Backing out of a job offer before the start date and what the law allows

The offer letter is signed, the start date is three weeks away, and the candidate has already handed in their notice at their current job. Now a better applicant has appeared, the role has been restructured, or a background check has surfaced something unexpected. Most employers assume the arrangement is loose until the new hire actually walks in the door, so pulling out before day one should be a formality. It is not. Whether you can cancel, what it costs you, and whether the person can fight back all turn on the contract you signed and the reason you are cancelling.

A signed offer is usually a binding contract

The starting point is contract law, not employment law. An offer of employment is a contract like any other. Once the candidate accepts it, and something of value passes between you, the promise of work in exchange for the promise of service, you have a binding agreement whether or not the first shift has been worked.

That is why the phrase "terminating an employee before they start" usually misdescribes what is happening. For most new hires you are not terminating employment at all. You are cancelling a contract that was already formed, or repudiating it before performance began. The distinction matters because your obligations flow from the contract, not from the employee's first day on the payroll.

Two features of the contract decide your position:

• Conditional offers: if the offer is expressed to be conditional, for example on satisfactory pre-employment checks, a police check, a medical assessment, or even on the person actually starting work, no obligation to employ arises until the conditions are satisfied. If a condition fails, you can walk away without breaching anything.
• Unconditional offers: if the offer is accepted with no conditions attached, the contract binds from acceptance. The employer who then cancels has repudiated the contract and is exposed to a claim for damages.

A clause stating that "employment commences on the employee's first day of work" does something different from what many employers hope. It can delay the start of the employment relationship, but it does not by itself destroy the contract that was formed at acceptance. If you genuinely want no contract to exist until the person starts, the drafting needs to say so expressly, and even then a court will look at the whole arrangement rather than a single clause.

When cancelling before day one is a breach

Where the contract is binding and unconditional, cancelling the offer before the start date is a breach of contract. The employee's remedy is damages, and the usual measure is what they have lost by relying on the offer. For a new starter those losses can be very real:

• the notice they gave their previous employer, or the notice period they forfeited by leaving early
• lost wages for the gap between the cancelled start date and when they secure another role
• relocation, moving, or other costs incurred to take up the job
• the value of the forgone opportunity itself, where an equivalent role takes months to find

Consider a worked example. A warehouse supervisor resigns from a stable job, giving four weeks' notice, to take a role that starts in three weeks. Two days before the start date you cancel. The supervisor spends six weeks finding an equivalent role. Their claim would plausibly include the six weeks of lost wages, the forfeited notice entitlements from the old job, and any moving costs, reduced by what they earned in the meantime. That is a claim worth defending properly, not a nuisance letter.

The employee also has a duty to mitigate their loss: they must take reasonable steps to find another job, and their damages are reduced by what they earn, or could reasonably have earned, in the interim. Where someone quickly lands an equivalent role, damages can be modest. Where they resigned from secure work, sold a house, or moved interstate on the strength of your offer, the claim can be substantial.

There is a threshold question the other side's lawyer will test first: whether a binding contract existed at all. If the offer was conditional and the condition was never satisfied, or if the terms never firmed up into an enforceable agreement, there may be no contract to breach. Courts look at what was actually agreed, in the written terms and in the surrounding conduct, not at what the job advertisement promised.

Unfair dismissal: the six-month and twelve-month walls

The employee who never started will usually find the unfair dismissal route closed. Under s 382 of the Fair Work Act 2009 (Cth), a person is protected from unfair dismissal only if they have completed the minimum employment period. Under s 383 that period is six months for most employers, extended to twelve months where the employer is a small business employer, that is, one employing fewer than 15 employees.

A person whose contract is cancelled before their start date has completed no period of employment at all, so they cannot clear the threshold and an unfair dismissal application will fail at the first hurdle. The procedural window is also short: s 394 requires an application to the Fair Work Commission within 21 days of the dismissal taking effect, with extensions only in exceptional circumstances.

There is a second, more technical reason the claim often fails. The unfair dismissal provisions protect people whose employment has been terminated, and s 386 defines "dismissed" by reference to the termination of a person's employment. Where no employment relationship ever commenced, the person may not have been dismissed within the meaning of the Act at all.

None of this means the person is without a remedy. It means their remedy lies elsewhere.

The claim that survives: general protections

The gap in the unfair dismissal scheme is filled by the general protections provisions, and this is where employers most often get caught out. The general protections do not require any minimum period of employment, because they do not require the person to be an employee at all.

Under s 342 of the Fair Work Act 2009 (Cth), adverse action expressly includes a prospective employer refusing to employ a prospective employee. Under s 351, an employer must not take adverse action against an employee or prospective employee because of attributes including age, disability, pregnancy, race, sex, religion, marital status, or family and carer's responsibilities. A general protections application must be made to the Fair Work Commission within 21 days under s 366, with extensions only for exceptional circumstances.

