RCSA Reference Checking – Part 2 by RCSA

RCSA Reference Checking Manual PART TWO Contract & Consumer Protection

Table of Contents Contract Key Points.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2. Terms of the Contract

2.1 Express Terms.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.1.1 The importance of scoping provisions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

1.1 What is a contract?.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

RCSA Code Response.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

1.2 Where is the contract?.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

In cases of uncertainty.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

1. Introduction to Contract

Managing Expectations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

1.2.1 Contract with client?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Ponder Point.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.2.2 Contract with candidate?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

.1 Registration agreement.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Ponder Point.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Employment agents regulation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

.2 A former employer’s contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Confidentiality.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Implied duty of good faith?.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Post employment restraints and suitability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

1.2.3 Contract with other agencies?.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Driver Recruitment Pty Ltd (trading as Authorised Solutions) v Wedeco AVP Pty Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

1.2.4 Contract with referee?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Redwood Group v Hays again.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

“As confidential as the law allows”.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

.2 As applied to contract with candidate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Ponder Point.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

RCSA Reference Checking: Part 2 – Contract & Consumer Protection

2.1.2 Are your terms of business a contract?.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 .1 Redwood Group v Hays.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 .2 Hays v Motorline.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Usual Practice.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Back of a Timesheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Prior Dealings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.2 Implied terms.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.2.1 Terms implied by court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 .1 As applied to contract with client. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Ponder Point.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

.1 Australia.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

4.3.1 Who are likely consumers of your services in reference checking transactions?.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

.2 New Zealand.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

.1 Employer Client.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

2.2.3 Terms implied from course of conduct or prior dealings.. . . . . . . . 15

.2 Candidate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

2.2.4 Terms implied from industry custom and practice.. . . . . . . . . . . . . . . . . . . . . . . 15

2.2.2 Terms implied by statute. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

2.3 “All care and no responsibility” clauses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.3.1 HWC v Corporation of the Synod of the Diocese of Brisbane & Ors (2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Ponder Point.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

4.3.2 Who sues whom?.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 5. Families of (Mis)Conduct

2.3.2 Wang v. Minister for Immigration & Anor (2009).. . . . . . . . . . . . . . . . . . . . . . . . . . . 16

5.1 Supplying unsuitable services.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

2.3.3 Redwood Group v Hays Specialist Recruitment (Australia) Pty Ltd (2009).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

5.1.1 Australia Commonwealth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

5.1.2 New Zealand:.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

2.3.4 Woodland Home Products Pty Ltd v Alliance Recruitment Pty Ltd (2009).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3. Conclusions on Contract

5.2 Misleading and Deceptive Conduct.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

5.2.1 Examples of breach in reference checking situation.. . . . . . . . . . . . . . . . . 22

Ponder Point.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Driver Recruitment Pty Ltd (trading as Authorised Solutions) v Wedeco AVP Pty Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Consumer Protection Key Points. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 4. Introduction to Consumer Protection

4.1 Approach.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

5.2.2 “But I was only passing on what the referee told me…”.. . . . . . . . 24 .1 Yorke v. Lucas .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

4.2 Why Consumer Protection?.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

.2 G ardam v. George Wills & Company Limited the “mere conduit” test.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Ponder Point.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Important exception.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

4.3 What is a Consumer?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Woodland Home Products Pty Ltd v Alliance Recruitment Pty Ltd.. . . . . . 24

RCSA Reference Checking: Part 2 – Contract & Consumer Protection

5.3 Making False (and Misleading) Representations.. . . . . . . . . . . . . . . . . . . . . . . . 25

5.6.1 Queensland:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

5.3.1 The need for services?.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Ponder Point.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

5.3.2 Representations about exclusions, rights or remedies. . . . . . . . . . . . . 25

5.6.2 Australian Capital Territory:.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

5.4 False & misleading representations about employment. . . . . . . . 25

Ponder Point.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

5.4.1 Australian Competition & Consumer Commission v Zanok Technologies Pty Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

5.6.3 Western Australia:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

5.4.2 Reference Checking Applications.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

5.7 Exclusion and Contracting Out.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 RCSA Code Response.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

5.5 Engaging in unconscionable conduct;.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 5.6 Breaching statutory duties requiring professional and ethical conduct... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

RCSA Reference Checking: Part 2 â&#x20AC;&#x201C; Contract & Consumer Protection

Contract Key Points • The law of contract traditionally provided a remedy if the parties suing and being sued were in a contractual relationship and the party being sued caused loss or damage because it had performed a contractual duty without due care and skill.

• Express or implied terms might cast obligations on you to perform your responsibilities with due care and attention and to ensure that the services you provide are suitable for the purpose for which they are required.

• Contracts may exist with clients, candidates, other recruiters and referees.

• A term implied by the courts into contracts with your clients is likely to be that you will take reasonable steps to provide candidates who in terms of qualifications and employment history appear suitable and that you will exercise reasonable diligence in checking whether they have any disqualifying attributes.

• A contract is a legal relationship that springs from some agreement. It creates rights that a court will protect and obligations that it will enforce. • Contract law gives flexibility in shaping the scope of the parties’ legal responsibilities when providing or receiving an employment service. • Care must be taken to ensure that agreement is actually reached regarding the terms of the contract. It is not enough just to provide a copy of terms of business.

• All-care-no-responsibility clauses need to be carefully drafted. Sometimes they may not be effective to remove common law duties of care or implied contractual (or statutory) duties of due care.

• You should try to expressly scope the services that you will provide in relation to reference checking. Careful scoping is consistent with the RCSA Code requirement for certainty.

RCSA Reference Checking: Part 2 – Contract & Consumer Protection

1. Introduction to Contract We have seen in Part 1 dealing with Duty of Care how the common law creates a general duty of care to take reasonable steps to avoid foreseeable damage that might result if care is not taken. That duty of care is the essential ingredient in the common law action for the tort1 of negligence. The tort of negligence has been recognised in Commonwealth countries since about 19322. However long before the common law allowed a plaintiff to sue for the tort of negligence, the law of contract provided a remedy if the parties suing and being sued were in a contractual relationship and the party who was being sued had caused loss or damage because it had performed a contractual duty without due care and skill. We have also seen how the presence of a contractual relationship might bring the parties into a “proximate”3 relationship so that duties are owed under the law of tort and under the contract. In this part, we examine the nature of the contractual duty to render due care and skill as well as a number of other contractual duties which may be either expressed or implied. Later, we will look at how consumer law has developed additional remedies in situations where the supply or possible supply of services (including employment services) fails to meet adequate standards of care, disclosure and honesty.

1.1 What is a contract? We often think of a contract as an agreement that is written down on a piece of paper. However, whilst the agreement is essential; the writing is not always necessary. We therefore understand a contract primarily as a legal relationship that springs from some agreement. It creates rights that a court will protect and obligations that it will enforce. Because the parties may themselves create these rights and obligations it is a very flexible relationship and one within which there may sometimes be scope to shape or alter other legal rights and duties. Example of a contract creating a right or obligation The provision in your terms of business that scopes the services that you will perform for your client when assessing candidate suitability is an example of the way in which your agreement gives rise to a contractual responsibility. You are contractually binding yourself to perform those services and may be liable for breach if you do not perform them. RCSA Reference Checking: Part 2 – Contract & Consumer Protection

Example of a contract altering other legal rights A common provision, with which you may be familiar, that excludes your liability for negligence is an example of such a provision4. It alters the way in which the law might assign legal responsibility under the tort of negligence.

1.2 Where is the contract? Once it is recognised that a contract is a legal relationship, rather than a piece of paper headed “Contract”, it should also be realised that contracts may be formed in a variety of different settings wherever the parties intend that an agreement they have reached should be legally binding upon them. In this section we look at some of the common contracts that may be made in an employment services setting and consider how their terms shape the rights and obligations of the parties to them with respect to reference checking obligations. 1.1.1 Contract with client? Your contract with your client is perhaps the one with which you will be most familiar. It is the one that gives rise to your entitlement to claim a fee and which shapes your contractual responsibilities with regard to the services that you will provide in assessing candidate suitability. It should usually reflect the nature of your relationship.

Ponder Point Do you think that your contractual responsibilities when engaged on a contingent basis should be as extensive as they might be when you are engaged on a retained basis? Why? NOTE: RCSA’s templates make a distinction in this regard.

1. Civil wrong. 2. Donoghue v Stevenson [1932] AC 562 H/L – the snail-in-the-ginger-beer-case.

3. A relationship in which the parties are so closely connected through their actions that one must take care to ensure that its actions do not harm the other. See the discussion on

Duty of Care. 4. For an extended discussion, see Section 6 in this Chapter: “All care and no responsibility” clauses.

1.2.2 Contract with candidate? Many recruiters may not have given much thought to whether they have entered into a contract with their candidates. Sometimes recruiters seek to obtain the benefit of a promise of exclusivity from the candidate. How is this enforceable if not through a contract? In many instances recruiters probably do enter into contracts with their candidates; but what are the terms? What terms might be implied into such an agreement where the parties have not expressly stated them? .1 Registration Agreement

In many instances, the terms of a contract with your candidates may be expressed in, or implied having regard to, the provisions contained in your registration agreements and other documents. Ponder Point Do you think that you enter into contractual relations with your candidates? Have you looked at your registration documents to see whether they might contain provisions that are likely to be considered to be contractually binding on you or your candidates? NOTE: If you believe that your candidates are bound by the contents of those documents it is likely that it was your intention to enter into a legally binding contractual relationship. What does such a relationship require of you when it comes to “representing” the candidate and undertaking reference and other suitability checks EMPLOYMENT AGENTS REGULATION

Employment agents’ regulation in some Australian States and Territories suggests that you may not be entitled to enter into a contract with your candidates.

