Does Employment Offer Letter Carry Legal Effect?
Author: Yang Jie & Tang Fuqiang
An employment offer letter is an employment document with specific function and serves fundamental purposes. However, it is not a general notice but carries legal effect. Employing units must access the risk of the contents in the letter.
In general, the staff recruitment procedures of enterprises are: firstly, analyse the job to determine the qualifications required for the job holder; commence the recruitment process and announce the recruitment requirements in line with the human resource plan and recruitment plan of the enterprise. Job applicants are then shortlisted to conduct interview and background investigation on outstanding applicants. After a series of examination, the employing unit will issue an employment offer letter to the qualified applicant and handle the appointment procedures after the candidate has reported duty. The issue of employment offer letter is a change from recruitment to appointment, enterprises have not yet received the labor service and there is neither labor relationship nor labor contract with the candidate. The rights and obligations between the two parties have not yet been covered by labor legislation, resulting in a number of labor disputes.
1. Typical Case
It was reported that the China representative office of a foreign airline company commissioned a foreign airline service company in late 2004 to recruit air hostesses of Chinese nationality. After the first and second interviews and medical check-up, employment of eight female candidates is confirmed and the relevant political examination has been completed. However, the foreign airline company and the foreign airline service company have not confirmed the start date. The recruits inquired about the matter on many occasions but the two companies said the procedures were being handled and told them to wait patiently. In September 2006, the companies informed the eight candidates that the foreign airline company had decided to withdraw the offer and hoped that the candidates could give up the offer voluntarily and the right to claim compensation, and the companies could offer a “gift” of RMB 11,000 each. They objected to the decision and initiated an action against the two companies requesting the appointment by the two defendants together with joint and several compensation of RMB 40,000 to 90,000.
On trial, the defendant foreign airline company claimed that it has not yet formed contractual relationship with these eight candidates and it would not undertake any contractual obligations for them. As a foreign company, its China representative office has no capacity to recruit staff of Chinese nationality and can only accept personnel deployed by licensed external affair organizations in China. Under such circumstances, even if the external affair organization had deployed the candidates to the foreign airline company, there is still no contractual relationship between the foreign airline company and the candidates.
The foreign airline service company said they placed job advertisement on the web upon the request of the foreign airline company and organized the personnel to the venue arranged by the foreign airline company for interview. During the recruitment process, they did not charge the foreign airline company nor the applicants any fee and had fully performed the co-operation agreement with the foreign airline company as well as the corresponding obligations that have been commissioned, and they had provided accurate recruitment information and services to applicants and should not undertake any liability for compensation.
After trial, the court considered that the employer and the applicant enjoy the freedom of concluding contract in the process of contract conclusion. However, the negotiation process should be based on the principle of honesty and integrity. If, in the process of concluding contract, the act of the employing unit creates reasonable reliance by the applicant, and the applicant suffers losses from acts based on reasonable reliance, the employing unit shall undertake the liability for compensation of such losses. Given that it is not mandatory to establish a labor relationship between the employer and the applicant unless under statutory circumstances, the plaintiff’s request for continuation of employment by the two defendants cannot be established. In late June 2008, having considered the faults of the employing unit, the wage level, duration of cessation of work, no labor service due to cessation of work and other income that may have been obtained during that period for serving in the old companies of the eight plaintiffs, the court held that the two companies should pay joint and several compensation from RMB 13,000 to 24,000 to the plaintiffs.
2. Case Analysis
Employment offer letters are also known as “intents of employment” and “offer letters”. The contents of employment offer letters normally include the benefits offered by the employing unit to the job applicant and indicate the willingness of the company to employ the job applicant as employee on the conditions offered. From a legal perspective, the employment offer letter is deemed to be the offer made by the employing unit.
