Understanding the legal implications of withdrawing an offer of employment

What happens after an offer of employment has been extended and accepted in principle, but the employer changes its mind prior to a contract being signed or the employee starting work? Is it as simple as just 'withdrawing the offer'? Not quite. Under South African law, there are legal consequences that cannot be ignored.

Basic legal principles

An employment relationship in South Africa can legally exist without a written employment contract being drawn up or signed. A verbal agreement is no less valid than a written one; however, it is more challenging to prove the terms of the agreement.

The employment contract, regardless of its form, is governed by both contractual law and labour law principles. Under contractual law, for a valid employment relationship to exist, the parties need only agree on the essential elements of such a contract. This could be as simple as agreeing that one party will work for the other in some capacity, that they will be reasonably compensated for that work, and possibly a starting date. There is no prerequisite that all other employment or contractual terms need to be agreed upon or reduced to writing and signed by both parties before a legal relationship and reciprocal obligations arise. For instance, if negotiations around remuneration structuring and other employment terms or benefits fail after the acceptance of the offer, this does not automatically invalidate the contract due to a lack of agreement on ancillary issues. However, it will pose a significant legal dilemma for the parties moving forward.

Once this legal framework is understood, it becomes clear that making an unconditional or unqualified offer of employment, covering just the broad basics, carries the risk that acceptance of that offer by the prospective employee, in principle, would establish a valid employment relationship. Once this occurs, labour law applies, meaning that termination of the agreement (or 'withdrawal of the offer') could potentially constitute a dismissal. This would be subject to the relevant fairness requirements and necessitate a valid reason for the dismissal, such as misconduct, incapacity, or operational requirements. Statutory notice periods would also apply. Furthermore, withdrawing the offer could, under contractual law, lead to a suit for breach of contract and a claim for damages or specific performance against the employer.

The reality and mitigating legal risks

The ideal scenario from a legal perspective is to negotiate and agree on all applicable terms and conditions before extending an offer. Additionally, having a signed contract in place before a new employee starts work is crucial.

However, reality does not always align with this ideal, despite the best intentions of the parties involved. Recruitment processes can be complicated, especially if a recruitment agency is involved. Miscommunications, unauthorised promises, unclear terms of reference, and a lack of disclosure about final approval requirements can all complicate matters. Applicants want clarity on their status, while employers do not want to risk losing promising candidates due to red tape and legal obstacles.

Fortunately, there are ways to navigate this process to expedite it while also mitigating potential legal risks. Here are a few pointers:

• Make conditional offers: If you must make an offer while details are still uncertain, at least make it a conditional offer. Clearly state in application forms and offers of employment that no valid contract will exist until all terms and conditions have been agreed upon by both parties. Final approval requirements and authority should also be clearly outlined. Mandates given to recruitment agencies should reflect this clarity.

  
  

• Use cover letters: When making an offer, it is advisable to use a covering letter that includes the full proposed contract of employment for the applicant's consideration. The cover letter should clearly state any pre-conditions that must be met and include a disclaimer that agreement on all terms must be reached before a valid employment relationship can exist. The contract itself should also specify if confirmation of employment is subject to any outstanding conditions, such as positive vetting outcomes. If there are policies that the applicant will be subject to in addition to what is stipulated in the contract, the applicant should be informed of these policies and where they can access them, as required by the BCEA.

  
  

• Communicate requirements clearly: Employers should ensure that the requirements associated with a particular position are communicated clearly and consistently. This should occur when advertising the post, during the selection and recruitment process, and also be recorded in any offer of employment. The letter of appointment should state that the employee warrants that they are aware of these requirements and that they meet them.

  
  

Understanding your rights

Employers should cover their legal bases during the recruitment and appointment process, especially when extending offers of employment. Likewise, employees should be aware of their legal rights when an accepted job offer has led them to give notice at their current employer. They may find themselves in a difficult position if they are informed at a late stage that the new employer has changed its mind or that final approval for the appointment has not been granted, resulting in the 'offer being withdrawn'.

Understanding the legal implications of withdrawing an employment offer is crucial for both employers and prospective employees. By taking proactive steps and ensuring clear communication, both parties can navigate this process more effectively.

© Judith Griessel