An employer has successfully defended claims by an employee that the employer engaged in misleading and deceptive conduct in relation to the job security of a role during pre-employment negotiations with the employee.
Implications for employers
Employers should avoid making representations about security of tenure to prospective employees during their recruitment. This is particularly so where the employer knows the prospective employee is leaving a current position to commence with them.
Employers who make express representations about job security that cause an employee to switch jobs may be found to have unlawfully engaged in misleading and deceptive conduct (and be liable for damages), if it ultimately transpires that the employment is not as secure as promised.
The employee was a lawyer who resigned from his employment to take up a position as Business Manager for Linfox Australia Pty Ltd (Linfox) at Avalon Airport. About three months into his employment at the airport, Linfox made the employee redundant. The redundancy occurred in circumstances where other commercial managers had gradually been moved in to take on duties otherwise performed by the employee.
The employee commenced proceedings against Linfox and its then General Manager, alleging they had engaged in conduct that was misleading and deceptive, or likely to mislead and deceive, and had induced him to leave his previously secure and long-term employment.
The employee alleged four separate forms of misleading and deceptive conduct engaged in by the defendants during the negotiations leading up to his recruitment, namely:
- a series of express representations by the General Manager and others on behalf of Linfox from which could be drawn an implied representation that Linfox required someone to fulfil the role of Business Manager for at least three years (the Security Representation);
- by failing to inform the employee that Linfox might resile from the Security Representation in the event the General Manager resigned his employment with Linfox (the Longevity Omission);
- express representations made by the General Manager and others led to an implied representation that Linfox did not employ anybody other than the General Manager in the management or performance of activities comprehended by the Business Manager role (the Exclusivity Representation); and
- Linfox and the General Manager failed to inform the employee that it already employed people in the management or performance of commercial activities at the airport (the Exclusivity Omission).
At first instance the trial judge found against the employee on each of these grounds finding that no representations or omissions of the kind alleged had been made by Linfox or the General Manager.
The employee appealed to a Full Federal Court.
Inadequate consideration of evidence
The Full Court reviewed the trial judge’s decision and reasons in respect of each alleged ground of misleading and deceptive conduct.
In respect of the alleged Security Representation, the Full Court upheld the decision of the trial judge finding that no express assurance had been given to the employee that he would have a secure job for at least three years. The representations made to the employee during his recruitment as to the importance of the position and the long term need for the role were all couched in aspirational terms of possibilities and opportunity; they did not constitute any promise of a fixed term of engagement. This view was strengthened by the fact that the employment contract itself contained provision for a probation period, notice of termination and redundancy entitlements specifically negotiated by the employee.
Further, the alleged Security Representation was a representation as to future matters. As such, in accordance with s 51A of the Trade Practices Act 1974 (now known as the Competition and Consumer Act 2010), the employee not only had to prove that the representation was made, but also that the defendants had no reasonable grounds to make the representation at the time it was made. The trial judge and Full Court found that even if the matter got to consideration of that point Linfox had adduced sufficient evidence to satisfy the court that at the time of the employee’s recruitment the company considered the position would last for at least three years.
As to the alleged Longevity Omission, the Full Court upheld the trial judge’s decision that because it found that the Security Representation had not been made, the allegation of the Longevity Omission could also not be supported.
In relation to the alleged Exclusivity Representation, the Full Court upheld the trial judge’s finding that discussions with the employee around the General Manager’s involvement at the airport did not constitute a representation that there were no other employees involved in such managerial activities because:
- the employee had not asked about any other managers involved in commercial activities at the airport;
- any discussion of management structure and involvement in commercial matters was not of great importance in the overall negotiations and was only ever discussed at a high level. It certainly did not involve discussion of specific roles performed by specific people; and
- at the time of the employee’s recruitment, the other managers involved in commercial operations at the airport undertook various duties which were changing during that period. At that stage the General Manager would not have known about the extent of their involvement or what they would eventually end up doing after the employee was hired.
Lastly, as to the alleged Exclusivity Omission, the Full Court held that nothing which occurred during the recruitment process necessitated disclosure of the involvement of the other managers. The employee had not enquired about it and it would not have been material to his decision to join Linfox. As such, no representation by silence could be made out and the failure to disclose these matters could not be considered misleading and deceptive conduct.
The Full Court found that even if the representations alleged by the employee had been made, the employee had failed to prove he had relied on them. This was important because reliance is an essential element to be proved when seeking statutory relief for misrepresentation. The Full Court did not accept that an experienced employment lawyer would be persuaded to enter into an employment contract on the basis of a representation about security of tenure. This was particularly in circumstances where the employee had been provided with a detailed draft contract that contained a probation period, notice of termination and a redundancy entitlement which the employee had specifically negotiated.
Haros v Linfox Australia Pty Ltd  FCAFC 42 (22 March 2012)