A question that often arises is what the status is of an employee who signed an employment agreement with an employer, but where the employer subsequently reverses the decision to hire them?
Does the candidate have a cause of action? Is that job candidate considered an employee, and does an employer-employee relationship arise between the parties? Do the rules of the “hearing process” apply to the dismissal of an employee, or is there no need to conduct a hearing procedure before dismissal?
In this article, we will present the various options available to job candidates with respect to their rights under the 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 determine whether a person’s services to a workplace were provided in the capacity of an “employee,” such that they are entitled to the rights and protections that labor law confers.
A person’s status as an “employee” is not determined by the description given to it by the parties, but rather from a legal standpoint based on the actual circumstances of the case. This examination is carried out through a number of tests established in case law that determine whether an employer-employee relationship has arisen. However, these tests are not applicable here, since the work has not yet actually commenced.
It is well known that employees negotiate with a new employer while still working at their current job, and the reasons for this are many and varied. Yet even though those candidates for a new job acted with the necessary caution, agreed 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, and not because of any lack of qualifications on the candidate’s part. There may even be a legitimate reason, such as a project that was cancelled so there is no longer any 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. This raises the question of whether the contract cancelled by the employer was done in accordance with the provisions of the law.
To examine this, one must study all of the circumstances that preceded the formation of the contract and check whether the breach of contract resulted from circumstances that the employer, at the time the contract was formed, did not know of, was not required to know of, and could not have prevented, and where performance of the contract in those circumstances is impossible. The point here is to examine the employer’s conduct and to trace the true reasons that featured in the set of considerations that prevented performance of the contract, and in practice the start of the candidate’s employment.
To the extent that the employer does not provide legitimate reasons, and it is shown that it acted in good faith, the court may determine that performance of the contract was possible in the given circumstances and order the employer to pay compensation in accordance with the Contracts Law.
Section 39 of the Contracts Law — performance of a contract in good faith
There is a common mistake among parties (employee and employer) who signed an agreement that has not yet been carried out, namely that each of them may withdraw from the agreement for no reason at all. This mistake gives the other party a cause of action for the harm caused — whether to the employee who lost other opportunities, or to the employer who invested money in recruitment procedures and/or was forced to lose money that was expected to be received as a result of the employee’s employment.
The relevant statutory provision for our purposes 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 that the parties must treat each other with honesty and fairness and act to realize their common intention, with loyalty and dedication to the goal they had before them. That is to say, so long as the circumstances have not changed in a way that frustrated performance of the contract, the parties must fulfill their obligations, and whoever does not act in accordance with the law is liable to pay the other party compensation.
And what happens where the parties did not set a fixed term of employment?
Not every employment agreement includes a minimum period during which the employer undertakes to employ the employee, and each party wishes to assess the extent of integration into the business. So is an employer obliged 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 for a fixed term may be terminated at any time, and the employer has a legitimate right at law to dismiss. On the other hand, as a result of the breach of the agreement, the job candidate suffers damages following the loss of the income they expected from the agreed wages, which may give rise to a cause of action.
Signing a contract. Is the employer obliged to conduct a hearing for the job candidate?
Although the right to a hearing is not set out in legislation, it has been established explicitly and consistently in the case law of the labor courts and derives from the rules of natural justice. This right is a fundamental right, particularly when the possibility of terminating an employee’s employment is being considered.
The purpose of the hearing is to bring about a decision on the employee’s matter that is substantive, informed, and balanced, since the employee may be harmed by the decision to dismiss them, and to allow the employee to try to persuade the authority-holder to change the employer’s position.
The hearing is not a “ceremony” to be held merely to discharge an obligation, and 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 must 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 to which they were assigned, and the employer must give them a genuine and good-faith opportunity, without being able to dismiss them within a short time and without any apparent reason, the same applies to an employee who has not yet actually begun work and has not been given an opportunity to prove their skills and abilities.
Can an employee also claim for the distress caused to them?
The rule is that compensation for distress is not awarded as a matter of course, but only in extreme cases that are exceptional in their severity. However, the more arbitrary the dismissal and the more defective the process, the more one may assume that greater distress was caused to the employee, so that the amount of compensation the employer will have to pay will be higher. The amount of compensation may grow the more the employee proves that not being employed caused them more serious harm as a result of the employer’s conduct.
In summary, a candidate too has rights under the 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 claim 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 firm for professional advice.
