Conditional Offers and the Employment Relations Authority

Conditional offers of employment withdrawn

As permitted by Section 174E of the Employment Relations Act 2000, the Employment Relations Authority (“the Authority”) is permitted to make findings on fact and law and express conclusions to dispose of the matters before it. Whether or not intentional, this permits the Authority to not apply relevant laws to the true material facts of a case.

The Authority made a determination on 26 August 2022, Kennedy v Field Nelson Holdings Limited [2022] NZERA 421 involving a conditional offer of employment having been withdrawn, this was decided by Authority Member Van Keulen that no employment relationship existed and the employer had the right to withdraw the offer that had been expressly accepted in writing to commence work.

Not long after that case was determined, another decision was published by Member Gane, this was Edwards v Laybuy Holdings Limited [2022] NZERA 443 dated 7 September 2022.

First year law students at university learn how to analyse and read cases. They learn the IRAC or ILAC method, that is: Issue, Relevant Law, Application of Law to facts, and Conclusion. The writer does not believe that these Authority decisions were made using the correct legal methods that are taught to first year law students at university.

Kennedy v Field Nelson Holdings Limited [2022] NZERA 421

Mr Kennedy applied for a role as Trade Drive Thru Assistant with Field Nelson Holdings Limited in its Mitre 10 store in Nelson. He was interviewed and offered a position which he accepted. The offer was “conditional”, it read: "This offer is subject to reference checks and pre-employment checks to [FNH’s] sole satisfaction."

Before Mr Kennedy was due to start work, Mitre 10 withdrew its offer. Mr Kennedy’s case was about whether he was an employee and whether he was unjustifiably dismissed and what remedies he would have been entitled to. The withdrawal of the “conditional offer” was within 1 business day of starting work, there was a roster, start date, start time. The company was in the process of completing its various checks.

The company says to have done a reference check which was not to its sole satisfaction, but did not make Mr Kennedy aware of this at the time. Therefore, the reference and its validity were not discussed with Mr Kennedy or reasonably confirmed as being accurate.

The Authority Member came up with an idea that the offer was “incapable of being accepted before the conditions attached to it were fulfilled”.

The law the Authority relied upon regarding conditional offers

The Authority Member referred to a number of cases to support reaching its conclusion at paragraph [25] of the determination. The Member referred to the offer and acceptance and the “condition” being analogous to a contract for the sale and purchase of real estate property, and referred to the ADLS/REINZ standard form.

The Member referred to Hunt v Wilson [1978] 2 NZLR 286; and Buhrer v Tweedie [1973] 1 NZLR 517 stating that (the Court of Appeal case citation was wrong, the correct citation is Hunt v Wilson [1978] 2 NZLR 261, even if we go to page 286 of that volume of the Law Report, we do not read anything on that page that applies to this case):

My conclusion is supported by the approach taken by the Courts which has modified and replaced the old contractual law principles of condition precedent and subsequent.

The Member is correct that Cooke J made some important observations regarding contractual contracts. Specifically, that condition precedent and subsequent were labels that are more confusing than useful. But, this has no application to Kennedy’s case in any way.

The Authority’s approach does not explain how and why Cooke J, observing that the labels of condition precedent and subsequent are more confusing than useful, how such an observation would specifically apply to Mr Kennedy’s case, that is, about whether or not the employer was entitled to withdraw the conditional offer that had been accepted.

The below text is from a book that second year law students can aquire when taking their second year Contract Law paper. This book refers to the most relevant decisions involving the law of contract that apply to New Zealand.

There is still law and a binding obligation between parties to a conditional contract surrounding the requirements that parties act reasonably in attempting to obtain fulfillment of conditions. The Buhrer v Tweedie [1973] 1 NZLR 517 case that the Authority Member referred to included authority from Smallman v Smallman [1972] Fam 25; [1971] 3 All ER 717 whereby if you actually spend the time to read that case, you will find that a party cannot withdraw at will from a conditional contract in this way.

What did Lord Denning have to say about this?

Applying these principles, it seems to me here that the parties reached agreement on all essential matters 'subject to the approval of the court'. On the faith of the agreement, the wife and the other man made confession statements. Thereupon it was the duty of the husband to seek the approval of the court. He should have launched a simple petition for divorce on the ground of his wife's adultery, put the correspondence before the court, and sought its approval. Instead of doing so, he claimed that he was not bound by the agreement at all. That was wrong. He was bound. The registrar was right in holding, in the s 17 proceedings, that the husband was bound by the agreement.

There are a lot more relevant cases involving parties being required to give each other notice of non-fulfillment of conditional offers or conditional contracts and the requirement of reasonableness. I will address this in more detail at a later date.

There are a lot of lawyers that think that a contract that is subject conditions can subjectively not be fulfilled that gives rise to the right to just withdraw, that is wrong, and is erroneous to think that way particularly if second year law taught the prevailing caselaw that applies here.

