When is an employment relationship formed?

  • Make it clear to prospective employees in the pre-employment and selection phase when and how an offer of employment will be made.
  • Advise the prospective employee they do not have employment until the employment agreement is signed by both parties.

When is an employment relationship formed? A recent Employment Tribunal case illustrates the danger to employers of not making it clear to prospective employees when and how an offer of employment will be made.

The Waikiwi Casing Company manufactured animal casings for surgical sutures, musical instruments, and ground food products such as sausages. The work was unpleasant, and involved the cleaning out and processing of animal parts such as intestines, bladders and stomachs.

Work was seasonal and the Company usually recruited new workers ahead of the new season which started in mid-January. The process for engaging new workers involved a series of unpaid trial/training sessions usually carried out in the evenings so that prospective workers could continue with their usual jobs. The Company gave evidence that workers were selected based on their aptitude and liking for the work, and that no offer of employment would be made to them until at least the third or fourth trial/training session.

Brenda Weaver completed three trial/training sessions. She gave evidence that at the end of the third session, the Company's supervisor, Meena Skeggs, offered her employment on $10.50 per hour commencing on 14 January 1998. Relying on this, she gave up her job at a local Pet Shop.

From mid December until 13 January 1998, Ms Weaver did not hear anything more from the Company about her employment. She therefore telephoned a friend who had also been offered employment with the Company, Tracey Proctor, who offered to contact Ms Skeggs. Ms Proctor contacted Ms Skeggs who told her to come with Ms Weaver to the factory on 15 January for another session and if everything went all right they could start work on 19 January.

Ms Weaver and Ms Proctor were surprised by this turn of events but didn't protest, assuming that the extra session was needed because it was a month since they had last been to the factory.

At the end of the extra session, Ms Skeggs told Ms Weaver and Ms Proctor that she would consult with the Company's Manager, Ian Scott, about offering them employment. If he agreed, they could start on 21 January. Ms Weaver and Ms Proctor were concerned to learn of this, as they believed that they had already been offered jobs back in mid December. However, they decided to let the matter lie and see what happened.

On 21 January 1998, Ms Skeggs telephoned Ms Proctor and offered her employment. Ms Proctor asked about Ms Weaver and Ms Skeggs said, "Brenda didn't get the job."

Ms Weaver brought an unjustified dismissal claim against the Company alleging that she had been offered, and had accepted, employment back in mid- December 1997.

In its defence, the Company denied that Ms Weaver had been offered employment and gave a number of reasons why that could not have been the case, including that making an offer at that stage of the training/trial process was inconsistent with its usual practice.

To resolve the case, the Employment Tribunal had to decide who to believe, Ms Weaver and her witnesses, or the Company and its witnesses. It decided that Ms Weaver and Ms Proctor's evidence was the most credible.

The Tribunal went on to find that Ms Weaver had been offered, and had accepted, employment with the Company in mid-December. Although she had not commenced employment, she was "a person intending to work" (ie: she had been offered, and had accepted work) and therefore fell within the extended definition of "employee" in the Employment Contracts Act 1991.

In making this finding, the Tribunal relied on recent Employment Court cases which ruled that a binding employment contract can be formed even though some key elements of the employment were not yet settled. It noted that the only significant point that Ms Weaver was left uncertain about was her start time on 14 January 1998.

The Company's dishonouring of its initial commitment to Ms Weaver's employment constituted a dismissal which was unjustified.

The Tribunal ordered the Company to pay Ms Weaver five months wages ($9,030) plus $6000 compensation for humiliation and distress.

This case demonstrates that employer's need to make it clear to prospective employees in the pre-employment/selection phase when and how an offer of employment will be made.

Under the Employment Relations Act, all individual employment agreements must be in writing and include the key requirements set out in Section 65 of the Act. The employer must give the prospective employee a copy of the intended employment agreement, advise them that they may seek independent advice about its content, and provide a reasonable opportunity for the prospective employee to seek that advice.

Employers need to make it clear to the prospective employee that they do not have employment until the intended employment agreement is signed and returned.

More employment law

Employment Law
Ace Payroll does not give legal advice but these employment law articles may assist more..
Minimum Wage
To check the current minimum wage, visit the New Zealand government website more..
90 Day Trial Periods
New employees can be on a trial period of up to 90 days more..
Daylight Saving
Daylight saving dates and handling related employment issues more..
Redundancy must be genuine
An employee can only be made redundant if their position no longer exists more..
Dismissal procedural fairness
An explanation of the meaning and importance of procedural fairness when terminating employees more..
Employee or contractor
Use this checklist to clarify the difference between an employee and a contractor more..
Contractors minimum wage
Contractors are not entitled to the minimum wage more..
Employee interview honesty
An employee must be honest at a job interview or risk subsequent dismissal more..
Employee deductions
Cannot make deductions without employee consent more..
Retreiving overpaid wages
An employer can retrieve overpaid wages if done correctly more..
Employment relationships
Make it clear when and how an offer of employment will be made more..
Terminated before started
Resigned from old job, then told new job no longer available more..
Video surveillance
The use of video surveillance by employers is common and legal more..
Host responsibility
Think about the safety of employees affected by alcohol at work functions more..
Failure to meet targets
An employee can be justifiably dismissed for failing to meet targets more..
Change pay frequency
Pay frequency can be changed if properly managed more..
Abandonment of employment
Must inquire into circumstances of worker's absence more..
Changed working hours
Redundancy possible if employee does not agree more..
Drivers license
Truck driver loses license. Dismissal fair and reasonable more..
Internet usage
You would be wise to have a policy for personal internet usage more..
Absent employees
Some tips on dealing with absent employees more..
Payment for Jury Service
There is no obligation on an employer to pay for jury service more..
Recruitment health questions
Health questions employers are entitled to ask prospective employees more..
Holiday And Leave Contents
Holiday pay, public holidays, sick and bereavement leave information more..
Alphabetical Index
The Ace Payroll alphabetical index provides links to all documentation more..
Ace Payroll FAQ Contents
All the most common Ace Payroll questions grouped by categories in a short table of key words more..