Employers may pay again for misleading claims
Published 10/26/99

In order to attract top quality employees, employers tend to present their company to job candidates in the best possible light; however, they must be careful not to mislead those candidates.

There have been several cases where employers have been held liable to employees for fraudulent misrepresentation. Several courts have found that the economic well being and financial stability of the potential employer is an important factor considered by prospective employees in accepting a job offer. Consequently, an employer who utilizes the positive economic health of the company to attract qualified employees, knowing that such assertions are not true when made, may not be able to hide behind an at-will employment contract when the employee is later laid off for economic reasons and sues the employer for misrepresentation. In a recent Michigan case, an employer was successful in attracting a candidate from another employer by providing the employee with a financial statement which showed a healthier financial picture than the most recent financial statement the employer had available to it. The Appellate Court affirmed a $175,000.00 jury verdict in favor of the employee for lost wages based upon this misrepresentation. The Court found that while in a regular contract action, the possibility of future lost wages might be too speculative for an at-will employee, in a fraud claim such as this, future lost wages are recognizable just as they would be in a personal injury automobile accident case.

By contrast, however, a recent Massachusetts Appeals Court found that even if the employer’s misrepresentations (with regard to the employee’s future job duties) induced the employee to leave his previous position, because that position was at will and could have been terminated at any time, the employee was not entitled to the wages and benefits he would have earned at the previous position because his claim for future lost wages and benefits was considered to be speculative.

The law is unsettled in this area. The most prudent course of action for an employer is to consider the job interview process as it would consider other negotiations of a business transaction; that is, understanding that misrepresentations upon which the other party relies to their detriment can result in liability for damages for fraud. If the court ultimately hearing such a case treats such a fraud claim like any other traditional tort claim (for example like an personal injury automobile accident case), the employer may find that it is liable for future lost wages as well as other damages to the employee.

For the employee candidate changing jobs, the employee would be wise to verify the information provided by the company through independent sources, if possible. Of course, in going about such independent verification, the candidate should exercise discretion and common sense.

J. Daniel Marr is a director and shareholder at Hamblett & Kerrigan, PA whose legal practice includes counseling businesses and business persons on a variety of legal issues and advocating on their behalf. Attorney Marr is also an adjunct professor at Daniel Webster College where he teaches business law. You can reach Attorney Marr by e-mail at: dmarr@hamker.com

This information is general information and may not reflect the most current legal developments, verdicts or settlements. The information provided should not be relied upon as an indication of the actual state of the law or of future developments. The information contained on the Hamblett & Kerrigan website is for informational purposes only and does not constitute legal advice. If the information referenced may be of legal importance to you, you should consult with an attorney to provide you with legal guidance and opinion as the the effect of the current law upon your situation.