.2 A Former Employer’s Contract

The contract that exists/ed between your candidate and his/her former employer may be relevant in several respects with regard to assessing candidate suitability for a particular role. CONFIDENTIALITY

Contractual and equitable duties of confidentiality may prevent your candidate from disclosing some information that you might want to check at interview or whilst reference checking. Examples cold be information about billing targets, remuneration, commission structure and clients. IMPLIED DUTY OF GOOD FAITH?

In some jurisdictions it has been held that a contract of employment contains an implied term of good faith (or mutual trust and confidence); and that an incident of it is that the former employer will not do anything that would unreasonably prejudice an employee when seeking future employment opportunities. This provision has been held to apply to the giving of a reference. In other jurisdictions the existence of such a term has been doubted and questions have been raised as to whether it is capable of extending beyond the termination of the employment. Australia

The High Court has still to make a ruling on this point. The position varies between the States. The trend of current authority favours the existence of such a provision; but leaves scope for the employer to act in its own interests. It is thought that the purpose of the implied term is to support an ongoing employment relationship and for that reason it might not extend to control the giving of references by the former employer after the employment ends.

The legislation has historically been directed at prohibiting the charging of candidate fees; but the current wording seems to go further than that and may prohibit entering into any contractual arrangement at all.

New Zealand

In these jurisdictions you will need to be very careful to ensure that you do not try to secure contractual benefits from your candidates (e.g. a contractual promise of exclusivity or a release of liability or an exclusion) that you are not lawfully entitled to obtain. In this section we look at some of the relevant provisions.

The statutory duty of good faith is broader than the implied term at common law and extends in favour of a person intending to work – i.e. a person who has been offered and who has accepted work as an employee.5

RCSA Reference Checking: Part 2 – Contract & Consumer Protection

In New Zealand, the obligation may arise independently via section 4 of the Employment Relations Act 2000.

It is therefore necessary to keep in mind that if the employment agreement has been made “subject to satisfactory reference checks”, it is likely that the statutory 5. Section 6(1)(b)(ii) Employment Relations Act 2000 (NZ).

duty of good faith will then apply to control the reference checking process; and that a breach of the duty may trigger a personal grievance. POST EMPLOYMENT RESTRAINTS AND SUITABILITY

A post-employment restraint may be relevant to the extent to which it might disqualify a candidate from working within a particular area for a particular time; or from soliciting clients or candidates of the former employer. If a recruiter fails to identify such a restraint there is a risk that it will have breached a contractual duty to take reasonable steps to identify any relevant disqualifying attributes and to put forward only candidates who are suitable for the role. In an on-hire situation, the failure to identify a relevant restraint may involve the agency in a breach of the restraint as well as in a breach of that provision of the RCSA Code for Professional Conduct which requires members to take reasonable steps to ensure that any new employees meet their obligations to a prior employer.6 1.2.3 Contract with other agencies? In multi-tiered supply arrangements there may be contracts with other agencies that will contain terms regarding the reference checking responsibilities of the parties and provisions relating to candidate attributes and suitability. It will be important to make sure that they are aligned as closely as possible to maintain consistency in candidate selection and to ensure that any “upstream” suitability checking meets “downstream” requirements.

“AS CONFIDENTIAL AS THE LAW ALLOWS”

Suffice it to say that the RCSA Code requirements for certainty and for the ascertainment of the extent to which any information obtained by a member is confidential, will mean that members should give careful attention to the obligations that they are taking on; and that members ought not commit to maintaining confidentiality of information in circumstances where the law may require disclosure.7 “As confidential as the law allows” is the watchword here. It means that you are prepared to preserve the confidentiality of information given to you subject to any lawful obligation that you may have to disclose it – e.g. under lawful compulsion, as where an investigative agency may be entitled to access the information – or where a court may require disclosure.

Ponder Point Agencies frequently promise that they will never divulge confidential information about their candidates. It is a promise that they probably cannot keep. Why? Do you make this promise in your marketing materials, brochures or elsewhere?

1.2.4 Contract with referee? It has been suggested that a contract may sometimes be formed with a referee to preserve the confidentiality of certain information that is communicated to the recruiter. Whether the agreement to maintain confidentiality amounts to a contractual agreement will depend upon the intention of the parties. Often it may give rise to a different sort of obligation – one of confidentiality that is enforceable in equity. We do not propose to say a great deal about the difference between the contractual obligation of confidence and the equitable obligation of confidence other than that they may be enforceable in different circumstances and give rise to different remedies.

RCSA Reference Checking: Part 2 – Contract & Consumer Protection

6. RCSA Code Principle 4.3. 7. E.g. under the access provisions of Privacy Principle 6.

2. Terms of the Contract Terms of a contract may be oral or in writing. They may be express – i.e. what they have said or written; or they may be implied – i.e. they were not actually said or written but they are included anyway because the law or the courts say they should be!

2.1 Express Terms The express terms of a contract are what the parties expressly agree. They may be oral or in writing depending upon the requirements of the jurisdiction in which you are carrying on business. Example In South Australia, contracts for the supply of employment services to a client should be in writing.8 2.1.1 The importance of scoping provisions If you are able to undertake and complete the scoping of your reference checking obligations thoroughly you will have a better chance of being able to discharge your recruitment duties efficiently and in a way that manages your legal risks and exposures. Several provisions of principle 6.3 of RCSA’s Code for Professional Conduct contain specific provisions relating to the requirements that fall upon members to scope reference checking obligations to a degree of certainty consistent with the professional standards which they must uphold.

RCSA Code Response Principle 6.3 states that: “Members must take reasonable steps to ensure the certainty and scope of their engagement: a. By a Client to provide an Employment Service – including but not limited to such matters as: i. content of any Service Commitment or Service Charter offered in connection with the provision of the Employment Service; ii. description of the specific service/s to be provided; iii. deliverable or outcomes, including proposed dates and delivery times; iv. fees and charges of the agreed services, including any temp-to-perm; contractor-to-perm; agency switching fee or similar fee arrangement; v. outline of the client and Workseeker relationship management process; vi. commitment to rapid and fair resolution of customer complaints or issues; vii. explanation of any service guarantee and claims processing; viii. description of any position required to be filled including the inherent requirements of the position and the extent to which the Client offers to make reasonable adjustments to avoid unlawful discrimination and meet Equal Employment Opportunity responsibilities;

RCSA Reference Checking: Part 2 – Contract & Consumer Protection

8. Section 21 of Employment Agents Registration act 1993 (SA).

ix. any particular purpose for which the Employment Service is being required; x. any reference, background, or suitability check required by the Client to be performed in respect of the position; xi. disclosure of Client identity; xii. disclosure of Workseeker information, assessment or valuation. b. By a Workseeker – extending to agreement regarding all matters relevant to the Member’s representation of the Workseeker including: i. Details of work conditions, the nature of the work to be undertaken, rates of pay and pay arrangements; ii. The obtaining of any necessary consents, approvals, or permissions required from the Workseeker; iii. The nature of any restraint imposed, directly or indirectly, upon the Workseeker with respect to the Workseeker obtaining further work.

You will see immediately that sub-paragraph (a) highlights features of the job and the client engagement that are going to be relevant to the type of information that you will need to obtain and disclose about your candidates. You will also see that sub-paragraph (b) requires you to establish with your candidate what you are going to do to the same professional degree of certainty. Consultants who are Accredited Professional Members of RCSA have a personal responsibility to abide by the Code and are personally responsible for any breach of the Code which they commit. The RCSA Board may impose sanctions upon them including expulsion, suspension and fines. In cases of uncertainty In cases where there is some uncertainty about what it is that the employment agency is required to do, the usual principles relating to the scope of your contractual obligations (either express or implied), the law of negligence and the possibility that your marketing and promotional material may have misled the client as to the scope of the services that would be performed will all have a bearing upon your liability. RCSA Reference Checking: Part 2 – Contract & Consumer Protection

Once you, your client and your candidate are all clear about what it is that you are going to do, and what sort of information you are going to collect, use and disclose, the representation of your candidates and clients becomes much easier. Serious problems often arise when recruiters fail to take steps to establish certainty of your contractual obligations with regard to these matters. Example 1: In cases where scoping has not been undertaken clients will sometimes have unrealistic expectations about what inquiries the agency has carried out; and may expect that the candidates whom you have floated (reverse marketed) come with a fully screened background and a warranty of suitability. Clients have made professional practice complaints to RCSA about this. Example 2: A client might complain that a particular background check (e.g. an insolvency check) has not been undertaken and might complain that you have failed in your professional and contractual duties. The client might refuse to pay your fee and a complaint might be made against you under RCSA’s Code for Professional Conduct. NB This actually happened! Example 3: A court might refuse to enforce your terms of business which attempt to shift responsibility for candidate selection to the client and you might be left exposed to claims for damages for breach of contract and negligence.9 Example 4: Agencies which do not scope their reference checking obligations often end up with inconsistencies between their marketing and promotional materials, their terms of business, and the quality of service which they deliver to their clients and candidates. The result is usually unhappiness all round. RCSA has received professional practice complaints from clients about this. Example 5: Uncertainty in relation to these matters may cause you to make an error of judgment such that you refer a candidate without disclosure of material and adverse information (with resultant damage being caused to the client). NB This actually happened!

