Offers of employment - beware of the legal consequences

What happens after an offer of employment had 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 easy as simply 'withdrawing the offer'? Not so much. 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 having been drawn up or signed. A verbal agreement is no less valid than a written one (it is just more difficult to prove the terms of agreement).

The employment contract (in whichever form) is governed by both contractual law as well as labour law principles. Under contractual law, for a valid employment relationship to come into existence, the parties need only be in agreement on the essential elements of such a contract - which could be as elementary as agreeing that one party will work for the other in some capacity, that they will be reasonably remunerated for that work, and possibly a starting date. There is no prerequisite that all other employment / contractual terms or specifics needed to have be agreed upon, or reduced to writing and signed by both parties, before there can be a legal relationship and reciprocal obligations on the parties. For example - if, subsequent to acceptance of the offer, negotiations around remuneration structuring and other employment terms or benefits fail, this would not automatically invalidate the contract due to lack of agreement on the ancillary issues. (It will however pose quite the legal dilemma for the parties, moving forward.)

Once this legal framework is is understood, it stands to reason that making an unconditional / 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 that happens, labour law also applies and this means that that termination of the agreement (or 'withdrawal of the offer') could potentially constitute a dismissal and would be subject to the relevant fairness requirements as well as presenting a valid reason for the dismissal (misconduct, incapacity or operational requirements). Statutory notice periods would also apply. Furthermore, withdrawing the offer could also, under contractual law, give rise to a suit for breach of contract and a claim for damages or specific performance against the employer.

The reality and mitigating the legal risks

The ideal from a legal perspective is naturally to negotiate and agree on all the applicable terms and conditions, before an offer is extended. Also, to have a signed contract in place before a new employee starts work.

Reality does however not always align with this, despite the best intentions of the parties. Recruitment processes can be complicated and even more so if a recruitment agency is also in the mix. There are often miscommunications, unauthorised promises, unclear terms of reference, no disclosure about final approval requirements, and the like. Applicants want to know where they stand and employers don't want to risk losing a promising candidate due to red tape and legal obstacles.

Fortuntately, there are ways to navigate this to expedite the process, but also mitigate potential legal risks. Here are a few pointers:

• If you have to make an offer when things are still a bit up in the air, then at least make a conditional offer. State clearly in application forms / offers of employment that no valid contract will come into existence until and unless all of the terms and conditions have been agreed to by both parties. Final approval requirements and authority should also be stated. Mandates given to recruitment agencies should make all of this clear.

• It is recommended that, wherever possible when an offer is made, a covering letter is used with the full proposed contract of employment attached thereto for consideration by the applicant. The cover letter should clearly state any pre-conditions to be complied with and include the disclaimer that agreement on all terms must be reached before a valid employment relationship would exist. The contract itself should also stipulate if confirmation of employment is subject to any other 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 advised of such policies and where they can access those policies (this is a requirement in terms of the BCEA).

• Employers should also ensure that the requirements which attach to a particular position are clearly and consistently communicated and applied - when advertising the post; during the selection and recruitment process; and also recorded in any offer of employment. The letter of appointment should provide that the employee warrants that they are aware of same and that they fulfil and meet those conditions.

Conclusion

Employers should cover their legal bases during the recruitment and appointment process, and when extending offers of employment. Likewise, employees should be aware of their legal rights when an accepted job offer had caused them to give notice at their current employer and put things in motion to start work elsewhere, only to be told at a very late stage that the new employer has changed its mind or that final approval for the appointment has not been granted, and that the 'offer is being withdrawn'.

© Judith Griessel