Although that contract could be terminated if any of the conditions was not fulfilled, Loesche did not have an unrestricted right to withdraw the offer for reasons unrelated to those conditions.
The offer letter did not specify a notice period, so a reasonable notice period had to be implied. The EAT held that what is reasonable will depend on the circumstances in each case, and that implied reasonable notice may exceed the statutory minimum notice periods set out in the Employment Rights Act 1996. Taking into account the duration of the interview process, the seniority of the position, and the fact that Mr Kankanalapalli was relocating to the UK to take up the job, the EAT considered that three months would be a reasonable notice period. It rejected Loesche's contention that shorter notice would be reasonable during the probation period, as this was never suggested or agreed with Mr Kankanalapalli when the contract was entered into.
The EAT concluded that Loesche's withdrawal of the offer amounted to a breach of contract, and ordered Loesche to pay Mr Kankanalapalli the sum of three months' notice.
What does this mean for employers?
The decision in this case serves as a warning to employers that labelling an offer “subject to references” or “subject to right to work checks” does not prevent the creation of a binding contract. If employers intend any conditions to operate as conditions precedent, such that no binding contract is formed until the conditions are satisfied, this must be stated expressly.
It also highlights the importance, where an employer's practice is to send an initial offer letter and follow up with a full contract once the offer is accepted, of including notice provisions in the offer letter. This should cover both the standard notice period and any shorter notice period that would apply during probation. This should avoid the risk of a tribunal implying a longer "reasonable" notice period, and ordering the employer to pay damages in respect of that period in the event of a dispute over the withdrawal of the offer.
