Dismissing an Employee Before Employment Begins — Is It Legal?

In this article, we will present the various options available to job candidates with respect to their rights as established by law, and the value of the monetary compensation they may claim.

The question of whether a person qualifies as an “employee” has been examined in the case law of the labor courts, as a rule, in cases where it was necessary to decide whether a person’s services to a workplace were rendered in their capacity as an “employee” and whether they are entitled to the rights and protections afforded by labor law.

A person’s status as an “employee” is not determined by the description given to them by the parties, but rather, from a legal standpoint, on the basis of the circumstances of the case as they truly are. This examination is carried out through a number of tests established in the case law that determine whether an employer–employee relationship has been created — but these tests are not applicable here, since work has not yet actually begun.

It is well known that employees negotiate with a new employer while still in their current job, and the reasons for this are many and varied. Yet even though such candidates for a new job acted with due caution, agreed on the terms in an employment agreement, and then notified their current workplace of their resignation, they suddenly receive notice that the new employer is reversing its decision to hire them — not because of a lack of qualifications on the candidate’s part. There may also be a legitimate reason, such as a project that was cancelled, leaving no need to recruit the candidate; but the end result is that the candidate is left unemployed.

Does the Employer’s Conduct Constitute a Breach of Contract?

An employment contract is a contract like any other, and the provisions of the Contracts Law apply to it. The question therefore arises as to whether the contract cancelled by the employer was done in accordance with the provisions of the law.

To examine this, one must study all the circumstances that preceded the conclusion of the contract and check whether the breach of contract resulted from circumstances that the employer, at the time of concluding the contract, did not know of and was not required to know of, and could not have prevented, and where performance of the contract in those circumstances is impossible. The purpose of this is to examine the employer’s conduct and to trace the real reasons within the set of considerations that prevented performance of the contract and, in practice, the commencement of the candidate’s employment.

To the extent the employer fails to provide legitimate reasons and is shown to have acted in good faith, the court may hold that performance of the contract was possible under the said circumstances and order the employer to pay compensation pursuant to the Contracts Law.

Section 39 of the Contracts Law — Performance of a Contract in Good Faith

There is a common mistake among parties (employee–employer) who have signed an agreement that has not yet been realized, namely that either of them may withdraw from the agreement without any reason. This mistake gives the opposing party a cause of action for the damage caused — whether to the employee who lost other opportunities, or to the employer who invested funds in recruitment processes and/or was forced to forgo funds that were supposed to be received as a result of the employee’s employment.

The statutory provision relevant to our matter is Section 39 of the Contracts Law, under which a contract must be performed in a customary manner and in good faith. The Supreme Court held that the meaning of the duty to perform a contract in good faith is to act toward one another honestly and fairly, and to work to realize their common intention, with loyalty and devotion to the purpose they had in mind. That is, as long as the circumstances have not changed in a way that frustrates performance of the contract, the parties must fulfill their obligations, and whoever does not act in accordance with the law is liable to pay compensation to the opposing party.

What Is Done in a Case Where the Parties Did Not Set a Fixed Employment Period?

Not every employment agreement includes a minimum period during which the employer undertakes to employ the employee, and each party wishes to assess the degree of fit within the business. So is an employer obligated to employ the employee against its will? The answer to this question is set out below.

On the one hand, an employment agreement that is not fixed for a specific period may be terminated at any time, and the employer has a legitimate legal right to dismiss. On the other hand, as a result of the breach of the agreement, the job candidate suffers damages due to the loss of income they expected as a result of the agreed wage — which may give rise to a cause of action.

Is There a Duty on the Employer to Hold a Hearing for the Job Candidate?

The right to a hearing is not enshrined in legislation; however, it has been established explicitly and consistently in the case law of the labor courts and stems from the rules of natural justice. This right constitutes a fundamental right, particularly when the possibility of terminating an employee’s employment is being considered.

The purpose of a hearing is to bring about a substantive, informed, and balanced decision regarding the employee — since the employee may be harmed by the decision to dismiss them — and to allow the employee to try to persuade the authorized decision-maker to change the employer’s position.

The hearing is not a “ceremony” to be conducted merely to satisfy a formal requirement; the employer must act with openness, fairness, and good faith and hear the employee’s arguments with a clean heart and a willing spirit.

Given the purposes underlying the duty to hold a hearing, as delineated in the case law of the labor courts, it is clear that a job candidate should be regarded as someone employed by the defendant for the purpose of the duty to hold a hearing toward them, even if their employment has not yet actually begun. It is entirely possible that, had the employer heard the employee before the decision was made, it would have reached a different decision, and this breach may be regarded as an unlawful dismissal in violation of the right to a hearing.

Just as every employee in a probationary period has the right to prove their fitness for the position in which they were placed, and the employer must give them a genuine and good-faith opportunity, without dismissing them within a short time and for no apparent reason, so too does an employee who has not yet actually begun their work and has not been given an opportunity to prove their skills and abilities.

Can Compensation Also Be Claimed for the Distress Caused to the Employee?

The rule is that compensation for distress is not awarded as a matter of routine, but only in extreme and exceptionally severe cases. However, the more arbitrary the dismissal and the more flawed the process, the more one should assume that greater distress was caused to the employee, so that the amount of compensation the employer must pay will be higher. The amount of compensation may increase to the extent the employee proves that the failure to employ them caused them more serious damage as a result of the employer’s conduct.

In conclusion, a candidate too has rights established by law even though they have not yet begun their work, and in cases where the employer acted in bad faith, the employee is entitled to sue for their damages, including a claim for distress.

If your employment was cancelled and you wish to examine your rights, you are welcome to contact our office to receive professional advice.