Oral and Written Contracts

We recently learnt of a situation where an employer made a verbal offer to a short-listed candidate at the end of their interview, and in front of others present, only to withdraw the offer two days later.  This was because the appointing Manager was subsequently informed that Senior Management had now decided to save money by not replacing the vacancy that they had just filled!! This decision was clearly not the applicant’s fault, who had meanwhile tendered their resignation in light of the verbal offer made.

The employer initially denied that they owed any liability to the individual, claiming that as they had not sent out an offer letter confirming the appointment, no contract existed. The candidate, in turn, stated that the employer was now in breach of contract; they had resigned their job based on the verbal offer made, so they were owed at least the equivalent notice pay that they had been told would form part of their contractual arrangements, as compensation for the employer’s subsequent breach of contract.  So who was right?

The short answer was the candidate.  The 'oral contract' was binding, especially as the consequences of the Manager’s actions were that the candidate believed they had a deal, resigned their job role and, therefore, suffered financial detriment when the offer was then withdrawn.  It is important to appreciate that there is no clear legal requirement under English law for an employee to have a written contract before it is established that a contract does indeed exist between the new employer and prospective employee.  

Oral contracts are binding, but the key issue that needs to be resolved is whether or not an employment contract was formed between the two parties. Just agreeing a start date and a salary is probably insufficient. The legal requirement is certainty, and terms and conditions of employment and job description responsibility can be very important, especially in Senior Management roles. In the absence of a signed contract, these requirements are more difficult to prove.

We have always advocated providing a Written Statement of Terms and Conditions of Employment (aka a contract) at the same time, or very shortly after, a brief offer letter. We also recommend issuing a copy of the employer’s handbook of policies, often called an Employee or Company Handbook, not least because we would expect such a document before giving notice to a current employer, but mainly because it will (or may) contain very important information that may influence decisions about whether to accept the job or not. We would also recommend doing so because it just makes the potential employer look that much more professional.

Back in April 2020, the Government made it a requirement that a Statement of Terms and Conditions of Employment must be issued on day one (or earlier). This was not prompted by the Government’s desire to protect employers, but pressure from employee groups, as well as wanting to make litigation through the already congested Court/Tribunal system less likely. The problem we have found is that in the absence of a proper written contract, the employer can be left on weak legal ground in the event of a dispute. Employers who have relied on just ‘not got around to it’, do not have a leg to stand on if there is then a dispute early into the employee’s employment.

The change was not just to the timing of issuing employment contracts, but it would also apply to people classed as workers, i.e. the ‘not genuinely’ self-employed. We always recommend to our clients that they should issue new employees/workers with their documentation before employment starts, or if not feasible to do so then, as part of induction training on day one.

Actions

• Even if a candidate impresses on the day, a degree of reflection is always advisable just to be sure that that is the right to decision to make, as a clearly made verbal offer is legally binding.

• When making a written job offer, an offer letter, contract of employment, and handbook should be sent out as soon as possible, confirming the details that support any verbal offer made.

• Make sure that as well as providing contractual documentation before the start date, that the legal right to work checks have been carried out prior to the employee joining.  The consequence of not doing so is that you will have lost your “statutory excuse” and, if audited, potentially face eye-watering fines!!! 

• Review induction training to include clarification of key terms and conditions of employment, and all relevant employment policies and procedures.

• Review whether such documents are legally up-to-date and comprehensible.

Consider carefully what to do about workers and their arrangement terms, as the law is tightening up on their employment status too, especially regarding the legal right to work checks. The Border Security, Asylum and Immigration Act 2025 has already passed into law, legally mandating that employers must verify the status of casual workers, zero-hours contractors, and individual subcontractors.

The specific Home Office Enforcement and Civil Penalty requirements for these expanded worker categories are expected to fully take effect later in 2026.  We would, however, advise that employers start getting into the habit now of undertaking these statutory checks so as not to get caught out.

The guidance provided in this article is just that - guidance. Before taking any action, make sure that you know what you are doing, or call an expert for specific advice