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Australian Lawyers and Consultants

Employer Responsible for Promises of "Headhunter"

September 2002

In the recent decision of O’Neill v Medical Benefits Fund of Australia (2002) FCAFC 188 (17 June 2002), the Full Court of the Federal Court held that an employer can be liable for representations made by a headhunter who is engaged by the employer for the recruitment process.

The decision is significant in that employers can be liable for large awards of damages, even if the employee is dismissed in accordance with their employment contract. Also, under the Trade Practices Act 1974 an employer can be liable for the representations of a headhunter to a potential employee.

The facts of the case where that Mr O’Neill had been employed for almost 10 years in a managerial position with National Mutual Health Insurance. An executive search company, on behalf of MBF, approached Mr O’Neill. The headhunter told Mr O’Neill that the job MBF was offering would be “as secure as his current secure positions with National Mutual”. In addition, an employee of MBF, in the HR department, stated that the position MBF was offering was for the “long haul”. However, after approximately 2 years he was retrenched by MBF, receiving payment in lieu of notice in accordance with his employment contract.

The Full Court found that Mr O’Neill relied on these representations in accepting employment with MBF and that they constituted “misleading and deceptive conduct” under the Trade Practices Act 1974. It held that MBF was liable for representations by its own employee an those of the external headhunter. The loss suffered by Mr O’Neill could be quantified by ascertaining the difference between the salary he would have earned with National Mutual, and the salary with MBF and in the employment he entered after being retrenched. The period of the loss would be the period Mr O’Neill would have been expected to stay in the employment of National Mutual.

For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.

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