It is not uncommon for employers to issue a covering letter setting out the headline terms of employment when approaching a candidate for a role. Comfort is often taken from describing the offer as “conditional”, subject to references and / or right to work checks. The assumption is that no binding contract exists until those conditional steps are satisfied and that the offer can therefore be withdrawn at that stage without risk.
A recent Employment Appeal Tribunal (EAT) decision in Kankanalapalli v Loesche Energy Systems Ltd is a sharp reminder that this assumption can be misplaced.
The Facts
The claimant, Mr Kankanalapalli accepted an offer for a project manager role, which was expressed to be subject to satisfactory references, a right to work check and a probationary period. The role required relocation and a start date had been agreed, but notably, no notice period was provided in the headline terms.
Following acceptance, the usual onboarding steps began before Mr Kankanalapalli started the role. The claimant provided personal details, right to work documentation and referee information.
However, shortly before the start date, the employer withdrew the job offer citing project delays. The employer’s position was straightforward: the offer was “conditional” (suitable references and right to work check), the conditions had not yet been satisfied, and therefore no binding contract had come into existence. Mr Kankanalapalli disagreed with the employer’s position and brought employment tribunal proceedings.
Employment Tribunal
At first instance, the Employment Tribunal rejected the claim. It accepted that the offer had been validly accepted, but concluded that no binding contract had arisen because the conditions relating to references and the right to work check had not yet been satisfied. These were treated as conditions precedent to contract formation, meaning a contract had not been formed until these requirements were satisfied. In the alternative, the tribunal held that even if a contract had existed, no notice was required given the employee’s short period of service, and that the employer had in any event provided one week’s notice.
The EAT’s view
In short, the Employment Appeal Tribunal disagreed with the Employment Tribunal’s approach. The key issue in the eyes of the EAT was whether the conditions attached to the offer (suitable references and right to work check) were conditions precedent (preventing a contract from arising until satisfied) or conditions subsequent (operating to terminate a contract if not satisfied).
On the facts, the EAT found that a binding contract had been formed when the offer was accepted by Mr Kankanalapalli.
In reaching its decision, the EAT took into account a number of factors, including:
The offer letter set out the key contractual terms
The employee had taken steps consistent with employment commencing
The employer had begun onboarding (including arrangements such as a security pass)
The wording around references suggested termination if unsatisfactory, rather than no contract existing until provided.
The conditions were deemed to be subsequent, not precedent. That meant the employer could not simply withdraw the offer. It needed to terminate the contract.
As there was no express agreement as to notice at the point the contract was formed, it meant the tribunal had to imply a term of reasonable notice. Importantly, the EAT made clear that this assessment must be based on what the parties had agreed or intended at the time of contract formation.
Taking into account factors such as the seniority of the role, the length of the recruitment process, the requirement for relocation and the employer’s expectation that the claimant secure a 12-month rental, the EAT held that three months’ notice was reasonable in the circumstances. The result was a successful breach of contract claim and an award of three months’ notice pay to Mr Kankanalapalli.
What does this mean in practice?
There are a few clear takeaways for employers:
“Conditional” is not a shield: Simply labelling an offer as conditional does not prevent a binding contract from arising.
Drafting matters: If you intend conditions to prevent a contract from forming, they need to be clearly expressed as conditions precedent.
Withdrawal may mean termination: If you need to pull an offer post-acceptance, it is worth taking legal advice.
Notice may be more than you expect: In the absence of express terms, tribunals will look at the reality of the situation and senior hires or relocation cases can push notice periods well beyond the statutory minimum.
This case is a useful reminder that the risk point for employers is not just when employment begins, but when the offer is accepted. Get it wrong, and a withdrawn offer can quickly become a larger than expected financial liability.
A copy of the full judgment can be read here.
If you are looking for legal advice relating to the situation described in this article or any other Employment law issue. Please contact our Employment team, who will be happy to help.
