Employment advocacy: Beware of conditional offers

By: Lawrence Anderson (Employment Law Advocate), Photography by: Supplied

Lawrence Anderson advises on the legalities around conditional employment offers


Conditional offers

It’s common for an employer to require certain conditions to be met before placing a prospective employee in the workplace. This might include reference checks, background checks, credit checks, and drug testing. This is not unreasonable for an employer to explore as they seek to place the right candidate.

It’s our view that if a "conditional" offer is made and accepted, an employment relationship is created in terms of the Employment Relations Act 2000 and should there be any issue with conditions being satisfied, there should be a fair process and substantive justification for an employer to stop the hiring process.

Two recent Employment Relations Authority decisions have departed from this idea. The first is somewhat quite surprising and rather unfair to the applicant.

Kennedy v Field Nelson Holdings Limited

Mr Kennedy applied for a job to work on the drive-thru trade sales team at a Mitre10. He was given a letter of offer with an employment agreement setting out the material terms of employment.

The letter of offer stated that to accept the offer, it must be signed and returned to the employer within one week otherwise the offer will lapse. Further, it stated: "this offer is subject to reference checks and pre-employment checks [to the employer’s] sole satisfaction".

Mr Kennedy accepted the offer by signing and returning the letter of offer and the employment agreement to the employer. Mr Kennedy then completed authorities for the employer to complete checks such as criminal records, driver’s licence, references, ACC, and credit checks.

Those checks were in progress but not fully completed. Mr Kennedy was given a roster and was expected to start on a specific start day. He had left a previous job to pursue this opportunity.

Then what happens? One business day before Mr Kennedy is to start work, he receives a phone call from the employer advising that the employer chose another candidate over him and that he will not be starting work.

Mr Kennedy was not given any explanation or evidence of how he would not have met the conditions of the employer; he was only told that another candidate had been chosen.

The employer said that it did not advise Mr Kennedy at the time that a reference check was unsatisfactory. It was later in pursuing the Employment Relations Authority proceeding that the employer relied on a reference check apparently not being to the employer’s sole satisfaction.

There was no evidence given to the Authority from that referee; there was no clear and convincing evidence that the assertion of an unsatisfactory reference was in fact true.

The Authority accepted this without the scrutiny that we would expect, particularly that as a basic principle of natural justice and law: "a party asserting a fact has the onus of proving it".

The conclusion of the Authority was that the offer was "conditional", not the contract, and the offer that was made was incapable of being accepted, even though the employer required acceptance of it within a week.

It was said that the situation would have been different if Mr Kennedy had actually started working. Two weeks later, another decision comes out, the material facts quite similar. This was Edwards v Laybuy Holdings Limited [2022] NZERA 443. The same approach was taken. Part of the rationale of these decisions involves property law cases from the 1970s, which involved specific property law legislation.

Conditional offers and the Employment Court

1970s? Property law? What about the employment law jurisdiction, the Employment Relations Act 2000, and what the Employment Court has said? When you look at this case practically, it seems unfair that a person accepting a job offer and about to start work now has no claim for his losses in the Employment Relations Authority.

Especially since there was no clear and convincing proof that a reference check was apparently unsatisfactory. So, an employer can make up any story in the Authority and probably get away with it.

We have written about this subject before focussing on what the Employment Court’s guidance on this issue. In June 2021, we published an article discussing what a "conditional" offer of employment is and that the Employment Court in the case of The Salad Bowl Limited v Howe-Thornley [2013] NZEmpC 152 confirmed that even under "conditional" offers of employment, a person can still fall under s 6 of the Employment Relations Act 2000 and be a person intending to work.

Specifically, the Employment Court said: [80] If Ms Howe-Thornley was, thereby, an employee (someone who had been offered, and accepted, employment even on a conditional basis), the plaintiff cannot avoid liability for unjustified dismissal solely upon its conclusion that the defendant had failed to satisfy either or both of these conditions and irrespective of the fairness and reasonableness of the way in which it went about reaching that conclusion.

The Employment Court has further observed that taking a rigid approach to offer, acceptance, and consideration in employment relationships can cause difficulties in the employment jurisdiction, Prasad v LSG Sky Chefs [2017] NZEmpC 150 at [18]. There’s an inherent imbalance of power between the employer and employee and the Employment Relations Act 2000 recognises that.

A "conditional" offer made by an employer to a job applicant is going to benefit the employer, but it is our strong view that if a condition is not met, the employee is still entitled to a fair process and evidential proof that a "condition" has apparently not been met—and in the absence of this, there should be the right to bring a personal grievance.

In Kennedy’s case, as described above, the Authority declared that its decision was not inconsistent with the approach taken in the Employment Court, referring to Salad Bowl v Howe-Thornley, and distinguished Kennedy from the Salad Bowl as to whether the employee had actually started work.

We find this odd because in the Salad Bowl case, a person described as being someone who has been offered and accepted, even on a condition basis, employment, becomes an employee irrespective of whether they have actually started work.

Following the Authority’s decisions, if a "conditional" offer is not capable of acceptance, why is it given in the first place when the employer is seeking acceptance of it? This creates quite a difficulty for a person simply looking for work where they have been expressly offered and accepted employment.

So, you have been presented with a "conditional" offer of employment? What do you do?

If you end up in a situation like Kennedy or Edwards and you incur losses from an offer being withdrawn like this, then be prepared to take your case all the way to the Employment Court and possibly even the Court of Appeal.

Let’s say you’re given a "conditional" offer of employment, then perhaps you should politely ask the prospective employer to do the checks first and then make an "unconditional" offer.
The important thing for you is that no matter what you do, do not resign from your current job until there’s absolute certainty moving forward going into another job.

What we can do for employers and employees

We’re Employment Law Advocates that represent both employers and employees under Section 236 of the Employment Relations Act 2000. That section permits advocates to represent in the employment jurisdiction. We’re not practising lawyers.

We represent in direct negotiations, the Employment Mediation Service, the Employment Relations Authority, and the Employment Court.

For more details, contact Lawrence Anderson on 0800 946 549 or 0276 529 529 or Lawrence@AndersonLaw.nz or visit AndersonLaw.nz.

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