Pre-employment representations

Authored by Nicholas Ellery, Partner and Alannah Hogan, Lawyer, Corrs Chambers Westgarth. Updated by the LexisNexis Legal Writer team and further updated by Erin Lynch, Partner, Grace Gunn, Senior Associate and Jessica Smith, Lawyer, Gadens.

When recruiting for a role, employers may be tempted to “talk up” the role or suggest certain terms and benefits may be available to the successful candidate. If the employer or someone acting on behalf of the employer, makes false or misleading representations to a job applicant, on which the applicant relies in accepting the position, the employer may face a claim for breach of contract and/or breach of the Australian Consumer Law (ACL).

For more information about management of these risks, see Guidance Note: Effective management of risks in the recruitment process.

What is a “representation”?

Disputes regarding pre-employment representations commonly arise where a promise was made orally or via email at interview, or around the time the prospective employee received a formal written offer of employment, but those representations are not particularised in the terms of the contract.

Examples of representations that may give rise to these claims include:

• that the employee will earn a particular minimum salary or minimum bonus;
• that the employee will be employed for a minimum period of time; or
• that the employee will be promoted within a certain time frame or hold specific responsibilities.

In Morton v Interpro Australia Pty Ltd, in the course of pre-contractual negotiations, a sales manager (Morton) queried the bonus structure that was to apply after the first year of his contract. The company’s manager advised Morton that he would receive a bonus based on a particular formula. Morton subsequently signed a contract of employment that contained no reference to the formula. Within 12 months of commencing work, a new management team took over the company and implemented a different, less generous bonus scheme. Morton sued for breach of contract. The court found that the formula became a term of Morton’s contract and was a binding representation.