9. This happened in Redwood Group v Hays – A New Zealand decision from 2009 which we discuss in more detail below.

»» NSW Case: The former CES failed to adequately gather, record and disclose information about a candidate’s relevant criminal history; and referred a candidate to a farmer, whom the candidate shot upon obtaining employment with him!!10 Managing Expectations As you engage in the scoping process you will be able to ascertain your client’s real requirements and you will be able to provide an improved service by advising your client realistically about what information can and cannot be obtained. You will be able to manage your client’s expectations regarding these matters so that there will be less potential for dispute and a greater potential for improved client relationships.

.1 Redwood Group v Hays11

An agency placed a candidate. The client refused to pay the placement fee. The agency issued a statutory demand for payment (as it was entitled to do) – threatening to wind up the client if payment was not made within the statutory demand period. The client applied to have a statutory demand set aside. The client argued that it should not have to pay because the agency had breached an “implied warranty” that the candidate would be suitable for the position. The agency, in reply, relied upon the exclusion clauses in its terms of business which provided: “A claim or dispute raised by the client does not entitle the client to set off against or withhold payment of any money owed to [the Agency]”

You should also be able to manage your candidates’ realistic expectations so that again there will be less scope for dispute and more scope for improved relationships.

and which placed responsibility for the final recruitment decision on the client. Effectively, the agency was saying that its terms of business had become a contract.

With practice you should be able to scope your reference checking obligations in a detailed and professional manner that will allow you to:

Although ultimately deciding that the client would have to pay the fee, the Court held that the agency could not rely on its written terms of business because there was no evidence that they had ever been accepted. They had not been signed; and whilst they had been identified in the header to the e-mail by which the agency sent a résumé (of a different candidate) they were not described in the body of the e-mail as terms that would form part of the contract.

• portray a professional presentation in dealings with your clients and candidates; • inform the preparation of your marketing and promotional materials; • inform the preparation of your terms of business (and assessment of terms of business submitted by clients); • describe and manage the risk that you undertake for the purposes of obtaining suitable insurance cover; • manage candidate and client relationships; • assist in selecting candidates who may be more likely to be suitable for the job. 2.1.2 Are your terms of business a contract? Most recruiters use printed terms of business, which they attach to candidate resumes and forward to clients expecting that the client’s consequent interview of a candidate so “introduced” will result in a contract being formed in the exact terms of the printed form. Is their optimism justified? A New Zealand High Court has said not. An Australian Court has said it could be.

RCSA Reference Checking: Part 2 – Contract & Consumer Protection

Asher, J, relying on earlier New Zealand authority, stated what RCSA has been telling its Members for some time: “… to bring about a binding contract the offer and the reply accepting must be of and in respect of precisely the same terms. The offeree must unreservedly assent to the exact terms proposed by the offeror.”12 The Court therefore held that there was an oral contract only. Whilst the oral contract did not include the express provisions relied upon by the agency, neither did it contain the implied warranty relied upon by the client.13 The following lessons may be taken from this decision: • It is not good enough to attach terms of business to an e-mail and assume, or hope, that they will be accepted; • If sending terms of business by e-mail, always make it clear in the body of the e-mail that the terms of business form part of the contract. 10. Monie v Commonwealth of Australia [2007] NSWCA 230. 11. Redwood Group Limited v Hays Specialist Recruitment (Australia) Pty Ltd [2009] NZHC 825 (15 July 2009). 12. When conduct of the client is relied upon to indicate acceptance of terms of business the conduct must be unambiguously referable to the terms of the offer that has been made.

13. The position may have been different in Australia where the Competition and Consumer Act 2010 imposes statutory guarantees in respect of the supply of services. See the Chapter in this manual on Consumer Protection.

.2 Hays v Motorline14

The Queensland Supreme Court had to consider arguments about whether an agency’s terms of business should be given contractual force. In the course of that litigation, the agency put forward three arguments as to why its terms of business should apply. USUAL PRACTICE

It relied firstly, upon evidence from its consultant that she had a telephone conversation with the client in which she “would have” discussed the agency’s terms of business and in which they “would have been accepted”; and that it “would have been her usual practice” to send out the terms of business shortly after such a discussion. Unfortunately, she could not give positive evidence of any recollection of having done so apart from providing a copy of the confirmation letter. The court was not prepared to find that a sufficient basis had been laid upon which to argue that the terms of business had become part of the contractual arrangement between the agency and the client at the time when the agency undertook the assignment. BACK OF A TIMESHEET

It was secondly suggested that the terms of business had been provided on the back of a time sheet and had been accepted when the time sheet was signed and returned. That argument was not successful either, because the time sheet was a “postcontractual” document. In order to be effective contractual terms must be brought to the knowledge of the other party and accepted before the contract is entered into. PRIOR DEALINGS

Fortunately for the agency, the reason why it was ultimately successful was that there had been a course of prior dealings on nine separate occasions when the agency’s terms of business had been provided to the client (or a closely related entity) (including on the back of earlier time sheets) without any objection having been raised to them. Absent the course of prior dealing (of if there had been any flaw in it), the agency’s claim might have failed. Several important lessons are to be learnt: • It is most important that terms and conditions should be brought to the attention of the client before the agreement to provide an employment service is reached. Documents that are provided after that point are likely to be little value in determining what the terms of the agreement were.

• Make sure your terms of business have been accepted before you agree to provide an employment service. • The best evidence that your terms of business have been accepted is a signed document provided to you before any employment service is supplied. • It will generally not be good enough for a consultant giving evidence in proceedings such as these simply to say what he or she thinks he/she “would have done in accordance with usual practice”. It is much better to be able to give direct evidence based on a personal recollection. A recollection of that type may be aided by having appropriate file notes or records of what was done and said. • It is important when submitting terms of business that consultants should be clear about the purpose for which they are being submitted. If they are intended to be binding, Members should be clear about that and not submit them on some other basis such as, “for your information” or “for your attention”. »» NOTE: The client relied on the use such expressions by the agency to argue that the terms of business were not intended to have contractual effect. The argument, although unsuccessful, may be raised successfully in other circumstances. • In circumstances where there has been a substantial course of prior dealing, it is possible that a court will reach a conclusion that the parties have impliedly contracted on the basis of terms that have been circulated in the course of the earlier transactions. It is less likely that a court will do so where the dealings have been infrequent or conducted over a short period. • There is a risk of uncertainty if, as often happens, inconsistent terms have been circulated by both parties – as where the agency’s terms are printed on the back of time sheets and the clients terms a print on the back of purchase orders. • Implied terms will not prevail over an express objection or reservation made by the client. So that if the client says, “I am unable to agree to these terms of business until they have been checked out by our legal department (or my supervisor)”, there will be no basis upon which a court may objectively draw an inference that the parties had intended to contract upon the terms set out in documents previously exchanged.

14. [2008] QCA 375 (28 November 2008)

RCSA Reference Checking: Part 2 – Contract & Consumer Protection

2.2 Implied terms There are several different ways in which terms may be implied into contracts. 2.2.1 Terms implied by court Courts may imply a term into a contract to give effect to the parties’ bargain. Before the court implies such a term it must be satisfied that the term is: • reasonable and equitable; and • necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; • so obvious that it goes without saying;

checks in relation to candidates for employment; and that this term had been breached when the consultant: • failed to speak to either of the candidate’s two nominated referees; or • if she did speak to someone, failed to pass on relevant information to the client. At first instance the trial judge said (as was approved by the Court of Appeal): “I consider this to be the primary and most basic of the enquiries the [Agency] was required to undertake and that had [the Consultant] done so the evidence suggests overwhelmingly it would have become apparent immediately that [the Candidate] was an unsuitable candidate”.

• capable of clear expression;

The agency was ordered to pay damages for loss suffered by the client as a result of the breach.

• not a contradiction of any express term of the contract.

REDWOOD GROUP V HAYS AGAIN

In a contract for the supply of employment services it may be necessary to imply a term that the services will be rendered with due care and skill. .1 As applied to contract with client

If a term were to be implied into your contract with a client, it would require you to make sure that your reference checking activities were carried out with due care and skill. This would require you to take reasonable steps to corroborate information that you received from your candidate. What is not always understood is that it would also require you to corroborate information that you receive from the referees. This will often mean that information received from referees should be cross checked with the candidate and/or with another objective source.15 DRIVER RECRUITMENT PTY LTD (TRADING AS AUTHORISED SOLUTIONS) V WEDECO AVP PTY LTD16

A client engaged a recruitment agency, to find a person suitable for appointment as its sales manager for South East Asia. The agency referred a candidate. Eighteen months later the client discovered that the candidate’s claimed qualifications had been false, he had been bankrupt and was an undischarged bankrupt, and in his business activities he had engaged in fraudulent practices. The New South Wales Court of Appeal unanimously held that it was an implied term of the contract that the agency would undertake thorough background and reference RCSA Reference Checking: Part 2 – Contract & Consumer Protection

In the case of Redwood Group v Hays, which we have already looked at in another context, the New Zealand High Court also had to consider whether such a term could be implied into an oral contract for the supply of recruitment services and if so, what it required. Facts Not long after the candidate commenced, the client wrote to the agency to express reservations about the candidate’s suitability. The candidate resigned in December 2008. Although the candidate had worked successfully in other CFO positions and there were no “disqualifying” factors (example the history of dishonesty), it seemed that she was not able to pick up some of the specialist skills necessary to work effectively in the property sector within which client carried on business. Argument The client argued that it should not have to pay because the agency had breached an “implied warranty” that the candidate would be suitable for the position. Ruling Asher, J held that, in the circumstances of this case: “…business efficacy would indicate that the recommendation of a candidate that 15 HWC v Corporation of the Synod of the Diocese of Brisbane & Ors (2008) and Wang v. Minister for Immigration & Anor (2009), which we have looked at in Part 1: Duty of Care are both cases in which problems arose because the information provided by the referee was

deficient. Spring also is a case where problems arose because the information provided by the referee was deficient. 16 [2008] NSWCA 290.

