In a recent news story an Italian banker who was expected to become the CEO of the Spanish bank, Santander, had his offer of employment withdrawn by Santander, leading to him seeking compensation in the sum of around 50 million euros for lost earnings. Whilst such high profile cases may be of interest in financial news, there are risks for all recruiters in reneging on a job offer.   

But where the employee has not yet started work, presumably the job offer can be withdrawn?

No, to do so would put the business at risk of a claim, unless the offer has not yet been accepted. Once an offer has been accepted by the candidate, a binding contract is usually in place. This means that the candidate could bring a claim for breach of contract if the offer is withdrawn after it has been accepted (either verbally or in writing). The claim would be for financial compensation to put the candidate in the same financial position they would have been in had the contract been honoured. This is usually restricted to compensation for the amount of the notice pay, depending on the length of the notice period (although for senior positions, other potential losses may apply). 

An Employment Tribunal has found that this risk also applies to verbal offers where the full terms of the offer, such as details of salary and start date, have not yet been communicated. In that case, the candidate had applied for a position via a recruitment agency. The recruitment agency had passed on the good news that an offer had been made by their client. However, the client subsequently decided to withdraw the offer and sought to deny that an offer had been made. The candidate brought a successful claim for breach of contract. Although no notice period or salary had been agreed, the judge determined what a reasonable notice period would have been, and concluded that it would have been a month. Based on the mid-point of the advertised salary of approximately £32,500, the candidate was awarded just over £3,000 to include the amount equivalent to one month’s notice pay and his tribunal claim fee. 

Recruitment Tips for Businesses

When an offer is made in writing (and assuming it is not the final offer), the offer should state that it is “subject to contract” or, where the offer is communicated verbally, that full details of the offer will be provided in writing (i.e. that the initial communication does not constitute the full terms of the offer). 

In most cases, the recruiter will choose to state that the offer is conditional for example, on receipt of satisfactory references or on a clear criminal record (DBS) check, where appropriate, or evidence of qualifications. This means that if the conditions are not met, the offer may be withdrawn, without the recruiter being in breach of contract. 

In the current climate of potential economic uncertainty, or due to a change in business requirements, the recruiter may change their mind about their original decision to recruit. Where a job offer is withdrawn, it is usually advisable to provide the reasons why, for example, because the position is redundant as the recruiter no longer requires the advertised role. This may reduce the risk of a successful claim that the offer was withdrawn based on the candidate’s prescribed characteristics, such as sex, race, disability or age. This risk may arise where information is later received about a candidate, such as via a job reference, which casts doubt on the desirability of employing them but could relate to a protected characteristic, or where the candidate subsequently discloses they are pregnant.

At Markel Law we regularly comment on SME related matters.

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