Case Study: Withdrawing offer of employment led to liability for ‘reasonable’ notice pay

In the recent Employment Appeal Tribunal (EAT) case of Kankanalapalli v Loesche Energy Systems Limited, an accepted job offer was found to be a binding contract of employment, despite it being conditional on certain requirements. This case is a useful reminder of the importance of giving due consideration to the drafting of offers of employment, ensuring that intentions are clear and including key terms of employment.

In this article, we look at key considerations when making a job offer, why the EAT found there to be a binding contract in this case and how to reduce the risk of liability when making offers of employment.

When does a job offer become legally binding?

A job offer is often the point at which recruitment discussions crystallise into legally enforceable obligations, so it is important to treat the offer letter as more than an administrative formality.

In particular, an offer described as “conditional” may still give rise to a binding contract once accepted, depending on how the conditions are drafted and intended to operate.

Where the wording is unclear or key terms are missing from the offer letter, employers may inadvertently create unintended contractual obligations.

Making an offer of employment: conditional and unconditional

This section highlights the core points employers should cover to reduce the risk of unintended liability, including using clear conditions and setting out key terms (especially notice).

When making an offer of employment, employers should be clear whether the offer is:

• Unconditional, or
• Conditional, subject to specified pre-employment checks

Common conditions include:

• Satisfactory references
• Right to work
• DBS checks (where appropriate)
• Evidence of qualifications

It is important to ensure these are drafted precisely so it is clear when they are satisfied and what happens if they are not.

Employers should also assume that an accepted offer may create a binding contract (even where expressed to be “conditional”), so the offer documentation should set out the key terms, including:

• Start date
• Pay
• Role
• Hours
• The notice and termination rights which apply

Kankanalapalli v Loesche Energy Systems Limited: key facts

The claimant was offered the post of project manager subject to satisfactory references, a right to work check and successful completion of a six-month probationary period. The offer letter also set out the key terms of the contract, including a start date of 1 November 2022, the salary, hours, holidays, bonus and pension. It did not specify a notice period.

The claimant accepted the offer by email on 26 September 2022 and subsequently emailed a completed new starter form, referee details and right to work documentation, with originals to be provided on the start date.

On 11 October 2022, the employer informed the claimant that it was withdrawing the job offer due to project delays. The claimant issued a claim for breach of contract.

Employment Tribunal dismisses claim

The Employment Tribunal dismissed the claimant’s claim, finding there was no binding contract because the offer remained conditional when it was withdrawn (still subject to conditions ‘precedent’ to the formation of a contract); alternatively if a contract had existed, it implied that as the claimant had less than one month’s service, no notice was required.

Kankanalapalli v Loesche Energy Systems in the Employment Appeal Tribunal

The EAT found that the Employment Tribunal’s approach to conditional offers was legally flawed. The Employment Tribunal failed to grapple with submissions on whether the conditions were precedent versus subsequent.

The EAT held that the conditions in the offer letter were ‘subsequent’, based on the facts of this case. This meant that a binding contract had arisen but could be terminated if the conditions were not fulfilled.

No notice term had been agreed and therefore, the EAT implied a term requiring reasonable notice to terminate. On the particular facts of the case, including seniority, relocation context, length of the recruitment process and communications suggesting commitment, reasonable notice was deemed to be three months. Terminating without notice was a breach of contract.

Reasonable notice pay where no notice period is agreed

Where an employment contract does not contain an express notice clause and is not for a fixed term, the courts may imply a term that it may be terminated on reasonable notice.

What amounts to “reasonable” notice will depend on the facts, including:

• Typical notice period for a job in that industry
• Seniority of the employee
• Notice period of any colleagues who have express contractual terms
• Expectations created during the recruitment process

This case is a clear warning that withdrawing an accepted job offer without notice can result in an obligation to pay notice, even before employment has formally commenced.

Reducing risk of liability: ensure the offer of employment letter reflects true intentions

In practice, the safest approach is to ensure the offer letter and any accompanying communications accurately reflect the employer’s intentions and the level of commitment it is prepared to assume at that stage.

Make it explicit as to whether any pre-employment checks are conditions to the formation of the contract, set out key terms (including any notice period), and keep wording consistent across the offer, contract and policies you intend to incorporate.

Keeping a clear audit trail of what was offered and accepted, will also help reduce the risk of unexpected liability for breach of contract.

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