I will be writing in this section in due course to give a breakdown of the caselaw that second year law students are taught at university (many of them are in their early 20's). In the professional scene in practice, it is the writers expectation that lawyers actually spend time to research and learn the law in this area.

The Authority’s errors in drawing reference to analogous cases

The Authority went on to refer to the Authority’s apparent consistency in previous decisions.

The Member referred to Barnes v Telecom New Zealand Ltd ERA Christchurch CA20/06, which if you read this case, you will find that Barnes did not accept the conditional offer of employment and the conditional offer was withdrawn before acceptance (there was no acceptance of the offer). A party is free to withdraw an offer that has not been accepted. This is therefore a case that facts are materially different.

The Member then referred to Gwilliam v KPMG ERA Auckland AA354/03. It is difficult to find this case, to find the correct case you must search for WESTPAC BANKING CORPORATION as the respondent party. In this case Gwilliam did not accept the conditional offer. Similarly as to the Barnes case above, this case too was where there was no acceptance and the offer had been withdrawn. Again, a party is free to withdraw an offer that has not been accepted.

The Authority Member then went on to say:

My conclusion is not inconsistent with the approach taken by the Employment Court to conditional contracts where the question of conditional offers was not relevant, even when offers were expressed as conditional, because the employee had commenced work and the arrangement between the parties had become a conditional contract.

In doing so the Authority referred to three further cases.

Philson v Airways Corporation of New Zealand Ltd EmpC Auckalnd AE35/96, this is wrong, it is Philson v Air New Zealand Limited AEC 35/96 [1996] NZEmpC 118. The Philson case was about Philson’s application for reinstatement, and on assessing the balance of convenience and the overall interests of justice for the parties, the Court declined to reinstate Philson into a safety sensitive role given the expert evidence of medical practitioners regarding the levels of cannabis in Philson’s system at the time regarding the requirement to undergo a drug test. Philson was already an employee being paid in training. Philson said to have unwittingly consumed a cake at a party that contained cannabis. The case did not involve issue of whether the employer had the right to withdraw a conditional offer. The Court said that Philson could still pursue a personal grievance under the legislation.

Scullin v Airways Corporation of New Zealand Ltd [2021] NZEmpC 180. Similar to the Philson case above, Scullin was an application for interim reinstatement, he was already an employee but offered another job as an Air Traffic Controller, conditional on a drug test and a CAA certificate that was frustrated from having had a hair follicle test which tested positive for MDMA. The employer followed a fair and reasonable process and it was proven and consulted with Scullin transparently that the condition was not fulfilled. The application was for reinstatement was declined for reason of clear proof that the condition was not met. There was fairness, and in the interests of safety, it was not reasonably practical to reinstate Scullin to the role.

The Authority Member referred to Salad Bowl Ltd v Howe-Thornley [2013] NZEmpC 152. This should have supported Kennedy’s case:

[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 Court has therefore recognised that even “conditional” offers of employment a person can still fall under s 6 of the Act and be a person intending to work.

Other relevant dicta

In Prasad v LSG Sky Chefs New Zealand Limited [2017] NCEmpC 150 the framework of the Employment Relations Act 2000, the nature of employment relationships, the imbalance of power, and for public policy reasons, the Court has recognised that rigid contractual principles when determining if an employment relationship was created creates difficulties. The example referred to was about novation of employment (an employer, taking place for another employer), See, for example, Savvy Vineyards 3552 Ltd v Kakara Estate Ltd [2014] NZSC 121 ; [2015] NZLR 281 at [29]):

[18] We are not drawn to this aspect of the defendant’s argument. It seems to us that it has been overtaken by developments in the law, specifically in the employment sphere in New Zealand and in contract law more generally. In this regard the strict contractual approach favoured under the previous Employment Contracts Act 1991 was displaced 17 years ago by the enactment of the Employment Relations Act 2000. That Act, as the name suggests, heralded in a new way of looking at contractual relationships in the workplace. It has more generally been acknowledged that a rigid offer/acceptance/consideration approach in contract law can give rise to difficulties.

Edwards v Laybuy Holdings Limited [2022] NZERA 443

The Authority Member in this case relied upon the Authority’s recent findings of law that is described above in Kennedy v Field Nelson Holdings Limited [2022] NZERA 421. The Member in this case, Member Gane, referred to the Kennedy case as Edwards v Field Nelson Holdings Ltd ERA Christchurch CA421/22.

The Authority had said that a conditional offer was accepted and the condition was said to not have been met, and therefore the Authority found in reliance upon its reasoning that I have unpicked above, that Mr Edwards was not an employee under the Act.

Was it actually a conditional contract? If it was, could the employer withdraw it in the way that they did? Time will tell, as this matter has been challenged to the Employment Court of New Zealand.

The cases the Authority referred to

Why are there so many mistakes in the Authority's case citations?

The case links will be published here soon.