Sometimes, an employer wants to withdraw an offer of employment, especially when the offer was conditional. But what if the employee has already accepted?

When can the offer be revoked? In September 2022, the Employment Relations Authority (Authority) in Edwards v Laybuy Holdings Limited clarified that a conditional offer of employment cannot be accepted until all pre-conditions of the offer have been met. The consequence is that where an offer of employment is subject to pre-employment checks (or any other conditions), the person accepting the offer is not yet an “employee”, and cannot bring a personal grievance until the pre-employment checks have returned to the employer’s satisfaction.

Background

Mr Edwards was offered employment by Laybuy Holdings (Laybuy), which he formally accepted. The offer was expressed as being conditional on the completion of pre-employment checks by Laybuy, which expressly reserved its right to withdraw the offer should the checks come back unsatisfactory. Mr Edwards declared “a number of matters of interest” to Layby, who upon further investigation elected to withdraw the offer of employment. Initially Mr Edwards appeared to accept this decision, but some months later raised a personal grievance for unjustified dismissal on the basis he was an employee from the time he accepted the offer, with Layby’s withdrawal amounting to a repudiation. Specifically, he argued that the definition of “employee” under section 6 of the Employment Relations Act 2000 (ERA) includes a “person intending to work”, and that following his acceptance of Layby’s offer of employment, that was precisely what he was.

Decision

The Authority held that the offer was conditional, and as the conditions attached were not fulfilled or waived by Laybuy, there was never a completed offer and acceptance. Mr Edwards could not therefore be a “person intending to work” for the purposes of section 6.

The Authority noted that the situation of a conditional offer is distinct from a conditional contract, the latter of which is established as binding with performance suspended until the condition is fulfilled.

The approach taken in Edwards v Laybuy is consistent with other recent decisions of the Authority, such as Kennedy v Field Nelson Holdings Ltd. In this case, Mr Kennedy was offered employment by Mitre 10, which he accepted. This offer was also conditional on satisfactory reference and pre-employment checks. Due to concern over undisclosed results in Mr Kennedy’s references, the offer was revoked. Similarly, the Authority concluded that that prospective employees in such situations are not “a person intending to work”.

This can be contrasted with situations where an offer is not expressed as conditional. In PCA v David Orsbourn Medical Services Ltd t/a Enhanceskin, the offer of employment was not conditional upon pre-employment checks. When allegations of theft arose in relation to PCA’s previous employment, Enhanceskin withdrew the offer of employment and PCA raised a personal grievance for unjustified dismissal. However, in this case, PCA was considered an employee. The fact that PCA had not commenced employment did not change this, it was enough that there was a concluded agreement, and that PCA was a “person intending to work”.

Key Takeaways

Edwards v Laybuy reaffirms that if an employer wants to retain the ability to withdraw an offer of employment, it must express the offer as conditional. Otherwise, the contract will be concluded as soon as the employee accepts it.

This decision has its limits. The Courts have made clear that extending the definition of “employee” to include “a person intending to work” was provided for the limited purpose of allowing an employee to bring a claim for unjustified dismissal during the period before actual work begins. Even if the offer of employment was expressed as conditional, if the person has commenced work, the Authority will view the arrangement between parties as a conditional contract and the worker will likely be an employee for the purposes of section 6 of the ERA. The failure to meet a condition in a conditional contact may be a reason for dismissal as long as an employer satisfies the test for justification.