The COVID-19 outbreak has led to sharp declines in labour demand across many sectors, forcing employers to take steps which, only a few weeks ago, may have seemed drastic – for example, considering redundancies, placing employees on furlough leave and varying contractual terms.
For these companies, taking on new hires is likely to be off the agenda and recruitment processes that were in their initial stages may have been halted. But what if an offer of employment has already been made – can a UK employer withdraw that offer in light of the COVID-19 outbreak?
In this alert, we identify the key legal risks employers should consider before rescinding an offer of employment and the practical, alternative measures that can be taken.
The key question is whether the offer of employment has already been accepted by the individual. If it has, the terms of the offer will need to be considered, including whether it was made unconditionally or subject to the satisfaction of certain conditions.
A. If the offer has been accepted, it cannot simply be withdrawn by the employer.
The employer may have to serve notice on the individual if it doesn’t want to proceed with the employment, otherwise it may face a breach of contract claim. The employer should check the offer and the contract to see whether the employment is subject to certain conditions being met, when the terms of the contract take effect, and whether, for example, the right to a period of notice to terminate the contract applies before the start date.
If the offer of employment was conditional (e.g. on the provision of satisfactory references or the individual passing a medical examination) then it might still be possible that the conditions will not be met and the employment will not proceed for that reason. However, the employer cannot falsely claim that a condition has not been satisfied just to get out of the contract.
If the offer was unconditional, or the conditions set by the employer have been met, then the individual may have a contractual right to receive notice to terminate the employment before it has begun. However, they may not have any right to payment during (or in lieu of) that notice period if the notice expires before their agreed start date and before they have any right to receive salary or benefits from the employer under their contract.
Terminating the contract lawfully is likely to be important to the employer, not only to avoid a breach of contract claim but also to allow it to maintain the protection of the contract, for example in respect of confidential information provided to the individual before their start date.
Before terminating the contract by serving notice, the employer should also consider the legal risks outlined under (B) below.
B. If the offer has not yet been accepted, the employer may withdraw it and there is no need to give any contractual notice of termination or make any payment in lieu of notice.
However, there are other risks that employers should consider before withdrawing an offer or terminating the contract:
• Discrimination – the individual may allege the actual reason for withdrawing the offer or ending the contract was a discriminatory one. Employers should tread particularly carefully if a potential protected characteristic has come to light after the offer was made. Clearly documenting the reason for withdrawing the offer or ending the contract is important to mitigate this risk.
• Could the employee argue that the termination is an automatically unfair dismissal (for example, connected to pregnancy) to which the normal requirement for two years’ service in order to pursue a claim does not apply?
Aside from the legal risks, there are many reasons why an employer might not want to withdraw an offer of employment unless it really is the only option. The individual may be an important strategic hire and, although the Coronavirus crisis is having a profound effect, it is (we hope) a temporary situation. So what are the alternatives?
• Bring in the new recruit and then furlough? This is not an option if the individual has not yet started work, as the Coronavirus Job Retention Scheme only covers employees who were on the employer’s PAYE payroll on 28 February 2020 (and those made redundant after that date who were later rehired).
• Delay the start date? This will require express consent from the individual unless there is an express contractual right for the employer to do so (and even if there is, employers should exercise that right reasonably, having regard to the implied terms of the contract). Employers may be concerned about the risk of damage to the employment relationship before it has even begun; however, given the profound impact the COVID-19 outbreak is having on everyone, provided the proposed change it is communicated sensitively, individuals are likely to be empathetic to the employer’s situation and, if they can see that termination is the likely alternative, they may well be prepared to agree to it.
If you would like to discuss the matters raised in this article further, or for guidance on your specific rights, responsibilities and potential liabilities, please contact Partner David Fisher, who specialises in partnership and employment law issues for multi-national employers, senior executives, firms and partners.