Legal insight: Breach of contracts

Q
This is the situation. I've offered a job to someone who lives interstate. They have accepted the job, signed the contract, and have resigned from their previous job and have moved to Sydney - which they have paid for themselves. However, due to internal restructuring, before that person starts, I've had to retract that job offer. Can they sue me for losses incurred by my breach of contract?

A
Withdrawal of a job offer can, in some circumstances, enable a person to sue. In one case (Walker v Citigroup Global Markets Australia Pty Limited [2006] FCAFC 101), an individual (Walker) was awarded over $2.3M in compensation in connection with the withdrawal of an offer of employment. The case serves as a strong warning to employers.

In relation to your situation, a key question will be: what representations were made to the person in relation to the role?

Claims can be made under the Trade Practices Act for misleading conduct during recruitment. If, when the offer was made, your company knew the restructure was pending, the representation that the role was available may be misleading. Courts, in that circumstance, can assess compensation by multiplying the remuneration the person would have received had they continued in their previous employment, by the number of years the court considers that employment may otherwise have continued (eg: 2 to 5 years).

In relation to the costs of the move to Sydney, if that was a lifestyle choice, you may not be liable. However, if the reason for the move was solely because of your job offer, then you could be ordered to cover the cost.

You could also face a breach of contract claim (either combined with or separate from a trade practices claim). Your exposure to such a claim may depend on whether you had guaranteed a minimum employment period. Say, for example, in the negotiations you guaranteed a minimum 12 month employment period, then the court may award damages equivalent to 12 months' pay.

In light of the above, it may be worthwhile for you to audit what representations have been made to the person, so you can assess your potential exposure to any legal claim.

About the author

Bronwyn Maynard is senior associate & team leader at Harmers Workplace Lawyers. For more information call her on (02) 9267 4322 or visit www.harmers.com.au

Bookmark and Share ALB
Click here to close


Latest comments


You deserve to be sued... Simon | 04/02/2010
The unsaid here in the answer is that your company deserves to be sued if your position is "am i liable?". You are 100% morally liable - the person has uprooted their whole life for this role in a reasonable tough economic environment. How would you feel? The tone of your question makes me question whether you should be in charge of employing anybody, period.
Report this comment | Hide
I cant believe you dont understand what you have done.. Jan becker | 04/02/2010
I have come to the conclusion you must not work in HR. Any reasonable person would realise the consequences of making an offer, then withdrawing it. Especially interstate. You do deserve to compensate this person for their personal and professional loss, all round.
Report this comment | Hide
Kate's comment Kate | 04/02/2010
Although I agree that it is not good HR practice, when you work for a big organisation, sometimes ignorant managers do dumb and unethical things that you have to deal with. Bronwyn, thanks for addressing a question that is 'out of the box' and will no doubt prove useful at some stage in my career.
Report this comment | Hide

Leave your comment


Name *
Comment title
Comment *

Read the latest issue online