Considering hiring someone new?

Offering new employment can be a risky business. Sometimes an employer backs out of discussions with a prospective employee without realising their words or actions have already given rise to an offer of employment. In other circumstances, an employer might intend make an offer of employment, but later want to withdraw the offer following unsatisfactory results from pre-employment checks.

So what can employers do to ensure early conversations don’t amount to a job offer, and to ensure they can withdraw an offer if pre-employment checks don’t go to plan?

Where an employer is discussing possible employment during the recruitment stage, or is wanting to make an offer of employment prior to a satisfactory pre-employment check, steps should be taken to avoid making an offer capable of acceptance. Once an offer capable of acceptance is made by the employer and accepted by the prospective hire, the prospective hire is considered “a person intending to work” and thus meets the Employment Relations Act 2000’s definition of “employee.”

Once an employee, the individual has the right to challenge the withdrawal of the offer by raising a personal grievance for unjustified dismissal.

How to avoid making offer of employment capable of acceptance

Generally, contract law principles require sufficiently specific terms to be included in a contractual offer for it to be capable of acceptance. In the employment context, this includes anything that could fundamentally impact an individual’s decision to accept the offer, such as the duties associated with the role, remuneration, hours, location, and start date.

Based on contract law principles alone, it could be argued that a loose conversation about a possible job opportunity falls short of being an offer capable of acceptance. However, case law provides that a person may still receive an offer capable of acceptance with or without knowledge of all, or any, of the specific terms of the offer.

In one judgment - Baker v. Armourguard Security Ltd [1998] 1 ERNZ 424 - concerning whether employees had an arguable case that they were “persons intending to work,” the Employment Court made a distinction between the formation of an employment relationship and the formation/articulation of the terms of that relationship. The court found that an offer of employment, with key terms to be negotiated and the job description finalised, was still an offer of employment capable of acceptance in light of the employers’ conduct at the time the offer was made, and after.

In another judgment - Omarama Motor Lodge Ltd v. Burnard EmpC Christchurch CEC14/96 (31 May 1996) - the Employment Court found that “I will be needing you in a few weeks’ time when things get busy” was an offer of employment capable of acceptance by an individual who had performed seasonal work for the employer in the past.

The bar for acceptance of an offer is also relatively low. Acceptance does not require a formal “I accept” statement, but rather can be inferred from the individual’s words or conduct – see Olsen v. Carter Holt Harvey IT Ltd [2008] ERNZ 557. Unless the offer specifically requires acceptance to be indicated in writing, a verbal “I would love the job” will likely be enough to be lawful acceptance. Once the person’s acceptance is conveyed, the employment relationship is in effect.

Ultimately, employers should beware that their words or conduct may amount to an offer capable of acceptance, even if most or all of the terms of employment are still to be figured out. Employers can safeguard against the risk of any verbal communications being misconstrued by either sticking to written communications that make it clear no offer has been made, or alternatively following up verbal communications with a written confirmation to confirm what was said.

This saved an employer in the Employment Relations Authority recently - Head v. Armourguard Security Limited [2024] NZERA 351 - where the applicant failed to prove they had accepted a verbal offer of employment due to the employer having text messages with the applicant which showed he was still progressing through the application process.

Offering employment subject to results of pre-employment checks

It’s common practice for employers to make an offer of employment subject to obtaining any relevant pre-employment checks (e.g., references, criminal record vetting, visa confirmation or qualification assessments). In the event the results from those checks are unsatisfactory, the employer’s ability to withdraw the offer of employment hinges on whether the offer was made conditional upon the checks being satisfactory. If so, the offer of employment is not capable of full acceptance until the condition is fulfilled, and thus the employer can withdraw it without consequence if it isn’t.

A recent judgment from the Employment Court - Edwards v. Layby Holdings Limited [2023] NZEmpC 188 - is a helpful illustration of how to successfully implement a conditional offer of employment. The applicant first received a verbal offer of employment, at which time they were advised a pre-employment check would take place. After the verbal offer, the applicant received the individual employment agreement and an offer letter that advised “This offer is conditional upon satisfactory pre-employment checks specific to the role we’re offering you.”

 At that stage, the applicant disclosed his criminal history which would appear on his criminal record to be received by the employer. The employer waited to receive the criminal record before taking any further steps. Following receipt of the criminal record, the employer found the results to be unsatisfactory and withdrew the offer in writing.

The employee contested the withdrawal in the Employment Relations Authority, and then Employment Court, arguing he was “a person intending to work” and thus entitled to raise a personal grievance for unjustified dismissal. However, the Employment Court rejected that the applicant had attained “employee” status as “a person intending to work” on the basis that the conditional offer was clearly set out and explained to the applicant at the time the offer was made.

Conditional employment offers

Conditional employment offers are an effective way for employers to securing new talent without fully committing to employing them until any necessary background checks can be made, provided the condition is clearly communicated to the individual receiving the offer.

A conditional offer should be made in writing, otherwise the employer risks the individual claiming they were unaware of the condition, or not provided with a reasonable opportunity to obtain independent advice. Best practice would be to state the condition in a separate cover letter amongst other key terms, however, the Employment Relations Authority has previously found that stating the condition in the individual employment agreement itself is sufficient - Kennedy v. Field Nelson Holdings Limited [2022] NZERA 421. It would also be sensible to reiterate the condition verbally to the person to avoid any surprises.

The wording of the condition itself should make clear that the offer is conditional upon satisfactory results from any relevant pre-employment check, and that if satisfactory results aren’t received, the employer is entitled to withdraw the offer.

Lucy Gallagher is a solicitor on the Employment team at Anderson Lloyd in Christchurch.