The practical upshot is stark. If you cancel a signed offer because a background check revealed a disability, because of the candidate's age, because they are pregnant, or because they raised a workplace right such as questioning the terms of the offer, the person can bring a general protections claim even though they never worked a day. State and territory anti-discrimination laws add a further layer, and unlike unfair dismissal these claims are not subject to any service requirement.

The adverse action provisions also reverse the usual burden of proof. Once the person establishes that the withdrawal happened and that a protected attribute or right was in play, the employer must prove the reason was not a prohibited one. That is an uncomfortable position to defend from, which is why the reason for any cancellation should be recorded in writing at the time, before a dispute starts.

The lawful ways to end it before day one

Cancelling before the start date is lawful where the contract itself gives you the room, or where the reason falls into a recognised category:

• A condition that was never satisfied: Failed pre-employment checks are the most common example. If the offer was conditional on a satisfactory police check, verification of qualifications, or reference checks, and the check fails, no obligation to employ ever arose. The condition must be genuine, relevant to the role, and reasonably capable of being satisfied, not a sham you invented to justify a cancellation.
• Misrepresentation in the hiring process: If the candidate secured the role on the strength of false qualifications or a fabricated work history, the misrepresentation may allow you to treat the contract as at an end. This is the classic fake qualification scenario: the hire was induced by fraud, and the contract can be set aside. The caveat is that the misrepresentation must be material, so you need to be able to show what was said, when, and why it mattered to the decision to hire.
• Serious misconduct before commencement: Where a candidate's conduct before the start date amounts to serious misconduct, of the kind the Fair Work Regulations treat as serious, such as fraud, theft, or deliberate conduct that puts health and safety at serious risk, termination without notice is generally available. In practice this overlaps with misrepresentation: the conduct is usually something uncovered during the pre-employment process rather than behaviour in a workplace the person never entered.
• Notice, or pay in lieu: Where the contract is binding and none of the above applies, the National Employment Standards notice rules in s 117 of the Fair Work Act 2009 (Cth) require written notice of termination, or payment in lieu of notice. The minimum notice period scales with length of service, starting at one week for an employee with up to a year's service and rising to four weeks after five years. Casuals are generally not entitled to notice, and your contract or award may require more than the statutory minimum, but never less.

Why a probation clause won't save you

Probationary periods are a persistent source of confusion. A six-month probation clause in the contract does not do what many employers assume it does:

• it does not shorten the minimum employment period for unfair dismissal, which is fixed by the Act rather than the contract
• it does not exempt you from the NES notice requirements, which still apply during probation
• it does not allow dismissal for a discriminatory reason, because the general protections apply from the recruitment stage onwards

What probation usefully does is set a clear framework for assessing performance during the early months and terminating for unsatisfactory performance, provided the dismissal is otherwise lawful and the notice obligations are met. The employer who assumes "probation means I can fire them with one week's notice" has the notice figure roughly right for a short-serving employee, but for the wrong reason, and has completely missed the protections that survive probation. The notice entitlement comes from the NES scale, not from the probation clause, and the unfair dismissal threshold comes from the Act, not from the contract.

Where an Artificer Legal employment lawyer should step in

The judgement calls in this area are not ones to make on a search engine. An employment lawyer can:

• review the offer and employment contract before they are sent, and draft the conditions, probation terms, and commencement clauses that give you a lawful exit if you ever need one
• advise whether a binding contract exists in the first place, and whether a failed check or a misrepresentation genuinely lets you walk away
• respond to a demand letter or a general protections application, and manage the 21-day deadlines that are easy to miss
• negotiate a settlement that reflects the other side's real loss, before legal costs and Commission proceedings escalate

The earlier a lawyer is involved, the cheaper the outcome. Advising on an offer letter costs a fraction of defending a general protections application, and the drafting fixes most of these problems before they arise.

The risk you are not checking for

The mistake most employers make is checking the unfair dismissal box and concluding they are safe. The six-month and twelve-month minimum employment periods genuinely block unfair dismissal claims, but they say nothing about the general protections provisions, which protect prospective employees from the moment an offer is made, or about the ordinary contract claim for damages. The person you cancel on can usually sue; the only real question is under which heading.

So the practical position for an employer is this: a signed, unconditional offer carries obligations from the moment it is accepted, cancel it only where the contract gives you a genuine reason to, record that reason in writing, and treat "probation" and "they haven't started yet" as no protection at all. For a prospective employee, the position is more encouraging: keep the offer letter and the correspondence, note the date you were cancelled on, because the 21-day clocks for unfair dismissal and general protections applications both start there, and take advice promptly if you have resigned or incurred costs in reliance on the offer. In either position, the contract you signed before day one is doing more legal work than most people realise.