was on any objective analysis clearly unsuitable for the job, would result in any fee owing to [the Agency] not being payable. Such a flaw in a candidate might, for instance, be a criminal record for dishonesty, known or easily ascertained by the employment specialist, but not discovered or passed on to the client.”17 However, there was no implied warranty as to general suitability. Asher, J stated: “I do not consider that any implied term can extend to a warranty as to suitability of the candidate for the job… The obligation on [the agency] was to provide candidates that in terms of qualifications and employment history appeared suitable. It was not to guarantee the success of the placement.”(Emphasis added). and: “It could be expected that matters such as the particular fit for the job offered, and the ability to master the specialist concepts involved in a new specialist job, would be assessed at an interview… If [the client] had wanted a clause that it would not have to pay the fee if [the candidate’s] employment terminated within three months, or some other period, it should have said so, and got [the agency’s] agreement. It did not do so.” The agency was able to demonstrate that it had complied with its implied obligations and the client was ordered to pay the fee. .2 As applied to contract with candidate

How might a term that services will be rendered by a recruiter with due care and skill apply to a contract with a candidate? We think that it would apply to require the agency: • to check thoroughly information gathered about the candidate; • to give accurate descriptions of the job and the need for particular types of information; • to ensure that the representation provided by the agency was reasonably suitable for the purpose for which it was required – namely to assist the candidate to find work; • to take reasonable steps to prevent unauthorised disclosure of information collected about a candidate; • not to act (use or disclose information) on the basis of unfounded opinions either RCSA Reference Checking: Part 2 – Contract & Consumer Protection

of its own or of others despite the fact that those opinions may be honestly held; • not to act on the basis of irrelevant information; • not to indiscriminately accept (or offer) contractual obligations of confidentiality to referees in a manner that would shut out a candidate’s right of access under privacy laws. Ponder Point There may well be other incidents of an implied contractual duty to exercise due care and skill in representing a candidate. What do you think it might entail? Which of those duties impact upon reference checking and information handling practices? NOTE: We later develop the argument that good privacy compliance provides a means of ensuring that you will comply with a number of these duties and that you are able to manage the risk of non-compliance. 2.2.2 Terms implied by statute Sometimes, terms of the contract will be furnished by statutes such as Fair Trading legislation. It is important to know the circumstances in which such a term is likely to be implied and whether it can be excluded. An attempt to exclude such a provision in any manner not permitted by the statute which creates it may give rise to illegality and may expose you to penalties. We will examine these terms in more detail in the section dealing with Consumer Protection. In this section we provide a brief introduction so that you can be aware of the types of terms that can sometimes be implied into your contracts by statute. .1 Australia

In Australia, the Trade Practices Act 1974 (C’th18) used to imply, into every contract for the supply of services by a corporation to a consumer, a warranty that the services will be rendered with due care and skill; and a further warranty, in certain circumstances, that the services will be fit for any purpose which the consumer makes known to the corporation as the purpose for which the services are required. That changed in 2010 with the passing of the Australian Consumer Law. The statutory guarantees in the Australian Consumer Law no longer rely on the contract for their 17. Note the similarity between the duty as described here and the duty as described in Driver Recruitment considered above. 18 Section 74.

effect. However they still require care and skill19, fitness for purpose20 and delivery in a timely manner.21 Of course not every transaction that you enter into will be a transaction with a “consumer”. The Australian Consumer Law contains a definition which imposes some limitations, including monetary limits, on circumstances in which a supply of services will be considered to be a supply to a consumer. Keep in mind however that although your client might not always be a consumer, it is likely that your candidate will be. Under the Australian Consumer Law the statutory guarantees cannot be excluded; however, in some circumstances, legal liability for a breach of it may be limited. .2 New Zealand

In New Zealand a similar statutory guarantee applies to the supply of services to consumers under the Consumer Guarantees Act 1993.22 The provisions only apply if the services are of a kind ordinarily acquired for ordinary personal, domestic or household use or consumption and are not intended for the purpose of resupply in trade or consumption through manufacturing production.23 Keep in mind however that although your client might not be a consumer, it is quite possible that your candidate will be. Where the supply forms part of a business transaction with a consumer who acquires, or holds himself or herself out as acquiring the services for the purpose of the business, it may be possible to contractually exclude the terms provided that the agreement is in writing or, in certain limited circumstances, provided that the supplier’s terms of business are in writing; the parties are “in trade” and the exclusion is otherwise fair and reasonable.24 There may be a limited number of circumstances in which your candidate may fall within the scope of this exclusion. Example If your candidate is an independent contractor whose services are on-hired to clients the candidate may be considered to be engaged in business.

2.2.3 Terms implied from course of conduct or prior dealings A term may be implied into a contract for the supply of an employment service where the term corresponds to what has happened on prior occasions when the parties have had a chance to turn their minds to the scope of services that are to be provided. For this circumstance to arise, the parties would need to have had conducted business on the same terms on a substantial number of occasions or over a substantial period of time such that it would be “safe” to assume that they had intended their transactions to be governed by those terms. This requirement was satisfied in the Hays v Motorline Case that we looked at earlier. There had been a prior course of dealings on nine separate occasions when the agency’s terms of business had been provided to the client (including on the back of earlier time sheets) without any objection having been raised to them. Both the District Court and the Court of Appeal were prepared to find that a temp-to-perm fee clause was an implied term in the contract; and that it arose out of that course of prior dealings. If the parties have previously scoped the reference checking services to be provided by the agency, then it is possible that those requirements will be imported into later contracts even though the matter has not been expressly discussed. It is therefore always important to think about what your past dealings have entailed and if you wish to do something new or different make sure that you negotiate and get agreement on fresh terms. 2.2.4 Terms implied from industry custom and practice A term may be implied into a contract for the supply of an employment service where the term reflects “standard industry practice” or “custom and usage”. The circumstance can be difficult to prove. It has been held by both the Australian High Court and the New Zealand Court of Appeal that the practice generally must be so well known and acquiesced in that everyone who makes a contract of that particular type (e.g. recruiters and clients) can be presumed to have intended that it would form part of the contract. Many attempts to imply terms into contracts on this ground fail because the alleged “standard industry practice” or “custom and usage” is variable and not “standard” at all and therefore cannot support the necessary presumption.

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19 Section 60 of the Australian Consumer Law (“ACL”). 20 ACL section 61. 21 ACL section 62.

22. Sections 28 to 30. 23. Section 2 – Definition of “Consumer”. 24. Section 43(2).

Example: Were we to be asked, we would say that it is NOT a standard industry practice, or part of custom and usage, that “agencies always provide two references”. The availability of (and need for) references will vary on a case by case basis according to the information that is required, the work history of the candidate, the requirements of the client and the willingness of the agency to undertake (and be paid for) the work of obtaining references.

2.3 “All care and no responsibility” clauses Four cases that we have so far considered have highlighted the view that, in the absence of an effective exclusion clause, recruiters may be left facing legal liability if they have not exercised reasonable care in selecting the candidates whom they put forward for interview. This can remain the position even if they have used some form of the familiar “all-care-noresponsibility” provisions frequently found in recruiters’ terms of business; and even though they may have left the “ultimate decision” to the client. 2.3.1 HWC v Corporation of the Synod of the Diocese of Brisbane & Ors (2008) The Queensland Supreme Court said: “…there is an arguable case of liability for breach of duty of care arising where a teacher, who had been engaged in improper conduct, had been allowed to resign and provided with a reference from the Principal of the school which allowed him to seek employment elsewhere, and having gained employment in another State, again engaged in improper conduct (sexual abuse) of a pupil, who now, as an adult, sought to bring civil proceedings for damages for personal injuries….”. 2.3.2 Wang v. Minister for Immigration & Anor (2009) The Federal Magistrates Court directed its criticism toward an “unbalanced” reference which focused only upon the positive features of the candidate and left out some important negatives: The Court said: “It is noteworthy that the reference does not mention the applicant’s unsatisfactory grades in all subjects studied, her failure to achieve satisfactory course progress, failure to complete Year 12 or its equivalent, and her need to develop her English skills to a more functional level... The reference is plainly misleading, no matter how literally correct it might be. It is RCSA Reference Checking: Part 2 – Contract & Consumer Protection

disturbing that a reference was provided in this form by a major education services provider more than a decade after the House of Lords judgment in Spring v Guardian Assurance plc (“Spring”) suggested the possibility of a duty not to negligently cause economic loss to a prospective employer by the provision of an inaccurate reference, although in that case a specifically requested reference rather than a general reference was referred to.” Both of these cases clearly indicate that a duty of care is likely to be found to be owing to a person who relies upon a reference. The duty was described in Spring’s Case as a duty “to avoid making untrue statements negligently or expressing unfounded opinions even if honestly believed to be true or honestly held”. Given that such a duty exists at common law, can it be avoided? The answer is “Partly – but only if a suitable exclusion clause is used”. 2.3.3 Redwood Group v Hays Specialist Recruitment (Australia) Pty Ltd (2009) The agency’s terms of business provided, as reported in the decision: “The client will need to satisfy themselves that any medical or other qualification has been met by the candidate. The final recruitment decision rests with the client.” When the agency issued a statutory demand to recover payment of a placement fee in respect of a candidate whom the client alleged was unsuitable, the Court refused to let the agency rely upon the clause because, regardless of how effective the clause might (or might not) have been in those circumstances, it never became a term of the agreement. It was included in terms of business that were only attached, and not referred to, in the e-mail which forwarded them together with the candidate’s resume. The Court thought that this was not enough to give them contractual effect. The Agency was thus left with a duty arising by way of an implied contractual term. The Court said: “…business efficacy would indicate that the recommendation of a candidate that was on any objective analysis clearly unsuitable for the job, would result in any fee owing to Hays not being payable. Such a flaw in a candidate might, for instance, be a criminal record for dishonesty, known or easily ascertained by the employment specialist, but not discovered or passed on to the client. … The exact words of the term do not need to be defined in this judgment and were 16

