Poorly Drafted Employment Offers — The Risk When Things Don’t Work Out
By DLA Piper | Wednesday, 13 Nov 2019
Relationships often don’t work out. It takes a lot of time, energy and trust to get things off the ground, and there is always the possibility that things aren’t quite what they seemed when the person first signed up.
Employment relationships are no different. With the best will in the world, there are a number of reasons why an employment relationship might break down. This can happen during any stage of the employment life cycle, but the relationship is particularly vulnerable at the pre-employment or offer stage where the employer has found its preferred candidate for a role. Here both sides are in puppy love mode. The temptation to see the best in the other side is unavoidable and neither is contemplating the possibility that things might go wrong.
The reality is that an employment offer can fall apart for various reasons.
In practice, it is usually the employer who calls time on the relationship. Common examples include where the candidate has failed to pass the employer’s background checks, where the candidate has lied about information on their CV, or where there ends up being too much of a gap between the parties’ commercial expectations.
But what happens if it is the employee who changes their mind and wants to walk away before they have started working for the employer? Are they free to do so? This was the question asked of the Court of First Instance in the recent case of Law Ting Pong Secondary School v Chen Wai Wah [2019] HKCFI 2236.
A Real-Life Contract Lawsuit Concerning Employment Offer
A candidate teacher, Mr. Chen, was offered an employment contract with Law Ting Pong Secondary School, a co-educational EMI school located in Tai Po.
The offer was contained in three separate documents: (i) an offer of appointment; (ii) conditions of service; and (iii) a letter of acceptance. Mr. Chen signed the conditions of service and the letter of acceptance on 17 July 2017, but not the offer of appointment.
The letter of acceptance provided that Mr. Chen accepted the appointment in accordance with the conditions of service and that the new employment contract would come into “immediate effect”. It also acknowledged that he would need to give 3 months’ notice in order to terminate his employment with the School.
The conditions of service included a clause requiring Mr. Chen to give 3 months’ notice in order to terminate his employment, or to make a payment in lieu of 3 months’ notice. However, they also provided that his employment was to take effect from 1 September 2017 to 31 August 2018 (i.e. around 6 weeks later).
On 22 August 2017, Mr. Chen changed his mind and wanted to pull out of the employment contract. He claimed that as he had made the decision before starting work for the School on 1 September, he was free to do so without giving 3 months’ notice or making any payment in lieu.
The School disagreed. It claimed that the requirement to give 3 months’ notice became effective immediately when Mr. Chen signed the letter of acceptance. It therefore brought proceedings in the Labour Tribunal claiming payment of 3 months’ salary in lieu of notice.
Decisions of Labour Tribunal and Court of First Instance
The Labour Tribunal initially found in favour of the School and ordered Mr. Cheng to make a payment in lieu of notice in the amount of HK$139,593.20. However, this was overturned after Mr. Chen successfully appealed to the Court of First Instance.
The CFI held that since the letter of acceptance was stated to be “under the conditions set out in” the conditions of service, the true offer of employment was contained in the conditions of service not the letter of acceptance. It noted that Mr. Chen could only have decided whether to accept or decline the offer if he had read the offer of appointment in conjunction with the conditions of service. As the conditions of service stated his start date to be 1 September 2017, the 3 months’ notice period could not come into effect prior to this date. The purpose of the letter of acceptance was simply to comply with the prescribed mode of acceptance stated in the offer of appointment.
The CFI set aside the judgement of the Labour Tribunal and dismissed the School’s case. The School was also ordered to pay costs.
Legal Lessons for Employers
The decision in Law Ting Pong highlights the risk of having poorly drafted offer documents and the potential cost to the business if things go wrong. Employers do not always think about the repercussions of an employee walking away at the pre-employment stage. However, employers are recommended to take the following practical steps:
- Keep to an absolute minimum the number of documents which contain a candidate’s employment terms. The greater the number of documents, the greater the risk of inconsistencies between them.
- If employment terms need to be spread over multiple documents, ensure they are consistent and dovetail with one another. The most obvious candidates for slipping through the cracks are inconsistent usage of defined terms, incorrect clause references and missing key terms (wages, bonus, termination notice, confidentiality, restrictive covenants, etc.).
- Ensure the candidate signs all documents at the earliest opportunity and in the correct order.
- Make any initial offer letters or documents conditional on the candidate signing, their acceptance of the underlying employment contract and any applicable background screening processes (e.g. reference, education, criminal background checks). Make provision for an ability to withdraw the offer or terminate employment without notice if any of these conditions are not satisfied.
- Go into negotiations with a healthy dose of scepticism and work through the consequences if things were not to work out as planned.
Authors
- Helen Colquhoun, Partner and Head of Employment, DLA Piper Hong Kong
- David Smail, Senior Associate, DLA Piper Hong Kong
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