When a conditional offer of employment is withdrawn, is there a right to raise a personal grievance?

Under the Employment Relations Act (“ERA”), the right to raise a personal grievance is limited to an ‘employee’.  Over the years, personal grievance claims have been brought by prospective employees after a conditional offer of employment has been accepted and subsequently withdrawn by the prospective employer.  A recent judgment of the Employment Court is instructive on whether a personal grievance claim may be raised in such circumstances.

Edwards v Laybuy Holdings Limited [2023] NZEmpC 188

In December 2020, Mr Edwards accepted an offer of employment from Laybuy Holdings Ltd (“LHL”).  Shortly after, LHL withdrew its offer of employment prior to the commencement of employment, as it was dissatisfied with the results of a pre-employment check.

Mr Edwards purported to raise a personal grievance after the withdrawal of the employment offer.  However, the Employment Relations Authority found that Mr Edwards was not an “employee” of LHL at the time, and he was not able to raise a personal grievance.

Issue

Mr Edwards challenged the Authority’s determination on a de novo basis.  It was argued that he was a “person intending to work” under the ERA, and that he came within the meaning of an “employee” under the ERA, as he had accepted an offer of employment from LHL by signing an employment agreement.  Mr Edwards argued that even if the offer was conditional, he would still be considered as a ‘person intending to work’ under the ERA.

Background

After several meetings, Mr Edwards was orally offered employment, and he was advised that there would be some pre-employment checks.  This was followed by a written offer, which advised that – “This offer is conditional upon satisfactory pre-employment checks specific to the role we’re offering you”.  In the offer letter, LHL also advised Mr Edwards that the offer may be withdrawn should it not be satisfied with the results of the background checks.

On 18 December 2020, Mr Edwards had a conversation with the HR lead of LHL and advised her that various items would show up on his criminal record check.  He said that he did not advise LHL of these matters sooner as he was not explicitly asked, and because previous employment offers had been withdrawn in the past due to his criminal record.  At the time, the HR lead of LHL advised Mr Edwards that, once received, the results from the criminal record check would be escalated within LHL for consideration.

On 7 January 2021, the criminal record check came back and confirmed the matters that Mr Edwards had mentioned to the HR lead.  On the next day, the HR Lead called Mr Edwards and advised him that the offer of employment was withdrawn due to the outcome of the criminal record check.  A letter confirming the withdrawal was later sent to Mr Edwards.  While Mr Edwards gave notice to resign from his then employer, they were amenable to him withdrawing his resignation.

There was no further contact between Mr Edwards and LHL until April 2021 when Mr Edwards sent a letter to raise his personal grievance and demand payment of salary.  In response, LHL rejected his claims on the grounds that there had been no employment relationship between the parties and no obligation to provide any salary.  Mr Edwards asked LHL to attend mediation, but this was not accepted by LHL.  The matter then proceeded to the Employment Relations Authority.

Authority’s determination

The Employment Relations Authority held that, given the employment offer was conditional and the conditions had not been fulfilled or waived by LHL, there was never a completed offer and acceptance, and as such Mr Edwards was not a “person intending to work” under the ERA.  The ERA concluded that Mr Edwards was not an ‘employee’ for the purposes of the ERA, so he could not bring a personal grievance.

Whether Mr Edwards was a ‘employee’

Under the ERA, ‘employees’ are able to raise personal grievances against their employer.  Section 6(1)(b)(ii) of the ERA provides for an extended definition of “employee”, which includes “a person intending to work”.  Under the ERA, a ‘person intending to work’ means “a person who has been offered, and accepted, work as an employee”.

In this case LHL made Mr Edwards a conditional employment offer, which he accepted.  The main question for the Court was whether he was a ‘person intending to work’, as defined in the ERA.

The Employment Court approached this case by considering the definition of “person intending to work”.  Although there was an offer of employment from LHL, and this had been accepted, the offer from LHL made it clear that it would only employ Mr Edwards upon being satisfied with the results of the pre-employment checks.  If it was not so satisfied, then the offer could be withdrawn.

The Court pointed out that this meant Mr Edward’s acceptance of LHL’s offer was not sufficient for the employment agreement to be binding on LHL.  The Court considered that the definition of a “person intending to work” only applies when the offeror has made an offer that indicates the intention to be legally bound.

Lastly, it was argued for Mr Edwards that the employment agreement itself did not include any condition requiring pre-employment checks.  The Court rejected this argument, as the conditional nature of the employment offer was clearly set out in the offer letter which was provided to Mr Edwards at the same time, and he was able to consider all of the terms and conditions.

The Court concluded that Mr Edwards was not a “person intending to work”, and therefore he was not an “employee” under the ERA, and he was not entitled to raise a personal grievance.

Concluding remarks

Offers of employment are commonly subject to certain conditions being met or satisfied.  Depending on the circumstances, this may include a criminal record check, visa check, reference check, identity verification, qualifications check, credit check, health check and drug or alcohol test.

This case assists employers to recruit with confidence by making conditional offers of employment.  However, it is noted that the judgment is confined to circumstances when a conditional employment offer has been withdrawn before employment has commenced.  Further, it is vital for employers to ensure that the specific conditions, and the rights to withdraw the employment offer, are clearly put in writing and communicated to the recipient, so that they may consider and seek advice.

For a prospective employee, when receiving a conditional offer of employment, it would be sensible not to resign until the prospective employer has confirmed that the applicable conditions are met (or waived), due to the risk that the conditional offer could be withdrawn.  It would also be wise to agree on a commencement date that takes into account the time needed to complete and confirm that the conditions have been met.  This is particularly important if prospective employees need to take into account their obligation to provide the required notice period to their existing employer.