Finding the right employee for your company is not always easy. Sometimes it is tempting to make promises during the recruitment process in the hope that new employees will prefer your company over others, but employers need to tread carefully; false, misleading or deceptive conduct designed to induce someone to take a job is unlawful under Australian Consumer Law.

Under s 31 of the Competition Consumer Act, a person must not, when offering employment, engage in conduct that is liable to mislead on the availability, nature, terms or the conditions of the employment. Common examples of misleading conduct have involved employers making representations or statements regarding remuneration, career progression, non-financial benefits, the company’s financial position and the length of the employment period.

It is necessary to establish that the employee 

relied on the misleading conduct and suffered loss as a result. Employers may also be liable for breach of contract where the promises were contractual in nature.

A recent FWC decision[1] highlights this issue. A senior insurance executive received over $330,000 in compensation for loss and damages after she relied on misrepresentations made by the company about its profitability, her salary and potential earnings when she accepted the role. The insurance executive was poached from another company, and was promised a base salary of $115,000 and a 2.5% profit share of the company.

Given that the salary she was offered was $100,000 less than what she was receiving from her current employer, it would seem unlikely she would accept the job offer. However, she was assured that thegap in salary would be made up by her profit share. After accepting the offer the employee discovered that false representations about the company’s true financial position were conveyed to her during contract negotiations. Even though the court accepted that the representations were not guarantees, it was held that the pre-employment claims were misleading and the company was ordered to pay compensation for loss and damages.

Lessons for employers

·         In contract negotiations, ensure there are no false or misleading representations made to a prospective employee.

·         Review all job advertisements for any misleading content. This includes ensuring all information in the ad is accurate and relevant to the position.   

·         Employment contracts should include an ‘entire agreement clause’. This will state that the written employment contract contains all terms and conditions of employment and supersedes any prior contractual or non-contractual agreements. While this provision is useful for defining the terms and conditions of employment, it will not absolve the company if false or misleading information was used to entice an employee to accept a position.