Over-selling a job

Posted on February 14th, 2017

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over selling jobThe Federal Court has ruled a company must pay damages to a worker, who left a job due to unjustified representations about the future performance of the company.  Relevantly, the job offer included a base salary plus a profit share. The representations were to the effect that the company was trading profitably and would trade profitably in the future.  In fact, the company’s financial performance had dipped prior to the interview and deteriorated further. The worker was retrenched.  She brought a claim for damages on the basis that she left secure employment when she would not otherwise have done so, because of the representations.

The Court accepted that whilst no ‘guarantee’ of future performance was made, the representations were made without reasonable grounds and they in fact induced the worker to resign her secure employment and accept a job offer from the company.

Damages were awarded both for the loss of base salary and also of the profit share the worker did not receive.  The total damages were in the vicinity of $350,000.00.  In a subsequent judgment, the employer was also ordered to pay costs, including on an indemnity basis from the date on which the worker had made a settlement offer which was more favourable to the company than the Court’s decision.

The case does not establish new principle but is a reminder that, much as employers may wish to get the right person for the job, they must be careful not to make representations about the future benefit or entitlements, or indeed about the present or future prospect of the employer itself, because of the risk the Court may later find the representations were not justified and caused loss to the worker that justifies an award of damages:  Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) (No. 2) [2016] FCA 430 (see also [2016] FCA 783, on costs).

Tony Cavanagh Director at Mullane & Lindsay Solicitors NewcastleTony Cavanagh is a Director at Mullane & Lindsay Solicitors and practises extensively in Commercial dispute resolution and litigation, and employment law. If you require any assistance in these areas please contact Tony Cavanagh or contact our Newcastle or Sydney office. 

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