Disaster may beckon when you change job
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• The June Legal Bulletin reported a county court case in which the judge found that an agent who had engaged an employee on behalf of a company was personally liable to that employee for damages resulting from a breach of that contract of employment. The company that was to be the "employee had not been incorporated at the time of the approach to the employee, and section 9 (2) of the European Communities Act 1972 imposes a responsibility on an agent in that situation.
This is a somewhat superficial summary of the report and, gentle reader, I suggest that you retrieve Part 15 of Legal Bulletin and read it. It did, however, occur to me that it might be of interest if I considered the problems that can arise when an offer of employment is made.
Where there is employment there is always a contact It _does not, however, need to be written, Service agreements or contracts of employment that are standard throughout a company are common examples of written contracts of employment. Their terms will be binding on the parties and, unless they are varied in writing, their terms will be certain As always in the law, there are some exceptions to that statement, but it is better, for the purpose of this article at least, to consider the terms of a written contract to be binding.
A "statement of terms and conditions", to use the language of an industrial lawyer, is not binding. Clear evidence to show that the terms and conditions have been varied by "custom and practice" will be accepted by a court which will imply a variation of the terms against the evidence.
The contract, whether written or not, will, as with almost all English contracts require "consideration". That means effectively that a benefit must pass from one side to the other. I contract to sell you a chair, you give me money: the money is the "consideration".
We may seem to have moved some distance from the position of the agent to whom I referred at the beginning of this article, but that is not the case. When you offer employment, whatever the terms may be, the employee's consideration is his attendance to carry out the work that has been offered on the agreed terms. More importantly there may be consideration, and therefore a contract, if someone alters his position as a result of the offer that is made.
Let us take a common example. You offer employment to a perosn who lives some distance away. It is clear to both of you that he will have to move to take up the offer. Until he moves there is an offer, but, even if he accepts, no consideration. So, no contract. Once he moves which might include incurring expense to sell his house there is a contract, and if you were to withdraw the offer there would be a breach of contract for which, in all probability, you would have to pay damages. That would not be true if the decision to move was not material to the new employment, Many employees who are attracted by an advertisment or by a direct approach have to give notice to an existing employer. That, clearly, is consideration and so, once the step is taken, there is a contract.
It is clearly something to remember.
The agent, in the reported case, clearly caused the employee to alter his position. It appears that, in anticipation of employment by the company that had not been formed, he gave up an existing job and prepared to take up the new position. A contract was made. The EEC law is clear. Where you act as agent for an unformed company you will be liable for any breach of a contract that has been made as agent for that company.
I am bound to say, before I move on to the question of the damages that can be recove red, that I am a little concerned by the report which seems to me to indicate that there may have been a concluded contract with the company which was eventually formed. As I have already said, a contract of employment does not have to be written and the payment of money by an employer to an employee is strong evidence of the existence of a contract.
The report seems to suggest that such a payment was made by the company to the employee before the breach occurred and it is difficult to understand why the judge required there to be a fresh contract to save the agent. Anyway, there it is.
The employee's problem is that the measure of loss may be very small.
Again, we have to look at different situations.
A senior position is offered with a provision for, say one year's notice. The aggrieved employee may well be able to claim the loss of one year's salary if the remaining terms make the offered employment secure.
Take an hourly paid employee who gives up a job to come and work for a new employer. He can be sacked without notice in the first 13 weeks, so he can hardly maintain that his old employment would have continued against the possibility that his former employer might, for whatever reason, have dispensed with his services.
Specific loss, such as removal expenses, presents no problem, but, at the end of the day, an employee who determines to change jobs as a result of an offer is at considerable risk.
The employer has the same rights. He offers employment and the future employee knows, for instance, that a computer will have to be purchased to enable him to carry out his work.
He accepts the offer of employment and the employer buys the computer. There is consi deration against the acceptance and, there fore, a contract. The employee changes his mind and, thereby, commits a breach of contract for which he can be sued; clearly the loss could be the cost of the computer. The problem is that the means of an employee may be such that an action is not realistic.
The English law requires, in any event, that you try to mitigate your loss. The employee must try to find new employment; he cannot simply sit at home and do nothing. The employer, in our example, must either try to find a new employee or sell the computer; he cannot simply keep it as a monument to folly.
Any person who changes jobs, at whatever level, is at risk. Only at the most senior level can an employee realintically hope to have an offer in terms that give some protection in the event that things go wrong. Happily we all change jobs from time to time without, perhaps, considering the possibility of disaster.
The introduction of the liability of an "agent" acting for an unformed company is a new concept and one that is of importance. We frequently seek to staff new companies while the company formation is in process and it is precisely that role which attracts the risk.
It seems that an agent in that situation can protect himself by getting the employee to sign and a signed agreement is critical an agreement to the effect that the agent will not be liable should the arrangement break down. While the law on that point is not decided, the moral of this little tale is that, should you be involved in the staffing of an unformed company you should get every potential employee to sign such an agreement. by Jonathan Lawton.