A recent decision of the Employment Appeal Tribunal (EAT) has provided an important reminder to employers: a ‘conditional’ job offer may still create a binding contract earlier than anticipated. This could have significant implications, not only for breach of contract claims, but also for National Minimum Wage (NMW) compliance - particularly in sectors where pre-employment training and onboarding are common.

Key point

• Contracts of employment and employment relationships may exist even before conditions such as training/references/RTW checks are met. 

The case in brief

In Kankanalapalli v Loesche Energy Systems Ltd, the claimant accepted an offer for a project manager role which was expressed to be subject to satisfactory references, a right to work check and completion of a probationary period. A start date had been agreed and, importantly, steps had already begun to prepare him for the role, including onboarding arrangements. Before he started, the employer withdrew the offer due to project delays.

The Employment Tribunal initially found that no contract had been formed because the conditions had not been satisfied. However, the EAT disagreed. It held that, on the facts, these were conditions subsequent, not conditions precedent. This meant that:

• a binding contract had already been formed when the offer was accepted; and
• the employer’s withdrawal amounted to a termination of that contract, requiring notice.

Why does this matter?

This decision highlights a key legal risk: labelling an offer as ‘conditional’ does not necessarily prevent a contract from arising.

Where an offer letter:

• sets out key contractual terms;
• is accepted (even informally); and
• is followed by steps consistent with employment (e.g. onboarding, documentation, preparations),

a tribunal may conclude that a contract is already in place.

The NMW angle: a renewed compliance risk

This case could have important implications for NMW compliance. Time spent on mandatory induction training counts as working time for NMW purposes when an individual has become a worker or an employee. 

Many organisations that do not pay for induction training manage this risk by making offers conditional on completion of induction training and other checks – the intention being to prevent worker status arising during the training period.

The new EAT decision makes this approach significantly more precarious. 

Even where conditions are stated as conditions precedent, i.e. a contract and employment relationship will only exist after the conditions have been met, a tribunal may find that the conditions are subsequent i.e. the contract and relationship exist before the conditions are met. The consequence is that induction training - previously assumed to fall outside the employment relationship - would need to be treated as working time. That, in turn, creates a real risk of inadvertent NMW breaches where training is unpaid.

Employers should be particularly cautious where they:

• issue detailed offer letters containing core terms and/or formal contracts;
• begin onboarding processes before conditions are satisfied;
• refer to ‘employment’ in pre-start documentation;
• delay providing formal contracts but otherwise treat the individual as engaged.

How can we help?

The EAT’s decision is a clear warning: where induction training is required, employers should think carefully about how it is structured and whether potential new starters are paid when completing training prior to starting work. You cannot rely on simple ‘conditional’ wording to prevent a contract - and worker status - from arising. Employers should take this opportunity to consider their offer processes and induction arrangements to ensure they remain compliant in light of this development.

If you need assistance with reviewing your recruitment, onboarding, and training arrangements or assessing NMW risk in this context, please get in touch.