not attempted by counsel. It would be a term that on an objective basis the candidate had the necessary qualifications for the position, and there were no matters known or that could with reasonable diligence be discovered that disqualified the candidate. I consider that such a term is so obvious that it goes without saying and is necessary to give business efficacy to the contract.” 2.3.4 Woodland Home Products Pty Ltd v Alliance Recruitment Pty Ltd (2009) The NSW Supreme Court similarly had to deal with a statutory demand for payment that an agency had made against a client. The client attempted to defend the demand by claiming that the agency had failed to perform the contract. The contract, as reported in the judgment, expressly stated that the agency would: “...take reasonable steps to confirm the qualifications, experience, ability and identity” of the candidate. It also said: “...however [the agency] makes no representation as to the actual skill level or competence of the Candidate.” Thereafter it set out in commendable detail what that last statement actually meant and explained the steps that the agency would and would not take in selecting candidates. The Supreme Court thought it was arguable that the statement that the agency made no representation as to skill level meant literally nothing more than that there was to be no warranty of the accuracy of the information provided about the candidate and no suggestion that the agency itself made any representation to the client. Despite the attempt at negativing the representations, the agency was left with the residue of its contractual duty to take reasonable steps to confirm suitability. Whether that had been complied was a triable issue and the statutory demand for payment was set aside.

3. Conclusions on Contract Where does all this leave the recruiter? We can say with some confidence that the recruiter will generally owe a common law duty of care and an implied contractual duty to submit only candidates whom, in terms of their qualifications and employment history, appear suitable; and to take reasonable steps to ensure that, on an objective basis, the candidate has the necessary qualifications for the RCSA Reference Checking: Part 2 – Contract & Consumer Protection

position, and there are no matters known or that could with reasonable diligence be discovered that disqualify the candidate. Such a duty would extend to original candidates and to any candidate offered by way of replacement. These minimalist legal duties will be supported by consumer protection laws which: • prohibit a person from engaging in misleading conduct – NB putting forward a candidate who did not satisfy those basic criteria could be considered misleading conduct – especially if the agency has provided marketing material containing representations about the quality of its service; • create or imply into some contracts with consumers statutory guarantees relating to the quality of the services that are to be supplied and, in some cases, a further warranty that the services will be fit for the purpose for which they are acquired. These statutorily implied terms and guarantees may not be capable of exclusion; but in some cases an agency can limit liability to the obligation to refund the fee or provide the service again without further fee. An exclusion clause that disturbs the statutorily implied terms will be void and may therefore be of no effect. We look at this in more detail in the section dealing with Consumer Protection. We can also say with some confidence, that a provision that merely declares that no representations are made will not be effective to exclude liability – especially if there is an express or implied duty to take some degree of care. Put simply, one cannot undertake a positive contractual obligation to use reasonable steps to confirm certain aspects of a candidate’s suitability and hope to avoid liability by a “no representation” provision if those steps are not taken. We can also say with some confidence that in those situations where you have entered into a contract with your candidates, the law will imply a term that you will carry out all aspects of your representation of the candidate with due care and skill. This will extend to the manner in which you handle candidate information as well as to other aspects of your representation of that candidate – e.g. the type of jobs for which you put the candidate forward, the issue of whether you put the candidate forward at all; and the explanation you give your candidate in the event that he/she is not successful. Of course this will often mean that you have to balance your duties owed to your client with your duties owed to your candidates. That is part of the skill and challenge of working as a professional recruiter! 17

CONSUMER PROTECTION Consumer Protection Key Points • A consumer is a person who receives (or who may receive) a supply of services. • “consumer” is a broad and flexible concept, the meaning of which will be shaped by the context in which the supply transaction takes place and by the degree of protection which the statutory law affords in that context. A person who may be a consumer in one context is not necessarily a consumer in some other context. • Consumer law now reflects a concern with the following aspects of transactions for the supply of goods and services: »» Risks associated with poor quality or unsuitable goods and services; »» Market distortions that may result from inadequate, insufficient or misleading information about goods and services; »» Inequality of bargaining power between consumers on the one hand and suppliers on the other; »» Unfair or unconscionable dealings, particularly with regard to vulnerable person; »» Necessary access to courts, government agencies and other means of dispute resolution. • The field consists of a number of legislative provisions that provide a measure of consumer protection by quite different means.

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• The principal means by which consumer law provides protection against the provision of unsuitable services is through the passing of legislation which creates statutory guarantees relating to the supply of services or various warranties or conditions as to suitability or fitness for purpose. • All jurisdictions have provisions that prohibit a person from engaging in misleading or deceptive conduct or conduct that is likely to mislead or deceive. • All jurisdictions have additional statutory consumer protections which prohibit the making of false (and in some cases misleading) representations in connection with the supply of services • All jurisdictions have additional statutory consumer protections which prohibit the making of false (and in some cases misleading) representations in relation to employment. • Cases in this area of consumer protection often involve very serious breaches of the professional standards and unconscientious exploitation of another’s inability or diminished ability to conserve his or her own interests. • In Australia, all jurisdictions have statutory provisions that relate to unconscionable conduct. The unconscionable conduct occurs when the stronger party to some transaction act is unfairly, usually by taking advantage of the other party’s disability such as poor language skill, vulnerability, inexperience, weak financial position etc.

4. Introduction to Consumer Protection Consumer protection is a field of law that has advanced in Australia and New Zealand considerably since the early 1970s. The field consists of a number of legislative provisions that provide a measure of consumer protection by quite different means. In this section we will consider the consumer protection provisions of Australia and New Zealand that are most directly relevant to the process of reference checking. Some of what is dealt with in this chapter builds upon what we have already looked at in the section dealing with contract. As we will be looking at a number of legislative provisions, it will be helpful if we identify the main consumer protection legislation that we will consider and set out the abbreviations we will use when referring to it. This is done in the following table. Table 1 Jurisdiction

Legislation

Abbreviation

Australia (C’th)

Competition and Consumer Act 2010 Australian Consumer Law

(C’th) ACL

New Zealand

Fair Trading Act 1986 Consumer Guarantees Act 1993

(NZ) (NZ)CGA

A.C.T.

Fair Trading Act (Australian Consumer Law) Act 1992 Agents Act & Regulations 2003

(ACT) (ACT)AA

N.S.W.

Fair Trading Act 1987

(NSW)

N.T.

Consumer Affairs and Fair Trading Act 1990

(NT)

Qld

Fair Trading Act 1989 Private Employment Agents (Code of Conduct) Regulation 2005

(Qld) (Qld)PEA

Fair Trading Act 1987 Employment Agents Registration Act 1993

(SA) (SA)EARA

S.A.

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Tas

Australian Consumer Law (Tasmania) Act 2010

(Tas)

Vic

Australian Consumer Law and Fair Trading Act 2012

(Vic)

W.A.

Fair Trading Act 1987 Fair Trading Act 2010 Employment Agents Act 1976

(WA) (WA)ACL (WA)EAA

4.1 Approach There are several different approaches that could be adopted in providing an overview of the subject. The approach adopted in this section is to introduce some of the core concepts and then to look at what we have described as a number of “families of (mis)conduct” against which consumers are to be protected. In this section we identify those families of (mis)conduct as: • Supplying unsuitable services; • Engaging in misleading & deceptive conduct; • Making false (and misleading) representations; • Making false & misleading representations specifically in connection with employment; • Engaging in unconscionable conduct; • Breaching statutory duties requiring professional and ethical conduct. As we consider each of those families in turn, we will identify the legislative provisions that operate within Australia, its various States and Territories and in New Zealand to provide the network of protection.

4.2 Why Consumer Protection? The law of consumer protection developed by way of statutory intervention because the common law of contract did not provide adequate safeguards to consumers of goods and services. One of the earliest interventions came in the form of Sale of Goods Acts during the 1800s. However the Sale of Goods Acts did not provide any protection in the case of a supply of services such as is more likely to be the case during the course of reference checking. Consumer law now reflects a concern with the following aspects of transactions for the supply of goods and services: • Risks associated with poor quality or unsuitable goods and services; • Market distortions that may result from inadequate, insufficient or misleading information about goods and services; • Inequality of bargaining power between consumers on the one hand and suppliers on the other; • Unfair or unconscionable dealings, particularly with regard to vulnerable person; • Necessary access to courts, government agencies and other means of dispute resolution. Ponder Point How do these “risks” manifest in the course of reference checking?

