Introduction

Employment contracts are usually signed prior to commencement of employment. Can an employee who has signed an employment contract back out of the accepted offer before employment commences?

The Court of First Instance (“CFI”) had recently dealt with a Labour Tribunal appeal case, Law Ting Pong Secondary School v Chen Wai Wah [2019] HKCFI 2236, where the appellant employee, Chen Wai Wah (“Teacher”), backed out of his accepted offer of appointment from the employer, Law Ting Pong Secondary School (“School”), as the School’s teacher before his employment commenced. In the proceedings below, the Labour Tribunal ruled that the Teacher had breached the employment contract between the School and the Teacher (“Employment Contract”) and ordered the Teacher to pay to the School HK$139,593.20 as payment in lieu of notice. The Teacher appealed against the Labour Tribunal’s decision.

Facts

On 17 July 2017, the School agreed to hire the Teacher and gave the Teacher the following documents:

(1)  The Offer of Appointment as Teacherdated 17 July 2017 (“Offer of Appointment”);

(2)  The Conditions of Service for Teachers in the School (“Conditions of Service”); and

(3)  The Letter of Acceptance to be completed by the Teacher (“Letter of Acceptance”). 

The Offer of Appointment provided that to accept the offer the Teacher had to sign and return both the Letter of Acceptance and the Conditions of Service. The Teacher signed the Conditions of Service and Letter of Acceptance on the same date.

On the one hand, the Letter of Acceptance provided, among other things, that:

(1)  “I accept the appointment offered in your letter dated 17th July 2017 in accordance with the attached Conditions of Service for Teachers in Law Ting Pong Secondary School.” (emphasis added)

(2)  “I also understand that once I accept this contract, the conditions of the new contract will come to immediate effect  e.g. I need to give three months’ notice to terminate my employment with the school.” (emphasis added)

On the other hand, in the Conditions of Service, the period of employment under the Employment Contract was expressly stated as:

“From1st September 2017 to 31st August 2018”.

To terminate the Employment Contract, the Teacher was required to give three months’ notice in writing, make a payment in lieu of notice, or a combination of both to the School.  On 22 August 2017, the Teacher backed out of the accepted offer without giving notice or payment in lieu of notice.

The School commenced proceedings in the Labour Tribunal against the Teacher for breach of Employment Contract. The Labour Tribunal found in favour of the School and ordered the Teacher to pay the School HK$139,593.20 as payment in lieu of notice.

The School’s claim

The School claimed that the Employment Contract, which comprised of (1) the Offer of Appointment, (2) Conditions of Service and (3) Letter of Acceptance, came into immediate effect upon the Teacher’s signing the Letter of Acceptance on 17 July 2017.  Accordingly, the Teacher failed to give the School three months’ notice in writing and is liable to pay to the School payment in lieu of three months’ notice.

The Teacher’s defence

The Teacher argued that despite having signed the Conditions of Service and Letter of Acceptance on 17 July 2017, his employment would not commence until 1 September 2017 as stated in the Conditions of Service.  Therefore, he was not liable to pay the School any payment in lieu of notice by backing out on 22 August 2017, which was before the employment had commenced.

The Court’s decision

The CFI allowed the Teacher’s appeal and dismissed the School’s claim.  The CFI found that any alleged terms stated in the Letter of Acceptance should not be considered to form part of the Employment Contract because such terms were not included in the offer made by the School at the outset.

Terms of employment offered by the School

The Offer of Appointment referred to the conditions set out in the Conditions of Service. Yet, there was no provision in the Conditions of Service specifically referring to the Letter of Acceptance.

To decide whether to accept or decline such an offer, a person would have to read the Offer of Appointment in conjunction with the Conditions of Service (not the Letter of Acceptance) to ascertain what terms would be agreed between the offeror and the offeree.

The CFI was of the view that the offer made by the School in relation to the Employment Contract was only subject to the terms of the Conditions of Service.  In particular, the period of employment under the Employment Contract was expressly stated as: “From1st September 2017 to 31st August”.

Acceptance of the School’s offer by the Teacher

It is trite law that an acceptance by the offeree must “mirror” the offer made by the offeror.

The CFI found that what the Teacher could (and which he did) accept was an offer with terms subject to the Conditions of Service only, as proposed by the School in the Offer of Appointment.  Any terms purportedly set out in the Letter of Acceptance could not have formed part of the offer made by the School.

Function of the Letter of Acceptance

The Offer of Appointment provided that the Teacher had to sign and return both the Letter of Acceptance and the Conditions of Service in order to accept the offer. The CFI was of the view that 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.

It would be inappropriate to go a step further and to hold that the terms contained in the Letter of Acceptance constitute part of the offer made by the School. Therefore, the Teacher’s employment would not commence until 1 September 2017, and the Teacher was not liable to make any payment in lieu of notice by backing out on 22 August 2017.

Takeaways

This case illustrates the importance of careful drafting of employment contracts.  Disputes may arise in case of inconsistency in the documents constituting the employment contract. Having an employee signing on every document alone does not mean the employee has agreed to every single provision in the documents and all such provisions will automatically form part of the employment contract; it all depends on the wording of the provisions. Inconsistent or conflicting wordings may render some clauses in the employment contract unenforceable.

Employers should carefully draft and review their employment contracts to ensure all documents constituting the employment contracts are consistent with one and other and that they are properly cross-referenced.  It is important to avoid uncertainty, especially on crucial terms such as the commencement date of the employment and the means of termination, in order to reflect the intention between the employer and the employee.