From time to time, things happen that lead an employer to regret making an offer of employment to a candidate, and the employer wants out.

The first issue to consider is whether a binding employment contract has been created. In simple terms, a binding contract begins when there’s an offer made by an employer that is accepted by the candidate. If a candidate has not yet accepted, you should take urgent steps to contact the candidate and revoke the offer.

However, if a binding contract has already been created, you will need to bring it to an end. Contact the individual as soon as possible and inform them that the business has decided not to proceed with their employment. Although you will probably have a very disappointed candidate, the situation will often end there without any adverse legal consequences for the employer.

Some employment contracts might contain a clause allowing an employer to terminate the contract at any time without notice prior to the commencement date, while others might require
the provision of notice or a payment in lieu of notice in order to terminate the contract.

Good reason

Take care to ensure that the reasons for revoking an offer before commencement are not prohibited under anti-discrimination legislation. For example, it would be unlawful to withdraw an offer because you discover that the prospective employee is pregnant.

You should also be careful not to make any false or misleading statements to candidates during the recruitment process, particularly when enticing candidates to leave secure employment to take up a job with your organisation. Verbal assurances about pay or promotional opportunities may be actionable under the competition and consumer laws if they are found to be misleading or deceptive (and could also amount to a breach of contract).

There was a prominent federal court case in 2006 where an employee was headhunted from a competitor and assured he would be employed for at least 10 months, only for the offer to be revoked before commencement. The employee sued for breach of contract and was awarded the equivalent of four years’ pay.

Personal data

 You should also be aware that candidates might be able to access documentation about the recruitment process where it contains their personal information. This might include documents which detail the reasons for not proceeding with the employment.

Accordingly, you should ensure that you keep appropriate records supporting the decision-making process.

Tips for mitigating your legal risks

You might want to consider inserting some of the following clauses into your employment contracts to help you limit your risk:

• A clause stating that the contract does not come into effect until the employee attends for work on the commencement date;

• A right to terminate the contract immediately where the employee provides false information about their qualifications;

• An ‘entire agreement’ clause that provides that the written contract contains all of the terms of employment and an acknowledgement from the employee that they have not relied on any verbal representations; and

• A time period for the candidate to accept the offer, after which point it will lapse.

Consider each matter in context, and always seek legal advice in order to reduce your organisation’s potential legal exposure.

Kylie Scott is Senior Associate of the Australian Business Lawyers and Advisors. 

To read past AHRI:ASSIST columns click here or visit the AHRI:ASSIST page. 

This article is an edited version. The full article was first published in the December/ January 2015 issue of HRMonthly magazine as ‘Cold Feet’. AHRI members receive HRMonthly 11 times per year as part of their membership. Find out more about AHRI membership here.