Skeletons in the closet: is an applicant for employment obliged to disclose past indiscretions?

6 June 2012

Employers often rely on an applicant for employment to provide accurate and true information in the interview and recruitment process. This includes details of past employment and reasons for termination of such employment. These facts are important for a prospective employer to decide whether or not the applicant is suitable for the position.

The employer is often under the impression that if the applicant for employment fails to disclose material information such as past dismissals for serious misconduct, the contract of employment can be terminated at a later stage on the basis of non-disclosure and, on this assumption, fails to perform adequate reference checks on the prospective employee.

In the judgment of Fipaza v Eskom Holdings Ltd & Others [2010] 31 ILJ 2903 (LC) the Labour Court was required to consider the question of whether an applicant for employment was under a duty to disclose a previous dismissal to a prospective employer.

The applicant, Fipaza was previously employed by Eskom and was dismissed for failure to report for work. Some one and half years later Fipaza applied for another job at Eskom and, after being interviewed, was offered the position. Fipaza made no representations in the interview as to the reason for her previous dismissal and Eskom did not enquire with her. Prior to Fipaza commencing employment, Eskom withdrew the offer on the grounds that Fipaza had failed to comply with her duty to disclose to Eskom during the interview that she had been previously dismissed for misconduct.

Fipaza challenged the dismissal in the CCMA. The CCMA upheld the dismissal and found that Fipaza's failure to disclose was intentional and a material misrepresentation, amounting to fraudulent non-disclosure. Fipaza launched a review application against the award.

The court, in analysing the commissioner's finding that Fipaza was guilty of fraudulent misrepresentation, found that in order for Fipaza's omission to amount to a misrepresentation, there must have been a duty on her to disclose the information.

The court considered the question of whether an obligation to disclose such information arises in law. In answering this question, the court had regard to the principles of contract law and the general principle of disclosure which provides that there is no general rule that one contracting party is under a duty to disclose material facts to the other contracting party unless such facts are in the contracting party's exclusive knowledge.

The court held that:

"In this instance, the fact of the applicant's dismissal was not within her exclusive knowledge, even though it may have been a material issue. It may have not have been within the knowledge of the members of the interview panel, but it can hardly be said they were not in a position to ascertain the circumstances in which the applicant's previous employment with Eskom ended either by simply asking the applicant, or by consulting Eskom's own records. Moreover, in its dealings with the applicant, Eskom gave no indication that it expected more information than it specifically requested".

The Labour Court accordingly held that, "there is no general duty on a contracting party to tell the other all she knows about anything that may be material".

The Labour Court concluded that, in finding Fipaza guilty of fraudulent misrepresentation, the commissioner applied the incorrect legal principle because, as Fipaza's previous dismissal was not within her exclusive knowledge and Eskom was in a position to determine the reasons for Fipaza's previous termination from its own records, there was no legal duty on her to disclose her previous dismissal.

The court found that, "had the Commissioner applied the correct legal test for determining the obligation to disclose, the outcome would have been different". The non-disclosure was thus found not to be a fair ground for her dismissal.

The principles that can be taken from this judgment are that:

• Applicants for employment are not under a general duty to disclose material information or facts, even where these facts may impact upon the employment relationship.
• A duty to disclose such material information or facts arises where the facts or information is within the exclusive knowledge of the applicant for employment.
• No duty will arise where the prospective employer can easily access or obtain such information either during the interview through questioning of the applicant or reference checks with previous employers.
• Where applicants for employment make positive false representations in the interview process, dismissal for fraudulent misrepresentation may be justified.
• However, an omission by an applicant for employment in not disclosing the material facts or information in the interview and recruitment process, will only justify dismissal if there was a duty to disclose, which only arises if such information is within the applicant for employment's exclusive knowledge.

This case reinforces the importance of a robust recruitment procedure including the need to conduct interviews for all prospective employers. It underlines the fact that applicants for employment should be requested to disclose all relevant facts relating to previous employment during interviews and that a complete reference checking process should be undertaken to verify and independently obtain facts and information from previous employers.

By Deirdre Venter, Partner, Webber Wentzel

Published in Without Prejudice July 2012