The Federal Court has dismissed claims by a former manager of Linfox, terminated after only four months of employment, that he had been misled about the role during the recruitment process.

Implications for employers

  • While this case essentially turned on its own facts, it is a reminder to employers not to talk up a role or make unsustainable promises during the recruitment process.  This is particularly pertinent in the current competitive labour market, especially in certain sectors where there is significant competition for skilled workers.  It is also a reminder that silence (ie, not providing relevant information) can constitute misleading or deceptive conduct.
  • A well drafted employment contract will provide some protection as the Court will place significant weight on it in terms of what has been agreed between the parties.
  • Subsequent to this case being heard, the Trade Practices Act 1974 was repealed and replaced by the Competition and Consumer Act 2010 (effective 1 January 2011).  This contains similar prohibitions against misleading and deceptive conduct.  Relevantly, it specifically prohibits a prospective employer or recruitment agent making false or misleading representations to a prospective employee about the availability, nature, terms or conditions of employment (with criminal sanctions).  It also deals with misleading job and business opportunity advertisements.
  • It should be noted that equal opportunity legislation and the relatively new provisions prohibiting various types of misrepresentations contained in the Fair Work Act 2009 are also relevant to conduct during the recruitment process.  

Background

In late 2008, Mr Haros was recruited by Linfox for the position of Business Manager for Avalon Airport, located near Melbourne.  As Business Manager, Mr Haros was to work closely with the General Manager of Avalon Airport to manage and expand Avalon Airport’s commercial interests.  Mr Haros had previously been employed as general legal counsel for the Schiavello Group and had resigned from this position to take up his new role with Linfox.

During the recruitment process, Mr Haros was informed that there would be an opportunity for a person who had been successful in the Business Manager role to be moved up to the position of General Manager, once the existing General Manager, Mr Anderson, decided to move on.  However, prior to Mr Haros commencing his employment with Linfox, Mr Anderson resigned and Linfox appointed Mr Giddings, the Commercial and Operations Manager of Avalon Airport, as Acting General Manager.

Mr Haros commenced employment with Linfox in late November 2008, and was tasked with preparing a new business plan for Avalon Airport.  As part of that business plan, Mr Haros proposed an amended organisational structure where Mr Haros and Mr Giddings would have been at the same level and reporting directly to the Chairman of Linfox Airports Pty Ltd.  Mr Haros presented his proposals to the Chairman without consulting Mr Giddings.

Mr Giddings became unhappy after finding out that Mr Haros had approached the Chairman “behind his back” and strongly objected to the initiatives proposed by Mr Haros.  Towards the end of February 2009, Mr Giddings put an ultimatum to the Chairman that if Mr Haros was not dismissed, he would resign.

On 5 March 2009, Mr Haros was called to a meeting and informed that his position had been made redundant with immediate effect.  Mr Haros was paid six months’ salary as a redundancy payment and payment in lieu of notice.  During the proceedings, Linfox acknowledged that Mr Haros’ employment had in fact been terminated due to unsatisfactory performance, but believed at the time that redundancy was an easier option for termination.

Mr Haros’s claim

Mr Haros commenced proceedings against Linfox, alleging that Linfox had engaged in misleading and deceptive conduct by representing that:

  • Linfox would employ him for at least approximately 3 years (and omitted to inform him that it may withdraw this representation if Mr Anderson resigned); and
  • Linfox did not employ anyone other than Mr Anderson in the management or performance of activities attributed to the Business Manager role (or omitted to inform him that it already employed people to perform those activities).  

Decision

The matter was heard by Justice Tracey of the Federal Court.

Security of employment representation

Justice Tracey noted that there was nothing in the exchanges between Linfox and Mr Haros which suggested a fixed term of employment.  Given that Mr Haros was unknown to the managers of Linfox, both his term of employment and advancement within the company would have necessarily depended on his performance.

Justice Tracey also considered the language used by the Linfox representatives who dealt with Mr Haros and noted that words like "potential" and "opportunities" were used repeatedly to describe the Business Manager position.  In doing so, Justice Tracey found that there was nothing in the language used which could reasonably have been interpreted as an assurance or representation that Linfox wanted to employ Mr Haros "for at least approximately 3 years".

Further, Mr Haros' employment contract did not contain a three year term or any other minimum term.  In fact, the contract included a 3 month probationary period under which Linfox could have terminated Mr Haros’ employment without cause and without notice.  Mr Haros had also negotiated the inclusion of clauses in the contract providing for a three month notice period and three months’ redundancy payment.  None of those clauses were consistent with a representation that Linfox wanted to employ Mr Haros for at least approximately three years.

Exclusivity of role representation

Justice Tracey found that the phrase “Business Manager role” could not be understood as including all commercial work at Avalon Airport.  Linfox was planning to significantly expand its activities at Avalon Airport and a large number of commercial developments were under consideration.  Mr Haros did not inquire whether anyone, other than Mr Anderson, was performing commercial work at Avalon Airport, and in any event it could not be reasonably expected that the General Manager would be the only one undertaking such work.

Terms of the employment contract

Justice Tracey also gave weight to the fact that Mr Haros’ contract of employment included an “entire agreement” clause and a “no reliance” clause.  Those clauses were to the effect that the contract set out the entire understanding and agreement between the parties with respect to Mr Haros’ employment, and that all negotiations, representations, warranties or commitments in relation to Mr Haros’ employment were superseded by the contract and were of no force or effect.

Justice Tracey noted that Mr Haros was an astute lawyer with relevant experience in employment law.  Mr Haros was given an opportunity to carefully review the contract and having done so, suggested certain amendments.  He did not object to the terms proposed by Linfox, nor did he question the inclusion of the “entire agreement” and “no reliance” clauses.

Conclusions

Although noting that Mr Haros was understandably aggrieved by the manner in which certain aspects of his employment were handled by Linfox executives, Justice Tracey dismissed the application, finding that the allegations of misleading and deceptive conduct during the recruitment process had not been made out.  Accordingly, Mr Haros was not entitled to compensation for the loss of his employment with Linfox in excess of the amount which he had already been paid.

Haros v Linfox [2011] FCA 699