COVID-19: What are my liabilities if I rescind a job offer?

1st April 2020 Employment

Since the introduction of the UK lockdown as of 23 March 2020, many businesses are now faced with making difficult decisions such as implementing pay cuts, furloughing staff or making redundancies. We are also seeing a rise in the amount of queries relating to rescinding offers of employment, that were made before the lockdown took effect.

To assist employers, we have set out some of the key considerations and potential liabilities of rescinding a job offer below.

1. Types of offers

Job offers are typically separated into two categories:

(a)  Conditional offers - where employers may require satisfactory references, criminal record checks (for example, a DBS check), medical checks, proof of academic qualifications and/or proof of right to work in the UK before the offer crystalises. When a conditional offer has been made, an employer can withdraw the offer if one of the conditions have not been met.

(b)  Unconditional offers - are made without any conditions attached. Once an unconditional offer has been made and accepted by an individual, there may then be a binding contract (subject to the requirements set out at point 2 below).

In ordinary circumstances, it is unlikely that an employer would want, or need, to rescind an offer of employment after acceptance. However, as wages are the main outgoing for many businesses, employers are looking to rescind recent employment offers to ease cashflow amidst COVID-19.

2. Has a binding contract been established?

For an individual to successfully argue that a binding contract has been established, they have to show that the offer was made without any attached conditions (or that any attached conditions have been satisfied), that the terms were set out in a clear and definite way, whether verbally or in writing, and that they had accepted that offer.

Sometimes a written employment contract will have already been agreed, however, it is also possible for certain terms to be implied by the courts in the absence of any written agreement.

3. Can an offer be rescinded?

If an employer can establish that the individual has not met the required conditions of a job offer, they can rely on that failure to rescind the offer. Similarly, if a job offer has not yet been accepted by the individual, the offer can also be withdrawn without consequence.

Where the factors set out at point 2 above are met and an employer withdraws a job offer, despite there now being a binding contract in place, the individual may pursue a claim for breach of contract.

4. What could an individual be awarded if successful in a breach of contract claim?

If successful in a breach of contract claim, the individual will be awarded damages. The purpose of damages is to put the employee in the position they would have been but for the breach. They are likely to only be awarded the notice period that they would have been entitled to under the terms of the contract and in most cases, the first few months of employment will be a probation period with a shorter notice period. In the absence of an agreed notice period, the Courts may apply a ‘reasonable notice period’. In the 2015 case of McCann v Snozone Limited, McCann verbally accepted a job offer made by a recruitment agency acting for the employer, and the employer subsequently withdrew the offer. Even though no notice period or salary had been agreed, a Tribunal found he was entitled to a reasonable contractual notice period of one month. Based on an expected salary of £28,000 - £30,000, McCann was awarded £2,708. 

In light of the McCann case, employers should tread particularly carefully where they are rescinding an offer from someone very senior, as having to pay out the notice period could be costly where their salary is high. The Tribunal may also interpret a reasonable notice period as longer than one month if someone is in a senior position.

All individuals are protected from being discriminated against during any recruitment process. Employers should therefore ensure that the reason for withdrawal is not because of or linked to a protected characteristic under the Equality Act 2010. If it is, the individual could have a potential claim for discrimination.

5. Are there any possible defences for the employer?

Frustration is a common law doctrine where a contract is treated as discharged by operation of law where an event has occurred which renders further performance impossible, illegal or radically different from that contemplated by the parties when they entered into the contract. A frustrating event will not be something which is expressly provided for in the contract, it will be something which falls outside the contemplation of the parties.

Although ordinarily the Tribunal is reluctant to apply this principle to an employment relationship, it is unknown whether they will be more amenable to it, in light of the impact of COVID-19.

6. Best practice

Employers should consider all options before rescinding an offer of employment. For example, an employer could look to agree a temporary reduction in starting wage, or postpone the start date. The Government has expressly stated that anyone not on an employer’s payroll by 28 February 2020 cannot be covered by the Coronavirus Job Retention Scheme, so it is not an option to Furlough a new starter that was hired after this date.

Employers should have careful regard to the potential liabilities before proceeding and we always recommend seeking legal advice before taking any action.

This note has been prepared by JMW Solicitors LLP and has been provided as a guide to the legal obligations under the legislation and not intended to provide full details of the law referred to.

The notes should not be treated as a substitute for obtaining complete and full legal advice on the law or on the effect of the legislation.

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Grace Caldicott is a Solicitor located in Manchesterin our Employment department

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