When does an employment contract become binding?
This morning I had a client call me wanting to know if they could withdraw an offer of employment they had made to an individual who hadn't yet started with them.
Withdrawing an offer of employment is a task no company wants to be faced with - especially when you thought you’d found the perfect candidate. However, sometimes withdrawing a job offer is necessary, so it’s important you’re fully equipped and know how to address the situation.
And, unfortunately, as with so many things in the employment sphere, "it depends"...
What reason would an employer have to withdraw an employment offer?
It takes plenty of time and effort to find the right candidate in today’s competitive job market and the last thing any employer wants is for all of that time, effort and energy to go to waste. But, sadly, sometimes it has to happen'
A sudden change in company finances or circumstances can make the offered role unsustainable.
Internally there may have been mistakes made as part of the hiring process, such as double filling a position, or improper conduct in the interview process.
The offer may have been sent to the wrong candidate in error.
In rare cases, the withdrawal of a job offer may be necessary because the candidate behaves in a way that causes the hiring team to decide they are not the right fit after all. This could be down to the candidate handling the offer unprofessionally by delaying, being rude to the recruiting staff, or trying to renegotiate the salary offer after accepting the role.
In other instances, routine checks on the candidate can return a criminal record, failed drugs test, falsified qualifications or unsatisfactory references. This is in part why conditional offers are common for many companies, as a way to protect themselves when hiring new staff, but I'll touch on that soon....
So, first things first... Has the offer been accepted?
Up until the job offer is accepted by the individual, the employment offer can be withdrawn at any time. In such instances, withdrawing the offer can be as simple as sending a letter to the candidate advising that the offer has been withdrawn and the reasons for this.
However, if an offer of employment has been made, and accepted, the individual then becomes "a person intending to work" whether or not they have signed an employment agreement, and is entitled to the same protections as someone who has commenced work. This applies even if the offer and acceptance verbal, and the employer had not yet provided a "formal offer of employment" or written employment agreement.
In short if an individual accepts a job offer, agrees on key terms of your employment (for example, pay) and all conditions have been met (for example, having satisfactory references and criminal record checks), the job offer becomes a binding contract, even if the individual has not started work.
But what if the conditions have NOT been met?
If the offer was conditional, an employer can rescind a job offer at any time if it’s found that the conditions set out in the offer have not been met.
These conditions can include:
Failing to hold or provide qualifications specific to that job role
Not being able to provide satisfactory references
Being unable to demonstrate eligibility to work in the country
Being unable to pass any background checks that have been requested.
Again, this can be as simple as sending a letter to the candidate advising that the offer has been withdrawn and the reasons for this. However, if a job is offered unconditionally (where no conditions are stated as part of the offer) and the candidate accepts, it becomes a much trickier task.
And if there were no conditions and the offer was accepted....
As mentioned above, a contract becomes binding at the moment the offer of employment was accepted. And it is important to remember that this is the case for a verbal job offer and acceptance, as it is considered just as valid as a written job offer.
To avoid any legal issues, it helps to treat the withdrawal of an unconditional job offer in the same way expected when terminating active employment, as this is technically what is happening. This means serving any relevant notice appropriate to the company's policy.
When withdrawing an offer of employment, it’s also essential an employer make certain that such a withdrawal of offer is not discriminatory or otherwise unfair. If any of the following aspects have influenced the decision to withdraw the offer - stop.
Age
Disability
Gender
Relationship status
pregnancy and maternity
Race
Belief
Sexual orientation
Following through with this could also open an employer up to legal action from the individual by means of a personal grievance.
But it is not impossible...
While withdrawing an unconditional offer that has been accepted is much more complex, it is not impossible. The best practise that we would encourage of an employer in this situation is to call the individual to discuss the withdrawal of the offer. This provides an opportunity to be open and honest about why the organisation is making the tough decision.
If it’s an internal error, say so. If it is due to a change in financial circumstances, explain this to them. Most people appreciate other individuals being straightforward, honest and transparent with them.
Where an employer takes the time to approach the (now technically) employee in this manner, it reduces the chance they will feel alienated, and leaves the door open to reach out again in the future, should another suitable role come up within the organisation. We also recommend you follow up this call with an official letter, as this shows professionalism while also acting as a formal notice.
And those 'employees' that started working without a formal offer or contract...
An employee who does not have an agreement prior to beginning work may then bargain on each and every point in the agreement, when that is eventually presented after commencement of employment. Both parties may then negotiate over the terms until they come to agreement.
Disclaimer
This article, and any information contained on our website is necessarily brief and general in nature, and should not be substituted for professional advice. You should always seek professional advice before taking any action in relation to the matters addressed.