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Obligations start as soon as contract signed

Date: 11/10/2017

The Employment Relations Authority has recently awarded over $7,500 to a woman (‘P’) who was dismissed from the Nelson Skin Clinic, Enhanceskin, before she even started working.

P was an applicant for an administration role with Enhanceskin in 2015. Following two interviews and an online test, P became the preferred candidate and was asked to complete an online police check, which she did.

P was then made an offer of employment and was provided with a draft employment agreement. She came into the Clinic to sign the employment agreement, and it was agreed that she would start work on 21 September 2015.

But in visiting the Clinic to sign the employment agreement, P had been recognised by the receptionist. The receptionist approached the Clinic’s Owner and told him she believed there had been an issue with the woman’s previous employment at a pre-school which involved cash going missing and criminal charges being laid.

There was some truth to this concern as P had resigned from a pre-school after theft allegations were raised against her. However, while she was charged by the Police, the case was dismissed in the District Court for lack of evidence.

The Clinic Owner approached the owners of the pre-school who confirmed that there had been issues during the employment relationship. When he checked P’s CV, he also discovered that her employment with the pre-school had been omitted.

The Clinic Owner then contacted the recruitment company that had handled the hiring process and said he could not employ P. He was told by the agency that they would handle it. After initially advising P that the Clinic had decided it needed a registered nurse, the agency then informed her that the offer had been withdrawn as the Clinic had learned of the theft claims.

Aggrieved, P took a claim in the Employment Relations Authority alleging that she had been unjustifiably dismissed.

The Clinic defended the withdrawal of the offer on the basis that P had not been upfront about her work history. However, the Authority agreed with P that she had been unjustifiably dismissed as the employer could not just withdraw the offer of employment once it had been accepted, and it did not follow any fair process before reaching its decision to dismiss. 

The Authority did not consider P to be completely blameless though and decided that the omission from her CV of her time with the pre-school warranted a 25% reduction in the remedies she was awarded. But she still came away with an award of $6,000 compensation and $1,684.80 for lost wages.

This case highlights a common, and costly, misconception for employers which is that there is no employment relationship until an employee starts work and that they can essentially terminate at will at any point before the start date.

The reality is that once a prospective employee has been offered and accepted employment, they have all the same protections at law as an employee who is working. This includes protection against termination without cause and the right to a fair process before the employer makes a decision to dismiss.

The situation would have been different if the offer of employment had not been accepted, and the employment agreement had not been signed, at the point when the Clinic learned about P’s issues at the pre-school. In that scenario, the Clinic would have been within its rights to revoke the offer of employment without following any due process. P would then have had little recourse.

It is important that employers, or recruiters where they are vetting job applicants on behalf of the employer, are thorough in asking the right questions of employees. This may include asking an employee about any perceived gaps in their CV.

However, even the most thorough due diligence may not identify all the potential skeletons in a job applicant’s closest. To protect against these situations, employers would be well-advised to include clauses in their employment agreements which deal with situations where an employee has failed to disclose information that may have impacted on the decision to hire them. 

If damning information later comes to light, a fair process then needs to be followed which includes putting the concerns to the employee for comment, hearing and considering their responses, and then making a decision on whether the concern warrants termination of the employment relationship.

An award of over $7,500 to an employee who never actually started work with the employer may seem high and even tough on the employer. However, it is a reflection of what the law expects of employers in situations such as this and the costly consequences of falling short of that expectation.