4.3 What is a Consumer? A consumer is a person who receives (or who may receive) a supply of services from you. Consumer law protects not only your clients with whom you have entered into a contract for the supply of your employment services; but also a person to whom you might supply your services such as:

Later we will see that this broad definition is narrowed with respect to particular types of consumer protection laws; but if we were to take as an example the broad prohibition against engaging, whilst in the course of trade or commerce, in conduct that is misleading or likely to mislead, we would see that the courts in Australia and New Zealand view that protection as extending for the benefit of the public at large. On the other hand, if we were to look at the protection provided against the risk of supply of unsuitable services, we would see that this is achieved by creating statutory guarantees or implying terms of suitability into a very limited class of consumer contracts and that, in this context, “consumer” receives a restricted definition.25 What flows from this is that “consumer” is a broad and flexible concept, the meaning of which will be shaped by the context in which the supply transaction takes place and by the degree of protection which the statutory law affords in that context. 4.3.1 Who are likely consumers of your services in reference checking transactions? As a recruiter, it is not uncommon to supply an employment service to two broad categories of people – clients and candidates. .1 Employer Client

The services that you are likely to be providing to your employer clients will relate to the sourcing and selection of suitable candidates. You might be providing recommendations and advice and consulting to the employer/client on the process as well. You might be marketing your services to the employer/client as a potential client. .2 Candidate

In some cases your candidates are consumers of your services. The services that you are likely to be providing to your candidates are services by way of “representing” them in their quest for work. You might be providing other services as well – resume assistance, training etc., where it is lawful to do so, either with or without fee.

• potential clients; • candidates and potential candidates; and • the public. RCSA Reference Checking: Part 2 – Contract & Consumer Protection

25. See e.g. s 2(1) Consumer Guarantees Act 1993 (NZ); s 4B Competition and Consumer Act 2010 (C’th) and s 3 of the Australian Consumer Law.

Ponder Point Do you think of your candidates as “consumers” of your services?

5. Families of (Mis)Conduct

What protections does the law extend to them? What steps do you take to ensure that your staff are aware of the protections that exist and that agency practice is conducted in such a way as to operate within the protections?

Against that background, we will now look at the various families of (mis)conduct.

4.3.2 Who sues whom? It is a curious feature of consumer protection law that, in the main, consumers themselves are not always the main protagonists in consumer protection litigation. The majority of consumer protection prosecutions and civil law suits are brought either by the consumer protection authorities or by businesses – and in many instances by competitors, who perceive that another competitor may be securing an unfair advantage through the use of unfair tactics against consumers.

5.1 Supplying unsuitable services The principal means by which consumer law provides protection against the provision of unsuitable services is through the passing of legislation which creates various statutory guarantees as to suitability or fitness for purpose. The Australian jurisdictions, since 2010, have harmonised their approach to accord with the Australian Consumer Law. 5.1.1 Australia Commonwealth The Australian Consumer Law26 creates a statutory guarantee with regard to a supply of services to consumer, a condition that services will be provided with due care and skill. A further guarantee is created to the effect that the services will be reasonably fit for a given purpose which the consumer makes known to the corporation and that the services will be of such quality that they might reasonably be expected to achieve the intended result.27 There is an exception to this latter provision where the consumer does not rely upon the supplier’s skill or judgment or where it is unreasonable for the consumer to rely upon the supplier’s skill and judgment.28 There is also a guarantee that services will be delivered in a timely manner.29 In this context, “consumer” is defined30 to include: • A person who acquires services to a value not exceeding $40,000. There are provisions as to how the sum is calculated; • A person who acquires services to a value of greater than $40,000 provided the services were of a kind ordinarily acquired a personal, domestic or household use or consumption. In the case of a candidate, the employment services required, namely representation in finding work, would often be of a kind ordinarily acquired for personal use.

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26. ACL s. 60. 27. ACL s 61. 28. ACL s. 61(3).

29. ACL s. 62. 30. Competition and Consumer Act 2010 s. 4B(1)(b); ACL s 3(1)(a).

5.1.2 New Zealand: The Consumer Guarantees Act 1993 applies to all consumer transactions in trade for the supply of services of a kind ordinarily acquired for personal, domestic or household use. Terms are implied to the effect that: • the service will be carried out with due care and skill, and within a reasonable period;31 • the service, or any product resulting from the service, will be fit for any purpose made known by the consumer; but not where the consumer does not rely upon the supplier’s skill and judgment, or where it was unreasonable for the consumer to do so;32 and

Key features of the provisions include: • they cover a very wide range of conduct; • the conduct does not have to actually mislead or deceive anyone; • an unintentional or “innocent” breach is still a breach; • something may be misleading notwithstanding that it is literally true – i.e. it may be the truth; but not the whole truth; • the protection is not limited to consumers; it can be used by one business against another;

• the services will be completed within a reasonable time33

• conduct that is likely to mislead is relatively easy to prove;

• the consumer is not liable to pay more than a reasonable price for services where the price has not already been determined or is otherwise ascertainable under the contract.34

• it is very difficult (if not impossible) to exclude liability contractually;

A transaction will not be a consumer transaction if the services (albeit that they are of a kind ordinarily acquired for personal, domestic or household use) were acquired for the purpose of: • resupplying them in trade; • consuming them in a manufacturing process; or • repairing or treating in trade other goods or fixtures on land.

• there is no need to prove the parties entered into a contract or even suffered actual loss or injury; • the remedies are extensive; but generally do not include fines;37 • individual consultants who counsel, procure or are knowingly concerned in the conduct may be personally liable along with their agency. 5.2.1 Examples of breach in reference checking situation The statutory prohibitions could be breached in each of the following reference checking situations—

The first of these exclusions is likely to mean that the guarantees will not be implied in the Recruiter-to-Recruiter transactions.

• the referee, candidate or consultant provides information that is incomplete, inaccurate or not current;

An important feature of the New Zealand legislation is that parties to a consumer transaction may contract out of the implied obligations if the consumer requires the services for business purposes.35 This will mean that it may be possible to exclude their operation in many agency/client agreements.

• the referee, candidate or consultant provides information that creates a false impression;

5.2 Misleading and Deceptive Conduct

• a consultant predicts that a candidate will be a “good fit” without having a reasonable factual basis for making the prediction;

All jurisdictions have provisions that prohibit a person from engaging in misleading or deceptive conduct or conduct that is likely to mislead or deceive.36

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• a consultant represents that a candidate is a suitable candidate when, in fact, he/she is not;

• a client is misled, by conduct or representations made by the consultant, concerning 31. (NZ)CGA s. 28. 32. (NZ)CGA s. 29. 33. (NZ)CGA s. 30. 34. (NZ)CGA s. 31.

35. (NZ)CGA s. 43(2). Note the agreement which excludes the operation of implied terms would usually have to be in writing and the parties would have to be in trade. It is also necessary that the exclusion should be fair and reasonable.

the scope of reference checking and background screening activities that will be carried out by the consultant; • a consultant or agency misleads a referee or candidate into wrongly thinking that information will be kept confidential when, in fact, it is (or must) subsequently be disclosed by law; • a referee, candidate or consultant, upon obtaining subsequent information, fails to correct an impression already created, which has become misleading in light of that subsequent information; • a referee, candidate or consultant fails to disclose material fact; • a client fails to disclose a material fact concerning the requirements of the job; • a consultant makes a prediction of a certain outcome without having reasonable grounds upon which to base the prediction; • a client or consultant gives a wrong description of the work, or a wrong description of the inherent requirements of the work against, which the candidate suitability is subsequently checked with the result that the assessment of candidate suitability is misleading as regards the candidate’s ability to perform the actual work • a consultant provides information regarding a candidate’s suitability derived from a test (e.g. a psychometric evaluation) that is unsuitable for the purpose, flawed in its methodology; or inexpertly administered and interpreted; • a consultant provides an inaccurate or misleading comparison of candidates; • a consultant makes a false, inaccurate or misleading statement about the extent of the inquiries that he/she has undertaken (or will undertake) in selecting candidates; • a consultant represents that shortlisted candidates are “the best candidates” when others who are more or equally suitable are available; • a consultant represents that the candidate is “the best candidate” when the candidate is the only candidate. – best being the superlative degree of comparison, which therefore suggests that there must be more than two; • a consultant advertises positions that do not exist, or leaves a job advertisement in place once the position has been filled, in order to continue to attract applicants, who may be suitable for other positions and then reference checks generally in order to assess suitability. RCSA Reference Checking: Part 2 – Contract & Consumer Protection

Ponder Point That is not the end of the list! You can clearly see that the protection operates very broadly indeed and covers a wide range of conduct in which you are likely to be engaged in the course of or related to your reference checking activities. Can you think of some other examples? DRIVER RECRUITMENT PTY LTD (TRADING AS AUTHORISED SOLUTIONS) V WEDECO AVP PTY LTD38

• The client was a supplier of water treatment equipment and services. It engaged a recruitment agency to find a suitable person for appointment as its sales manager for South East Asia. • The recruitment agency proposed a particular candidate, and the client employed him. Eighteen months later the client discovered that the candidate’s claimed qualifications had been false, he had been bankrupt and was an undischarged bankrupt, and in his business activities he had engaged in fraudulent practices. • The client sued the recruitment agency claiming damages for breach of contract, for negligence, and recovery of loss or damage suffered by conduct in contravention of s 52 of the Trade Practices Act 1974 (C’th). • At trial it was revealed that the candidate gave the recruitment agency a curriculum vitae, according to which he had since July 2001 been employed as an area manager with Tyco Measurement and Controls (“Tyco”). He nominated two referees, both within the organisation of which Tyco was part. The trial judge considered that the contract required the consultant to contact the referees by telephone. • The candidate had in fact ceased to be employed with Tyco in March 2003. the referees gave evidence that they received a telephone call regarding the candidate from a woman in 2003, and that they told the caller that the candidate was no longer employed with Tyco and were unable to speak of his work performance and that she should speak to a supervisor to whom the candidate had reported at Tyco. The supervisor gave evidence that he had not been contacted by an employment agency for a reference, and that if he had been contacted he would not have given a favourable reference. He gave reasons for this; without recounting them, the candidate was an unsatisfactory employee in a number of respects, he had been 36. ACL s. 18; (NZ) s.9. 37. Prohibitions against misleading and deceptive conduct may also be found in some employment agency regulations where a breach may

constitute a criminal offence and result in the imposition of a fine.

