“I’ve changed my mind” – The Implications of a Buoyant Labour Market

Tuesday 11 October, 2022

Currently some employees (or prospective employees) looking for work have many options to choose from.  Businesses are having to manage a buoyant labour market, where labour is in demand and businesses are competing for staff. 

Some businesses have benefited from this, while it has led to frustration for others.  More often than ever before, we have seen situations where a prospective employee has accepted a role with a new employer but later changes their mind for instance, to take up a role with another employer, before commencing employment. What then are the legal obligations and entitlements of the parties involved? 

Is a prospective employee an “employee”?

Section 6 of the Employment Relations Act 2000 (‘the Act’) sets out the definition of “employee”. A person “intending to work” is deemed to be an employee under that definition.  Where an employee has not physically commenced work but has signed an employment agreement with a scheduled commencement date, they satisfy the definition of an employee as they are a person intending to work, and have the same protections and obligations as someone who has actually commenced work.  

What happens if they change their mind?

If the employee changes their mind after signing an employment agreement that is enforceable upon signing, contractually they must give notice of termination of their employment in accordance with the agreement.  Where they fail to do so, they will be in breach of the employment agreement. 

Even if the employment agreement expressly states that it is enforceable at some point after signing (such as from the first day of employment), there could be an argument that it is enforceable in any event as, at law, the new recruit meets the definition of an “employee” from the point that the offer is accepted.

Dealing with the notice period

If the notice period would expire before the employee’s commencement date, the employee may give notice of termination, never work for the employer, and would not be in breach of the employment agreement. 

However, where the employee gives notice of termination before commencing and is due to start work before the notice period expires, the legal position of both the employer and employee with respect to the remainder of the notice period would be mutually inconvenient.  Likely, neither party would wish for the employee to work out the remainder of their notice period as it may not be worth either party’s while. 

The parties may agree to shorten or waive the notice period (so the employee does not commence in the role), effectively amounting to a variation of the employment agreement.

In a situation where the employee intends to work the remainder of their notice period against the employer’s wishes, the employer might even begrudgingly pay the employee in lieu for the remainder of the notice period (if the employment agreement allows for this) to avoid them physically commencing in the role only to leave a short time later.

Breaches of obligations

Usually, employers and employees will take a pragmatic approach to this issue and agree for the employee not to work the remainder of the notice period, either by waiving or shortening the notice period or delaying the start date (making it obsolete).  

Where either party breaches their contractual obligations to the other party, they may take action against the party in breach through the Employment Relations Authority.  However, practically in most situations the time and costs involved in doing so would not be worth the recourse available.  

While frustrating for employers to expend time and cost in recruitment only for the successful candidate to change their mind and end the employment before it begins, it is one of the unfortunate realities of competing for talent in the current market.  Local authorities are not immune from these challenges.

For any questions relating to this article, please get in touch with one of our experts below.