The Case

Between March–April 2013, Ms Rakic entered into discussion with Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Johns Lyng), about a job offer. During those discussions, Ms Rakic claimed that Johns Lyng made representations to her about the profitability of the business. This was an important consideration for Ms Rakic because part of her future remuneration was a percentage of the business’s net profit.

Relying on the representations made by Johns Lyng, Ms Rakic left her employment with another employer (in which she was receiving $100,000 more in base salary) and accepted the position with Johns Lyng. However, Ms Rakic was told that an employee with a 2.5% profit share in the Johns Lyng business would achieve a payment of $106,750 for the 2012–2013 financial year, which would more than make up that salary shortfall. However, Johns Lyng failed to inform Ms Rakic that it was suffering a deterioration in sales.

When Ms Rakic did not receive the expected remuneration, she commenced proceedings against Johns Lyng, claiming the representations made to her were misleading or deceptive within the meaning of the Competition and Consumer Act 2010 (Cth) (ACL).

To be able to utilise the misleading and deceptive conduct provisions in the ACL, the conduct must be made in trade and commerce. Johns Lyng argued that its conduct was not in trade and commerce, and hence did not fall within the ACL. Johns Lyng also argued the deterioration in sales was an unexpected event.

The Verdict

The Federal Court found that negotiations about a job offer is conduct within trade and commerce. Therefore, if that conduct was misleading and deceptive, the ACL could be utilised to bring a cause of action.

The Court found that the representations to Ms Rakic had been made to induce her to accept the job offer and that it was reasonable for her to expect they would eventuate. The Court found the representations to be misleading and deceptive.

The Court ordered Johns Lyng to pay Ms Rakic $333,422 in damages.

The Lesson

You should be careful when making representations to potential employees about their future working conditions and remuneration. You must ensure those representations are realistic and reasonable. If there are any factors that might result in your representations not occurring, those factors must be made known to the prospective employee so that they can properly assess whether or not they wish to accept the position.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.