given two warnings, and when he left Tyco the supervisor was in the process of recommending his dismissal. • The trial judge said that she accepted that the evidence did not establish whether it was the consultant who spoke with the nominated referees. Her Honour considered that it could be inferred either that she did and failed to pass on to the client what she was told, or that she did not make any enquiries of them. • The recruitment agency argued that it had complied with its contractual obligations to the client, and that in any event the client had not suffered recoverable loss from any breach of contract or negligence or contravening conduct. • The trial judge held that the recruitment agency was liable to the client for breach of contract and in negligence, and also in consequence of contravening conduct. She assessed the damages and the recoverable loss or damage at $164,224, with liberty to apply in relation to interest. • The recruitment agency appealed and was unsuccessful in its attempt to have the trial judge’s decision overturned. 5.2.2 “But I was only passing on what the referee told me…” Two Australian cases are important for the liability of consultants in this area— .1 Yorke v. Lucas39

The High Court suggested that a person who does no more than pass on information supplied to him or her, making it clear that he or she is merely passing it on for what it is worth and disclaims its truth or falsity, may not have engaged in misleading conduct if the information proves to be incorrect. .2 Gardam v. George Wills & Company Limited40 - the “mere conduit” test

Similarly, in a case concerning false representation under what was then section 53 of the Trade Practices Act,41 French J said that the innocent carriage of a false representation from one person to another, in circumstances where the carrier is and is seen to be a mere conduit, does not involve him in making the representation. IMPORTANT EXCEPTION

However, his Honour went on to say that, when a representation is conveyed in circumstances in which the carrier would be regarded by the relevant section of the public as adopting it, then he makes a representation. RCSA Reference Checking: Part 2 – Contract & Consumer Protection

Example • If a consultant passes on a reference and includes a disclaimer to the effect that the consultant is merely passing on information and takes no responsibility for its truth or falsity, the consultant may have avoided engaging in misleading and deceptive conduct and simply have acted as a conduit of the information. But several things can go wrong: Firstly, in purporting to act as a “mere conduit”, the consultant may have breached obligations to either the client or the candidate to play a more active role in making sure that the information was not misleading. Such an obligation might arise under contract or under privacy law or under the law of negligence. Case Example WOODLAND HOME PRODUCTS PTY LTD V ALLIANCE RECRUITMENT PTY LTD42

The recruitment agency provided in its terms of business that: “Alliance makes no representation as to the actual skill level or competence of the Candidate.” It went on to carefully explain what it meant, excluding responsibility to undertake a range of checks such as academic transcript checks, police checks, medical checks, proficiency testing etc. The Judge considered the extent to which this might absolve the agency from liability and said: “In my view, there is a reasonable argument that the words “however Alliance makes no representation ...” and following relate only to negativing the proposition that Alliance itself is warranting the accuracy of the information provided to it and to negativing a suggestion that it is itself making any representation to the Plaintiff. This protection against liability for warranty or representation may not necessarily absolve the Defendant from failure to “take reasonable steps to confirm” a candidate’s suitability.” Secondly, you will also learn from your reading of the section dealing with Defamation that it is generally no defence to a defamation action merely to have passed on what someone else has said to you. 38. [2008] NSWCA 290. 39. [1985] 158 CLR 661.

40. [1988] 82 ALR 415. 41. Now ACL s.29.

42. [2009] NSWSC.

If the information that you have passed on is defamatory, it will be of no use to you in a defamation action to be able to say that if the candidate had sued you for misleading and deceptive conduct you might have had a defence! Putting this another way – “There is always more than one way to skin a cat”!!

5.3 Making False (and Misleading) Representations All jurisdictions have additional statutory consumer protections which prohibit the making of false (and in some cases misleading) representations in connection with the supply of services.43 The protections are not limited to consumers. In order for the provisions to be breached all that is required is that some representation of fact should be made (either expressly or impliedly) in trade or commerce in connection with the supply or possible supply of services and that it should be false in the sense that it is wrong. Where the protection is also extended to misleading representations, the prohibition will be contravened if the representation, though literally true creates a misleading impression. There need be no deliberate or dishonest intention. A breach may result in criminal as well as civil liability and pecuniary penalties may be imposed. Most recruiters would be able to identify a false or misleading representation. The examples that we gave under the heading Misleading and Deceptive Conduct would be relevant here as well. There are, perhaps, two other sets of examples that require closer examination. 5.3.1 The need for services? Firstly, the provision is contravened if a false or misleading representation is made concerning the need for any services.44 Examples: • A recruiter tells a candidate (or client) that it is necessary to collect certain information (say, criminal history, excessive references, health information, psychometric evaluation etc.) when, objectively considered, there is no such need. • A recruiter tells a candidate that it is necessary to conduct a reference check against certain job parameters, when those parameters do not objectively form part of the job description, or inherent requirements of the position. RCSA Reference Checking: Part 2 – Contract & Consumer Protection

5.3.2 Representations about exclusions, rights or remedies Secondly, the provision is contravened if a false or misleading representation is made concerning the existence, exclusion, or effect of any condition, warranty, guarantee, right or remedy.45 Examples: • A recruiter purports to exclude liability under its terms of business or to obtain an indemnity or release from a candidate under the terms of its registration when there is no legal entitlement to do so; • The recruiter gives an assurance about rights of the confidentiality or privacy (e.g. “we will never disclose your personal information without your consent”), which it is impossible for the recruiter to perform (because law may compel disclosure in some circumstances); • A recruiter tells a candidate that he/she may not have access to personal information because it is confidential, when it was not obtained confidentially or when the law will not extend to prevent disclosure.

5.4 False & misleading representations about employment All jurisdictions have statutory consumer protections which prohibit the making of false (and in some cases misleading) representations in relation to employment.46 By way of example, the relevant New Zealand provision states: 12 Misleading conduct in relation to employment

No person shall, in relation to employment that is, or is to be, or may be offered by that person or any other person, engage in conduct that is misleading or deceptive, or is likely to mislead or deceive, as to the availability, nature, terms or conditions, or any other matter relating to that employment. The provisions do not depend on a definition of “consumer”. Some of the legislative provisions focus upon conduct that is likely to mislead or deceive the person who is seeking employment;47. whilst other provisions, such as the New Zealand provision considered above do not make a distinction between work seekers and anyone else who may be misled.

43. ACL s. 29; (NZ) s.13. 44. See e.g. ACL s. 29 paragraph (l).

45. See e.g. ACL s. 29 paragraphs (m) and (n). 46. ACL s. 31; (NZ) s.12.

Cases in this area of consumer protection often involve very serious breaches of the professional standards and unconscientious exploitation of another’s inability or diminished ability to conserve his or her own interests 5.4.1 Australian Competition & Consumer Commission v Zanok Technologies Pty Ltd48 The ACCC prosecuted Zanok Technologies (“Zanok”) alleging that »» Zanok directly, and through its agent Australian Regional Employment Agencies Pty Ltd (‘AREA’), placed advertisements on websites, offering members of the public employment opportunities for Information Technology (‘IT’) graduates; »» During ‘interviews’, the prospective employee would be informed that Zanok had an established business in providing IT services and that a period of training was required at a cost to the trainee of up to $4,700 which would prepare the trainee for employment with Zanok that was guaranteed on completion of the training, or earlier if the trainee ‘proved’ themselves to the company; »» The training in fact provided by Zanok was unstructured, disorganised and of no assistance or value to the trainees; »» The period set aside for the training was in fact used by Zanok to have a number of the trainees contact prospective customers of Zanok and otherwise assist Zanok to establish its business; »» Zanok deceived the trainees into believing they would be offered employment in return for paying a fee for the pre-employment training when in fact Zanok had no available employment opportunities and in lieu of providing the promised training, required the trainees to assist Zanok in setting up its business. The court found that the commission had made out the basis of its prosecution, ordered extensive injunctions against its ad hoc and ordered to pay the costs. 5.4.2 Reference Checking Applications In a reference checking scenario, examples of conduct that that might contravene the statutory protections could include:

RCSA Reference Checking: Part 2 – Contract & Consumer Protection

• Reference checking after having advertised jobs for which the recruiter has no authority to recruit (and thereby misleading applicants that the agency can secure the advertised job for a suitable applicant or can guarantee that suitable applicants will be considered for the job by or on behalf of the employer); • Misrepresenting the job parameters against which the reference is to be checked and against which the candidate submits to having his/her suitability checked.

5.5 Engaging in unconscionable conduct; Unlike Australia, New Zealand has not yet found it necessary to make extensive legislative incursions into the field of unconscionable conduct already subject to the law of equity. There are some exceptions with respect to consumer credit transactions and to contractual remedies. It is also important to keep in mind that in New Zealand, a very extensive statutory obligation of good faith is imported into the employment relationship by section 4 of the Employment Relations Act 2000. It is also worth noting that the definition of “employee” in section 6(b)(ii) includes, “a person intending to work”. This would extend to a person who has been offered and accepted a job, but who has not yet started work. In that situation it is quite possible that reference checking would be undertaken with respect to that person and the employment may even be subject to satisfactory reference checks. It would follow, that the conduct of the reference checking should be conducted in a manner that would be consistent with the statutory obligations of good faith. A failure to do so may result in initiation of personal grievance. In Australia, all jurisdictions have statutory provisions that relate to unconscionable conduct49. The provisions extend to business transactions other than transactions for the supply of goods or services to a listed public company50. Unconscionable conduct occurs when the stronger party to some transaction acts unfairly, usually by taking advantage of the other party’s disability - such as poor language skill, vulnerability, inexperience, weak financial position etc. The statutory protections are designed to prevent businesses from engaging in unconscionable conduct when they supply services to consumers. Unconscionable conduct means “doing what should not be done in good conscience”.51 In determining whether unconscionable conduct has taken place, the courts will have regard to a wide range of factors including: 47. ACL s.31. 48. [2009] FCA 1124.

