Take Care When Making That Offer of Employment

You think you have found the ideal applicant for your position.  You offer them the position.  They may even have signed an employment agreement. But before they start work you become aware of information that makes you question their suitability.   Can you revoke the offer of employment?

A recent decision in the Employment Court of Kennedy v Field Nelson Holdings Limited [2022] NZERA 421 highlights the care you should take when making an offer of employment to an applicant.

In this decision Mr Kennedy raised a personal grievance against the Field Nelson Holdings Ltd claiming that he had been unjustifiably dismissed from his new job when the offer of employment was withdrawn by the employer before his first day of work.  Mr Kennedy was offered a position in writing that made it clear that the written offer of employment was ‘subject to’ satisfactory reference checks and pre-employment checks to the employer’s satisfaction.

Field Nelson Holdings then withdrew their offer of employment to Mr Kennedy before his first day at work because of an unsatisfactory reference.  Mr Kennedy argued that as he had signed an employment agreement he had accepted their offer of employment and was therefore an employee by virtue of the definition of ‘employee’ in the Employment Relations Act 2000 which includes ‘a person intending to work’.    The Employment Court held that as the offer of employment made to Mr Kennedy was clearly expressed to be conditional on (or ‘subject to’) satisfactory reference checks, then Mr Kennedy had accepted this to be the position when he signed and returned his individual employment agreement.  He had accepted a conditional offer only, and Field Nelson Holdings could withdraw it if those conditions were not met.

As an employer, what can you learn from this?

Firstly, when making an offer of employment ensure you always do this in writing in a cover letter.  Your cover letter should clearly stipulate that the offer of employment is made conditional (or ‘subject to’) reference checks or pre-employment checks that are to your satisfaction.

Do not say or do anything that leads the applicant to suggest that they already have the position, or that the pre-checks are just a formality or ‘for appearances sake’.  Good practice would be to also include the proposed employment agreement with that cover letter so that the applicant knows the terms and conditions that will form the conditional offer.

Only contact the referees or reference checks that the applicant has given you permission to contact.  If you wish to contact someone who is not a specified referee, you must get the applicant’s consent first.

Secondly, if you have been given more than one reference to check – don’t stop with your checks just because the first reference check comes back positive.  Check them all.  However, if your first reference check is not to your satisfaction, you are not obliged to continue checking all references.  No subsequent positive reference will un-do an unsatisfactory reference.  Make sure you have clear administration systems in place to ensure that thorough reference checking (and any other pre-employment checks) are made before the employee begins work.

Are you then obliged to disclose the content of this negative reference to the unsuccessful applicant?  This could be problematic.  The Privacy Act 2020 provides there is an obligation for ‘agents’ (this includes individuals, private or public sector organisations)  to disclose to an individual all information they hold about them if requested by the individual.  However, a potential employer may withhold ‘evaluative’ information from that individual requesting it. if the employer and referee have agreed that the information or identity of the referee will be confidential.  Section 50 of the Privacy Act 2020 makes it clear that ‘evaluative’ material includes information gathered for the purposes of determining the suitability of a potential employee for a position.

So the moral of this story is that if you receive negative information from a referee or reference check ensure you ask them if they wish that information (or their identity) to be kept confidential from the applicant.  While this may seem somewhat harsh to the unsuccessful applicant, many referees would simply refuse to give references if they didn’t have a promise of confidentiality or the ability to speak honestly.

Lastly, you can still potentially withdraw your job offer up until the applicant accepts it.  While an employment agreement must be in writing, in some circumstances an employment relationship can still be formed by a verbal acceptance of the offer.  You may then also want to include in the cover letter a further statement clarifying your offer of is not deemed to be accepted until the applicant has signed and returned the agreement.  If you are unsure how to proceed get some advice.