If you have recently employed someone, but now wish to back out, you need to take a variety of considerations into account regarding whether you can terminate the employee.

Some reasons you may want to revoke offers to employ include that you:

  • did a reference check and the employee was not what you expected;
  • found someone else better suited for the role; or
  • changed your mind.

Your options for termination depend on the reason for wanting to terminate the employee. This article will outline the key legal considerations when terminating an employee before they start.

Employment Contract

If your employee has already signed their employment contract, you will need to look into the terms of the contract when determining whether you can terminate them.

For example, some contracts may say the employment is conditional and only commences when the employee shows up for day one at work. 

If this scenario happens and the employee has not commenced work, you may be able to terminate their employment. 

If the employee has started employment, employment contracts often include a probationary period which has a specific notice period attached. You may need to provide the employee with the specified notice period if they have already commenced employment. If there is no probation or mention of notice of termination in the employment contract, you may need to follow the National Employment Standards.

National Employment Standards (NES)

The NES are the minimum employment entitlements in Australia that you must afford to all employees. It outlines that the employee:

  • must have continuous employment; and
  • is entitled to a notice period for termination.

It is not always clear whether an employee may have the right to notice of termination as this depends on whether you have employed them yet.

For example, if the employee has only received an offer and has not commenced working, they are not entitled to notice of termination under NES. 

In contrast, if they had started employment, they would be entitled to the minimum one week notice for termination.

Redundancy and Unfair Dismissal

You do not need to be concerned about redundancy as there is no redundancy pay for employees you have employed for less than 12 months. This is unless their employment contract stipulates differently.

Also, employees cannot lodge an unfair dismissal claim, as this also requires:

  • 12 months of employment for companies with less than 15 employees; and
  • six months of employment for companies with more than 15 employees.

Anti-Discrimination 

It is also important for you to consider the reasons for revoking an offer. You must ensure that anti-discrimination legislation does not prohibit this reason.

For example, if you discovered a prospective employee was pregnant, it would be unlawful to withdraw an offer for this reason alone. 

Similarly, the reason you may wish to withdraw an offer of employment could be due to unsatisfactory pre-employment checks, like criminal history. Here, you may only be able to revoke the offer of employment if the employee’s criminal history relates to inherent requirements of the role.

Misleading and Deceptive Conduct

You may get carried away with making certain statements and promises to candidates about joining your business. Here, you need to be careful to avoid making any false or misleading statements during the recruitment process.

This is especially important when enticing candidates to leave their current employment to take a position in your business. During the recruitment process, you may verbally outline the:

  • nature;
  • conditions; and 
  • opportunities for the job.

If these statements are misleading or deceptive, the employee may be able to bring a claim under competition and consumer laws.

Confronting a Claim for Compensation

Employees can try to bring a claim against your business if you provided an employment contract and revoked it.

For example, the employee may claim that they relied on the signed employment contract and had formed a reasonable expectation of employment with you. This reliance may be to their detriment as they already resigned from their current job.

If you hire an employee and they resign from their original job, and then you withdraw the offer to employ them, there can be some issues. This will depend on why you revoked the offer. 

For example, if the employee failed a background check, this may be ok if there is something in the employment contract about the offer being conditional on background checks. 

On the other hand, if you decided that you wanted to hire someone who was better at the job, then you may be required to provide compensation to the prospective employee.

Tips for Protecting Your Business and Reducing Risk

You should have a robust employment contract drafted to include terms outlining that:

  • the contract does not come into effect until the employee attends one day of work;
  • you have a right to terminate the contract immediately where the employee provides false information about their qualifications;
  • the employment is subject to employee reference checks; and
  • that the written contract contains all of the terms of employment, and the employee agrees that they have not relied on any verbal representations.

Key Takeaways

While it is possible to terminate employees lawfully, it depends on the specific situation and varying factors such as:

  • whether there is an employment contract or enterprise agreement;
  • whether the employee has commenced employment; and
  • the reasons for terminating the employee.

If you are considering terminating an employee before they start, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.

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