49. ACL ss 20 to 22. 50. See e.g. ACL s. 21.

a. the relative strengths of the bargaining positions of the supplier and the customer;

ii. the terms and conditions of the contract;

b. whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier;

iii. the conduct of the supplier and the customer in complying with the terms and conditions of the contract;

c. whether the customer was able to understand any documents relating to the supply or possible supply of the goods or services; d. whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer or a person acting on behalf of the customer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; e. the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier; f. the extent to which the supplier’s conduct towards the customer was consistent with the supplier’s conduct in similar transactions between the supplier and other like customers; g. the requirements of any applicable industry code;

iv. any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered into the contract; k. without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the customer for the supply of the goods or services; l. the extent to which the supplier and the customer acted in good faith. In a reference checking the situation, recourse to any form of deceit, trickery or sharp practice against a candidate might amount to evidence of unconscionable conduct. Examples might include Obtaining consent to undertake certain types of investigation by a trick such as not disclosing the true extent of the investigations proposed to be carried out.

5.6 Breaching statutory duties requiring professional and ethical conduct.

h. the requirements of any other industry code, if the customer acted on the reasonable belief that the supplier would comply with that code. (NOTE: Some regard may be had to the RCSA Code under this paragraph);

Several States and Territories in Australia had preserved the statue regulation of the conduct of employment agents.

i. the extent to which the supplier unreasonably failed to disclose to the customer:

The Private Employment Agents (Code of Conduct) Regulation 2005 contains an extensive statutory code which governments the conduct of employment agents towards candidate is, referred to in the Code of Conduct Regulation as “work seekers”. It applies to anyone who carries on business as a private employment agent in Queensland. Remember, you may be carrying on business in Queensland even although you are not located there. The protections include obligations:

i. any intended conduct of the supplier that might affect the interests of the customer; ii. any risks to the customer arising from the supplier’s intended conduct (being risks that the supplier should have foreseen would not be apparent to the customer); j. if there is a contract between the supplier and the customer for the supply of the goods or services: i. the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer;

RCSA Reference Checking: Part 2 – Contract & Consumer Protection

5.6.1 Queensland:

• to act honestly, fairly and professionally in the conduct of the agent’s business; • to treat work seekers and persons looking for workers honestly and fairly; • to exercise reasonable skill, care and diligence in the conduct of the agent’s business;

51. ASIC v National Exchange Pty Ltd [2005] FCAFC 226.

• to represent a work seeker in an ethical and professional way; • not to do anything that may unfairly jeopardise a work seeker’s current work or future work opportunities; • to ensure a work seeker’s right to maximise the work seeker’s potential for career development is preserved; • to give a work seeker accurate advice about employment and placement options, including current labour market information; • to promptly give a person looking for workers information about a work seeker on the basis of the work seeker’s suitability for a vacant position and disregarding irrelevant consideration; • if a work seeker asks, give the work seeker whichever of the following is relevant within 7 days of the request-a. if the work seeker is not referred as a candidate for a particular vacancy-genuine reasons the work seeker was not referred as a candidate for the vacancy;

operations undertaken by employment agents. Each of the obligations cast on private employment agents under the Code of Conduct Regulation that affects the manner in which an employment agent might go about conducting reference checks. Ponder Point Can you see how each of these requirements might impact upon the way in which you handle the reference checking process? Some of them will relate to the way in which you manage the expectations of your candidates in the process and discharge your obligations to them. Others will relate to the way you manage and discharge your obligations to clients. 5.6.2 Australian Capital Territory: Schedule 8 to the Agents Regulation 2003 similarly contains a number of statutory obligations which impact on the manner in which an employment agent or conduct itself in the course of reference checking. Those obligations include: • An agent must act honestly, fairly and professionally with all parties in a transaction.

b. advice on the work seeker’s application for a vacancy;

• An agent must not mislead or deceive any parties in negotiations or a transaction.

c. if the work seeker is placed in a position--a copy of any documents about the position in the agent’s possession at the relevant time;

• An agent must exercise reasonable skill, care and diligence.

• to not, without the work seeker’s written permission, disclose the work seeker’s identity or other details to a person looking for workers • not otherwise disclose a work seeker’s identity or other details other than as required by law • not use information about, or provided by, a work seeker-a. for a purpose other than finding work for the work seeker; or b. in a way that is contrary to the terms of any permission given by the work seeker about the use of the information. As you can see, it is a very extensive set of obligations. It is a set which builds upon and reflect us each of the concerns that inform the development of consumer more generally. However, in this instance, they are fashioned in such a way as to apply specifically to the

RCSA Reference Checking: Part 2 – Contract & Consumer Protection

• An agent must not engage in high pressure tactics, harassment or harsh or unconscionable conduct. • An agent must not, at any time, use or disclose any confidential information obtained while acting on behalf of a client or dealing with a customer, unless— a. the client or customer consents to the disclosure; or b. the agent is permitted or compelled by law to disclose the information. • An agent must not act as an agent or represent himself or herself as acting as an agent on behalf of a person without the written consent of the person. • An agent must act in accordance with a client’s instructions unless it would be contrary to the Act or otherwise unlawful to do so. • An agent must not accept an appointment to act, or continue to act, as an agent if

doing so would place the agent’s interests in conflict with the client’s interests. • An agent must not solicit clients or customers by advertisement or other communication that the agent knows or should know are false or misleading. Ponder Point The language of the ACT legislation differs somewhat from that in Queensland. Where Queensland uses the simple expressions, “work seeker” and “persons looking for workers”, the ACT legislation talks about “clients” and “customers”. What is the distinction? How does it impact upon the way in which the ACT statutory obligations fall upon you? It is important to understand on whose behalf you are acting. Who do you say is your “client”? Could it ever be the candidate? Who is the “customer”? 5.6.3 Western Australia: Section 29 of the Employment Agents Act 1976 provides, somewhat tersely: “A person who knowingly makes or publishes or causes to be made or published in the course of business as an employment agent any representation or statement which he knows or reasonably ought to know — a. is false or misleading in a material particular; or b. is likely to deceive or mislead a person in a material way, commits an offence.”

5.7 Exclusion and Contracting Out In the section on Contract we stated that it may sometimes be possible to contract out of some liabilities through the use of carefully drafted exclusion clauses or disclaimers; and we reserved a detailed discussion of the point for later Chapters. At this stage it is important to note that it is often very difficult (and sometimes illegal) to contract out of the statutory consumer protection provisions. We saw in this chapter one exception – in New Zealand it may be possible to contract out of obligations implied by the Consumer Guarantees Act if the consumer requires the services for business purposes and the contracting out is in writing and it is otherwise fair and reasonable. In other cases, the consumer protection legislation will generally operate so that an attempt to contract out of the provisions is rendered void. In some cases, fines and penalties may be imposed; in others some limited scope to contract out may be provided if certain safeguards relating to the replacement of the services (or their cost) are provided. It is also difficult to contract out of liability arising from contravention of the statutory prohibitions against engaging in misleading and deceptive conduct. That is because in most instances the exclusion is contained within a contract which was induced as a result of the misleading or deceptive conduct. A court will sweep all aside – the tainted contract and the purported exclusion it contains – and for good measure may sometimes add the sting that the supplier has misrepresented the scope of some right or remedy and on that score impose further sanctions. It is also important to remember the whole point about exclusion clauses is that, to be effective, they must exclude liability arising under several different categories of legal liability. As we have said before, “there is always more than one way to skin a cat” and it is not much help to have excluded one form of risk only to be “skinned” by another!

RCSA Reference Checking: Part 2 – Contract & Consumer Protection

RCSA Code Response Throughout this part you will have detected that consumer protection law is concerned with making sure that standards of fairness, integrity, honesty and professionalism are observed. The RCSA Code for Professional Conduct reflects these same concerns to the extent to which it outlines a general requirement that: “Members must observe a high standard of ethics, probity and professional conduct which requires not simply compliance with the law; but extends to honesty, equity, integrity, social and corporate responsibility in all dealings and holds up to disclosure and to public scrutiny.” The RCSA Code, then, builds on that requirement by making specific provision for such matters as privacy and confidentiality, honesty, work relationships, legal compliance, safety and so on. The difference between the RCSA Code and the consumer protection laws that we have been discussing in this part is that the Code operates as a means of maintaining Member discipline and conduct, whereas the consumer protection law creates rights and obligations. When RCSA deals with a complaint, it is not enforcing legal rights or obligations – that is more properly a matter for the Courts and law enforcement agencies – RCSA is simply maintaining a standard of professional conduct that is consistent with its interests as a voluntary organisation, which include the maintenance of a high level of professional conduct amongst its Members. It is important to keep this in mind because candidates and clients, who bring complaints to RCSA, often think that RCSA can provide them with the same sort of remedies that they might be able to obtain in court.

RCSA Reference Checking: Part 2 – Contract & Consumer Protection