copyright  |  disclaimer  |  privacy policy  |  print ready

« back

Liability for pre-employment representations

Excerpts from this article first published in ‘Human Resources’ Magazine, Issue 89, 20 September 2005

The recent decision of the Supreme Court of Western Australia in Magro v Fremantle Football Club Limited & Ors highlights the need for corporations to exercise caution when negotiating terms and conditions of employment with prospective employees.

In 1997, Mr Magro entered into negotiations with the Fremantle Football Club for an assistant coach’s position. The negotiations were conducted on behalf of Fremantle by three of its executives. During the negotiations, the three executives represented that the assistant coach’s position would be for a three year term.  Based on the above representation, and others, Mr Magro accepted the position as head coach. There was no written contract of employment entered into for the position.  After 11 months in the job, Fremantle dismissed Mr Magro. Following his dismissal Mr Magro commenced proceedings against Fremantle and the three executives for breach of the Trade Practices Act 1974 (Cth) (TPA).

The TPA contains a general prohibition against corporations participating in misleading and deceptive conduct. The TPA also specifically prohibits a corporation from participating in conduct that misleads a prospective employee about any matter relating to future employment. Persons, including Company officers, involved in a contravention of the TPA can be personally liable for any damage arising from a contravention.

The Court ultimately found that Fremantle had, during pre-employment negotiations, represented to Mr Magro that his contract of employment would be for a three year term. This representation as to tenure was pivotal to Mr Magro accepting employment with Fremantle. As Fremantle had intended for the contract to be terminable on notice, and not for a three year term, it had misled Mr Magro. Accordingly, Fremantle’s representation as to tenure contravened the TPA.
The Court also found that each of the three executives were personally liable for the damages suffered by Mr Magro. The Court’s initial assessment of damages exceeded $500,000.00.

HR Tip

A corporation cannot avoid its TPA obligations.

It is important that during the negotiations for a contract of employment, especially for senior employees, representations that may not be true are not made. These representations may induce the employees to enter into the contract. If the representations later turn out to be false, the employer and those that aided and abetted in making the representation, could be liable under the TPA.

Be sure that recruitment agents also do not make representations on behalf of the employer. False representations by recruiters acting as agents for the employer could also attract TPA liability for the employer.

Jason Donnelly
Senior Associate
Australian Business Lawyers