Given today's competition for qualified
employees, employers must be careful to highlight all that they have to offer
but stop short of making representations that may not materialize after an employee
comes on board. What was once usually dismissed as harmless exaggeration by
employers increasingly has become the grounds for expensive lawsuits by employees
who allege fraud once they realize that everything is not as it was depicted
in the hiring process.
The fraudulent hiring claim is
especially significant because some courts have allowed employees to pursue
such claims even though, as "at-will employees," they otherwise would
have no recourse against their employers. Normally, under the at‑will
doctrine, an employer can fire an employee for a good reason, a bad reason,
or no reason at all, unless a contract or law limits the employer's power.
In one recent case, two employees
who traveled halfway across the country at their own expense to take jobs that
were not as they had been represented were awarded compensation and punitive
damages for fraud. The two men had been recruited as divers for offshore oil
operations. They were assured that there were plenty of offshore diving jobs
available and that, even as trainees, they would get in the water immediately.
The offshore diving jobs did not materialize as promised. A broken promise to
do something in the future, like the promises made to the divers, will support
a claim for fraud if the promise was made in order to deceive someone, and with
no intention of keeping the promise.
In another case, Karen accepted
a job offer as a nurse for a health‑care corporation after she asked about
the financial health of the company and was told that money for her position
had been allocated. One month later, she was part of a large layoff precipitated
by a severe financial crisis. The court gave Karen a chance to prove either
of two fraud theories. The first was that the statement about money being set
aside for her position was false, and that she had relied on it to her detriment.
The second theory, called silent fraud by the court, was that the employer had
a duty to disclose its serious financial troubles, and that it withheld such
information to induce Karen to take the job. The company's claim that it was
unaware of the gravity of its problems until Karen had reported for work was
an issue for a jury to decide.
A variation on fraudulent hiring
occurs when fraud is used to keep an employee from leaving. For example, when
a controlling interest in a machinery company was sold to a sister company,
Jerome's employer assured him that absolutely no changes would be made that
could hurt his job security. Jerome stayed, but before long he and some other
older employees were subjected to a pay cut and eventually summary dismissal.
The court allowed Jerome's claim for fraudulent misrepresentation to go to trial.
Employers can take steps to reduce
their exposure to fraudulent hiring lawsuits. Most of these steps involve close
control over the message given to applicants. Interviewers need to be trained
so that they do not let a description of the company's attributes turn into
puffery. Using two interviewers at once gives the employer a witness in case
of a later dispute over what was said. Communications such as employee manuals,
Internet job postings, and written offers of employment should be checked for
unintended or unauthorized promises. In some cases, it may be advisable to use
a written employment agreement that clearly indicates that its terms supersede
any oral statements that may have been made. After‑the‑fact protection
for the employer could come from contract language under which an employee terminated
without cause waives the right to sue in exchange for a certain amount of compensation.
