IS MY CONTRACT LEGALLY BINDING?
Once you have accepted the offer and the conditions to which the offer was subject to have been satisfied, a legally binding agreement will exist. For an agreement to be legally binding, the conditions for forming a contract would have to be met, namely there must be an offer, acceptance, intention to create legal relations and consideration. You may have signed a contract to show your acceptance of the terms but contracts can also come into existence by communicating acceptance verbally or electronically so it is important to remember that you don’t need to sign for a contract to exist.
I DON’T WANT TO JOIN ANYMORE. WHAT SHALL I DO?
Whether it’s because you have been offered a better job by another company or you’ve just changed your mind, you must remember that you have entered into a contract with your prospective employer. You will need to terminate the contract by serving the period of notice which is stipulated in your contract of employment. It is important to look at the notice clause in your contract of employment and then give your prospective employer notice in accordance with your contract.
Practically, it is good for you to give notice to your prospective employer as soon as possible so that they can make alternative arrangements. The employer will have invested time and resources by interviewing you and making you offer so it is good practice (and polite) to contact them to explain the situation. You never know when your paths will cross again.
CAN MY EMPLOYER DO ANYTHING IF I WITHDRAW FROM THE CONTRACT?
If you don’t serve the notice required under your contract of employment, you will be in breach of contract. Your prospective employer will potentially be able to bring a claim against you for breach of contract. However, the prospective employer will be required to prove what loss (if any) has occurred. In most situations, the prospective employer is unlikely to have any loss because you won’t have started work yet. If they have used a recruitment agent, the terms with the agent are likely to stipulate that the recruitment fee is payable only when you have commenced employment or after you have been with the employer for a certain period of time.
WILL I HAVE TO PAY ANYTHING?
It is rare for employers to claim against employees who decide not to join after signing. It is, from their perspective, usually not worth the time and expense of bringing legal proceedings. However, a decision by your prospective employer about whether to bring a claim very much depends on whether there has been any quantifiable loss and the extent of this loss. For example, the prospective employer may incur cost in finding a replacement for you or may have purchased new equipment or machinery pending your arrival. There could be a claim for direct or consequential loss.
ARE ‘NO-SHOW’ CLAUSES LEGAL?
A no-show clause in a contract of employment is one which states that you have to pay a certain amount of money in the event that you do not start work with your prospective employer. This is sometimes seen in the contracts of very senior employees who are being recruited to fill a very specific role or for a particular business-critical project. It is possible that the no-show clause is a penalty clause and will therefore be unenforceable. There is also an argument that a no-show clause is a restraint of trade.
However, there is case law which suggests that in certain circumstances, a no-show clause will be enforceable by your prospective employer and will be a liquidated damages clause. The court will look at the circumstances when looking at the enforceability of the clause. For example, whether the parties have been legally advised before entering into the contract or whether a document has been prepared showing the potential losses that might occur if you don’t join.
If you are an employer or employee and would like further advice about withdrawing from a contract of employment, please contact Shiv Raja at firstname.lastname@example.org.