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Employer can still be bound by oral agreements
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Colin and Dianne Barnden owned a formica fabrication business and employed their son, Bradley, as a general hand.
In 2001, Mr Barnden had major surgery and was incapacitated for some time. The business suffered. Mr and Mrs Barnden decided to sell the business, and entered into negotiations with Don Brown for his company to buy it.
Mr Brown had no experience in the industry. Throughout negotiations, he made it clear that he needed existing staff to move over to his business if it was to be successful. He asked the Barndens to get all of their staff, including Bradley Barnden, to agree to take up employment with his company on the same key terms and conditions.
Mr Barnden did this and all staff, including Bradley Barnden agreed to take up employment with Mr Brown's company.
On 3 August 2001, Mr Brown met with staff prior to his company taking over the business on 17 August 2001. He told them that they would all have jobs with his company on the same key terms and conditions. Bradley Barnden confirmed that he wished to work for the new company.
On 6 August 2001, Mr Brown met with staff, including Bradley Barnden, and gave them a written employment agreement to consider. If it was acceptable they were to return it to him signed.
When Mr Brown met with Bradley Barnden, he offered him a pay rise, which Bradley Barnden indicated he was happy with.
Over the weekend, Mr Brown reviewed his company's position and decided that it could not afford to employ Bradley Barnden. Meanwhile, Bradley Barnden was still considering the employment agreement that Mr Brown had given him.
On Monday 13 August 2001, Bradley Barnden went to Mr Brown's office to give him back the signed employment agreement. Mr Brown refused to take it from him and said that he was too busy to discuss things. He then sent Bradley Barnden on an errand to get a fax machine from his parents' home as the office fax machine had broken down.
When Bradley Barnden arrived at his parents home, his father, Colin, informed him that Mr Brown had telephoned to say that he had changed his mind about employing him. Colin Barnden told his son to go back to work and act as if nothing had happened, and "not to lose his cool".
Bradley Barnden returned to work with the fax machine and went to Mr Brown's office. Mr Brown then informed him that there was no longer a job for him with the new company.
Bradley Barnden sued Mr Brown's company for unjustified dismissal.
In its defence, Mr Brown argued that Bradley Barnden was never an employee of his company, as the written employment agreement had been withdrawn prior to acceptance. Consequently, Bradley Barnden could not have been dismissed.
Mr Barnden on the other hand claimed that a binding oral employment agreement had come into existence when Mr Brown requested the Barndens to offer existing staff, including him, employment with his company on the same key terms and conditions, and he accepted that offer.
He also claimed that, even if a binding oral agreement had not come into existence at that time, a binding written agreement had come into existence on 13 August 2001 when he returned the signed agreement to Mr Brown and he had refused to take it.
Mr Brown disputed this and said that he had made it clear to staff that he intended not to be bound by any oral arrangement by advising them that they would be receiving a written employment agreement to consider and that this would form the basis of any offer of employment. Thus no agreement to employ had been reached until that offer had been accepted.
He also disputed that Bradley Barnden had returned the signed agreement to him on 13 August 2001, and that he had refused to take it.
The Employment Relations Authority found that a binding contract had come into existence, and that Bradley Barnden had therefore been unjustifiably dismissed.
Mr Brown needed the staff to make the business function because he had no experience in the industry. He had therefore requested the Barndens to offer staff, including Bradley Barnden, employment with his company on the same key terms and conditions, which Bradley Barnden had accepted.
It was at this point that the parties' intention to be immediately bound was cemented and a valid agreement came into existence. An individual employment agreement that is not in writing is not invalid, the Authority said.
The Authority also preferred Bradley Barnden's evidence that he had tried to return a signed copy of the employment agreement to Mr Brown on 13 August 2001, but Mr Brown had refused to take it. Even if it was wrong about the oral agreement, a valid written agreement had come into existence at this point the Authority said.
The Authority awarded Bradley Barnden $508 in lost wages and $4000 for humiliation and distress.
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