Pursuant to the Contract Law of the People’s Republic of China, [*01] the formation of contract includes two components: offer and acceptance. “Offer” refers to the expression of the willingness to conclude a contract with others. Once the offeree accepts the offer, there is a contract between them, and the offeror is bound by the contract, and the revocation of offer must be made before acceptance. Therefore, once the offer letter is issued, it becomes binding on the employing unit. Since the offer letter is issued by the employing unit unilaterally, the applicant may choose to accept or otherwise. Once the job applicant agrees to establish a labor relationship with the employing unit in accordance with the offer letter, the contents of such letter will be binding on both parties. If a party disagrees to conclude a labor contract on the terms and conditions laid down on the offer letter, the other party has the right to sue for breach of liability. If the employing unit wants to revoke the offer letter after issue, it must revoke the offer before acceptance by the job applicant.
As regards this case, it was reported in the media that the foreign airline company and the foreign airline service company have confirmed the employment with these people and they have indicated acceptance by going through the relevant procedures. If the two companies refuse to employ them, a breach of contract is constituted and liability for breach of contract shall be pursued.
3. Practical Operation
An employment offer letter is a recruitment document with specific function and serves fundamental purposes. However, it is not a general notice but carries legal effect. Employing units must access the risk of the contents in the letter. In practical operation, the use of employment offer letter should be pursued in solemn form of law to mitigate the risk of enterprises to the largest extent.
(1) Use of Offer Letter in Final Stage of Recruitment
The issue of offer letter indicates that the staff recruitment process has completed and enterprises are willing to employ the job applicant on the terms offered. However, a number of enterprises may find that the job applicant does not meet certain requirements after issue of the offer letter and revoke the offer, leading to the liability for breach of contract and loss of reputation. Enterprises should re-examine the recruitment process and conduct appointment checking, such as medical check-up, background investigation, etc before the employment offer, so that the risk of dispute can be reduced.
(2) Specification of invalidity of offer letter
In reality there is such a situation: An enterprise issued an offer letter to a candidate but the candidate accepted the offer a few months later and the enterprise has found another candidate. To avoid the embarrassment brought about by this situation, enterprises should consider setting the conditions on invalidity of offer letter, and acceptance should be made by a time limit, and declare that the offer will automatically be void if no reply is heard within the time limit.
(3) Specification of the relationship between offer letter and labor contract
An offer letter is an offer from the employing unit while a labor contract is an agreement between the employing unit and the job applicant, which is a legal document for establishing labor relationship. Offer letter does not exclude labor contract. After concluding the labor contract, the enterprise may choose to invalidate the offer letter or treat it as an attachment to the labor contract which remains valid. Where there is inconsistency between the offer letter and the labor contract, the enterprise must invalidate the offer letter.

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[*01]
The Contract Law of the People’s Republic of China – Article 13 The parties shall conclude their contract by means of offer and acceptance. Article 14 An offer is the indication of the intent of a party to conclude a contract with another party. The indication shall comply with the provisions as follows: 1) its content shall be specific and definite; and 2) it shall indicate that the offeror will be bound by it upon acceptance by the offeree. Article 15 An invitation to offer is an indication of the intent of a party to obtain an offer from another party. Distributed price lists, auction announcements, tender invitation announcements, share prospectuses, commercial advertisements, etc. are invitations to offer. Commercial advertisements whose contents comply with the requirements for offers are deemed to be offers. Article 16 An offer becomes valid once it reaches the offeree. If a contract is concluded by means of electronic data interchange, and the addressee designates a specific system to receive the electronic data, the document is deemed to have reached the offeree when it enters the designated system. If no specific system is designated, the document is deemed to have reached the offeree upon its first entry into any of the recipient’s systems. Article 17 An offer may be withdrawn. The notice of offer withdrawal shall reach the offeree before or at the same time as the offer. Article 18 An offer may be revoked. The notice of revocation of the offer shall reach the offeree before acceptance is issued. Article 19 An offer may not be revoked if: 1) the offeror has specified that it is irrevocable by setting a time limit for acceptance or otherwise; or 2) the offeree has reasons to believe that the offer was irrevocable and has already prepared for the performance of contract.