A recent Employment Appeal Tribunal ruling in Kankanalapalli v Loesche Energy Systems Ltd is a timely reminder that withdrawing a job offer, even a conditional one, can carry real legal consequences.

Public sector organisations recruit constantly, often running lengthy processes for specialist or senior roles. It is standard practice to make offers "subject to" satisfactory references, right to work checks and a probationary period. Many hiring managers assume that until those conditions are fulfilled, no binding contract exists. The recent Employment Appeal Tribunal (EAT) decision of Kankanalapalli v Loesche Energy Systems Ltd shows that assumption can be wrong, and costly.

What happened

A candidate applied for a project manager role and was offered the position on 23 September 2022, "subject to receipt of satisfactory references, a right to work check and a successful six month probationary period". He accepted by email on 26 September, provided new starter information, referee details and right to work documents, though he did not return a signed copy of the offer letter.

On 11 October 2022, the employer withdrew the offer, citing project delays. The candidate brought a claim for breach of contract. The employer argued no binding contract had ever been formed because the conditions had not been satisfied.

What the EAT decided

The EAT sided with the candidate. On the facts, it held that a contract was formed when the candidate accepted the offer. The conditions around references, right to work and the probationary period did not have to be completed first. A binding contract had already arisen which could be terminated if the conditions weren’t satisfied. This meant that reasonable notice had to be given to lawfully terminate the contract.

Central to this finding was the fact that the offer letter contained the essential contractual terms, and onboarding steps were already underway ahead of the candidate's start date, including arrangements for a security pass. Importantly, the wording on the referee form read "I understand that my employment may be terminated without satisfactory references" rather than stating that no contract would come into existence until references had been obtained.

On notice, the EAT held that as there had been no discussion about notice when the contract was formed, a term of reasonable notice had to be implied, one that could exceed the statutory minimum. Taking into account the seniority of the role, the length of the recruitment process, the requirement for the candidate to relocate, and the employer's suggestion that he secure a 12-month rental, the EAT found that three months' notice was reasonable, and awarded three months' notice pay accordingly.

What this means for public sector employers

This risk applies to all employers regardless of sector. That said, certain features common in public sector recruitment, such as lengthy, structured selection processes, the frequency with which candidates for specialist or senior roles resign from existing positions, relocate or make other significant commitments in reliance on an offer, may in practice increase the exposure.

Key takeaways for public sector employers

1. "Subject to" wording does not automatically prevent a contract forming: The courts will look at the overall picture, including the offer letter, the onboarding steps taken, and the language used in supporting documents, to determine whether a binding contract has arisen. Do not assume that using standard conditional language is sufficient protection.
2. Be clear about what your conditions actually mean: If you want to make sure no contract exists until all checks are completed, your offer letter must say that clearly. If your wording is vague or inconsistent across your documents, a court will likely interpret it against you as the employer.
3. Set out the notice period upfront: Whatever notice period applies should be written into the offer letter. If it is not, a court will decide what is reasonable based on the circumstances - and for senior or specialist roles, that could mean a much longer period than you expected.
4. Budget and funding changes: Public sector projects are frequently subject to funding decisions, spending reviews, budget cuts or political change. This case is a direct parallel as the offer was withdrawn due to project delays. In a public sector context, the same scenario could easily arise where funding is frozen or a programme is restructured. Therefore, depending upon the circumstances an employee may still be entitled to notice pay.
5. Don't overlook security and vetting checks: Many public sector roles, particularly in central government, defence, policing or regulated environments, require security clearance or enhanced DBS checks in addition to standard references and right to work checks. The same question applies: are those clearance requirements conditions that prevent a contract forming, or conditions within an existing contract? Therefore, clear  documentation is key to avoid any ambiguity.

Our view

This case is a useful reminder that the risks around job offers can arise earlier than many employers realise, and the public sector is no exception. If you’d like to discuss your processes and risks please get in touch.