The case of Law Ting Pong Secondary School v. Chen Wai Wah highlights the importance of having a carefully considered provision covering the termination of the contract of employment before employment commences. This is particularly important where there is a long period between the signing of the contract and when employment is to commence. For example, where the recruited employee needs to sit out a notice period and/or non-compete period before the employment can commence, or where the employee is recruited well in advance as part of their industry's recruiting cycle, like for teachers.
In the case mentioned the school recruited a teacher. On 17 July 2017 the recruited teacher was given (i) an Offer of Appointment as Teacher ("Offer of Appointment"); (ii) the Conditions of Service for Teachers (the "Conditions of Service"); and (iii) the Letter of Acceptance to be completed by the teacher (the "Letter of Acceptance"). The teacher signed and returned the Conditions of Service and Letter of Acceptance to the school on the same day.
The Letter of Acceptance stated that the teacher ‘accept[ed] the appointment offered’ in the letter ‘in accordance with the attached Conditions of Service for Teachers’. It also stated that the teacher understood that the conditions of the new contract would ‘come to immediate effect e.g. I need to give three months' notice to terminate my employment with the school’.
The Conditions of Service stated that the period of employment would be ‘from 1st September 2017 to 31st August 2018’. Under the Conditions of Service, the teacher was required to give the school three months’ notice in writing, or payment in lieu of notice, or a combination of both in order to terminate the employment contract (the "Termination Provisions").
On 22 August 2017 the teacher backed out of the contract without giving notice or making any payment in lieu of notice. The teacher argued that since his employment would not commence until 1 September 2017 the Termination Provisions in the Conditions of Service did not apply.
The school claimed that the Termination Provisions applied once the teacher signed the Letter of Acceptance on 17 July 2017 and he needed to give three months' notice.
The Labour Tribunal agreed with the school and ordered the teacher to make a payment of wages in lieu of notice to the school.
The teacher succeeded on appeal to the Court of First Instance (the “Court”).
(1) Terms of Employment offered by the Claimant
The case turned on a point of contractual interpretation. Although the Letter of Acceptance mentioned that the contract would come into immediate effect, the Court found that the Conditions of Service (and not the Letter of Acceptance) set out the terms of employment and that did not commence until 1 September 2017.
(2) Acceptance of the Claimant’s Offer by the Defendant
Following this finding, the Court held that it is ‘trite law’ that acceptance of an offer has to ‘mirror’ the offer made. Since the terms set out in the Letter of Acceptance did not form part of the offer, they could not form part of the accepted terms. Under the Conditions of Service, the period of employment was expressly stated to be from 1st September 2017 to 31st August 2018. Hence, the teacher was not under employment at the date of termination and was not liable to make any payment in lieu of notice.
(3) Function of the Letter of Acceptance
The Court also considered what function the Letter of Acceptance performed. The Offer of Appointment provided that in order to accept the offer made by the school, the teacher had to sign both the Letter of Acceptance and Conditions of Service. Therefore, in effect, the teacher's act of signing the Letter of Acceptance was simply to comply with the prescribed mode of acceptance stated in the Offer of Appointment, instead of adding further terms to the offer made by the school.
Takeaway for employers
Generally speaking there is usually not a long lead time between the signing of the contract of employment and the commencement of employment, and the risk of a recruited employee not starting employment is perhaps not that great. However, for various reasons, there may be situations where there can be a long lead time. With the passage of time intentions can change. It is therefore important to focus attention on (a) when the contract of employment is expressed to commence, and (b) what is required of the recruited employee in order to terminate that contract before employment commences. This would largely be a matter of careful drafting of the offer/contract of employment.
While it is uncommon for an employer to sue an employee (or a prospective employee), clearly setting out their obligations is important for managing expectations and deterrent effect.
Judgment available here.