Failure to 'tell all' a legal minefield for employers

This is an interesting article I recently read, by Shana Schreier-Joffe . I think it's particuarly relevant for employers going through periods of instability and change.

Kate has written previously about the consequences for employers who misrepresent jobs in terms of increased turnover due to employee's expectations not being met in the job and I think this article provides even more compelling reasons for employers to be upfront with employees.

Richard Dunks

Businesses currently recruiting should be up front with candidates about their business in the current economic climate if they want to avoid exposing themselves to employee claims of misrepresentation by omission.
Companies which withhold important information from prospective employees regarding the future plans and direction of the company or its financial cirumstances, in particular any potential restructuring that may occur in the future, may give rise to legal action by misled employees.

In fact, misrepresentation by omission could affect all companies recruiting in the current environment, and for companies that don't take heed, potential legal action could include claims for damages for lost remuneration, commissions or other benefits the employee had been promised. For example, if a candidate is offered a role overseeing a team of 15, or reporting directly to the CEO, yet three months into the role he discovers that his team will be reduced or redeployed elsewhere, or that restructuring will greatly diminish his position in the company hierarchy, then he will understandably feel disappointed and even angered that the role has changed so dramatically from what had been originally presented to him.

If these changes were envisaged by the company at the time of recruitment and not disclosed to the employee, the employee may well have some legal recourse.
Most employers have been so used to 'talking up' their business to potential employees, that they do not realise how important it has become to be candid in the midst of the current economic climate. Employers who are currently hiring should err on the side of disclosure with candidates.

Employers should carefully consider all communications to candidates regarding the role and state of their business, including any discussions or information provided by recruitment agents acting on behalf of the company. This should include any information provided verbally, in writing or specified within the employment contract. While I can understand why employers might be reluctant to openly discuss potential changes that may occur to their business, or the difficult financial position of the company, potential employees need to have all the appropriate information available to allow them to make an informed decision about their careers and employment situation.

Employers should not hide or try to downplay potential workplace changes, as not all changes are necessarily viewed as reactions to negative business performance. There are many reasons why a relatively well performing business might have plans to restructure or make significant changes to their workplaces, whether to create or maximise a competitive advantage or simply adapt and benefit from current market conditions.

Practical advice to employers:

• Be upfront as much as possible about the state of the business, and any planned changes
• Avoid overstating the role, job stability or future opportunities
• Don't exaggerate the performance of the business

If there are potential workplace changes that are of a particular concern or likely to impact that role, and which may leave the company at risk of litigation, ensure that they are disclosed to the potential employee. If it will significantly impact the role performed by the potential employee or the employee's ongoing employment, then ensure details are recorded in writing in the letter of offer or contract of employment.
Shana Schreier-Joffe is a Partner at Harmers Workplace Lawyers

The original link for the full article is: http://www.smh.com.au/small-business/resources/failure-to-tell-all-a-legal-minefield-for-employers-20090629-d1wj.html