June 11, 2020

Based on California appeal court rulings, hiring employers may no longer completely shield themselves from liability with an at-will employment agreement.  Even with a signed at-will agreement, misrepresentations or false promises made to the newly hired employee may provide the employee a basis for a fraud claim.

Basic Facts of Case 1:  An employer wanted to hire a new employee.  The employer contacted the prospective employee.  The prospective employee was reluctant to relocate and leave his stable job, unless the new job would be permanent. Subsequently, the employer promised the employee long-term employment.  Under pressure from the employer to quickly accept the position, the employee orally accepted the job.  The employer presented the employee with a written employment agreement specifying the employee’s employment was to be “at-will.” The employee signed this agreement. After work slowed down at the company, the employee was terminated.

Basic Facts of Case 2:  An employer hired a new employee.  The new employee signed a document which did not specify how long the employee would hold the job and whether the employment was at-will.  A day later, the employer presented the employee a new document which varied from the first, mainly stating that the employment was to be at-will.  The new agreement also varied in the pay and job responsibility terms.  The employee signed this new document after he was told that the earlier agreement would control.  Three weeks later, the employer reneged on the earlier agreement and terms.  A few days later, the employee was terminated.

Outcome: In both these cases, the employees sued the employer for fraud, claiming they only left their previous jobs based on their employer’s representations and oral promises.  Each employer asserted the at-will agreement as a defense.  Nevertheless, both courts ruled that an employer who fraudulently induces an employee to enter into an employment agreement by promising terms the employer never intended to honor cannot avoid liability for fraud merely because the employment contract contained an at-will provision.

What you should do: To avoid facing the above problem, employers should take the following steps:

1.  Watch what you say.  During the recruiting process, be straightforward and accurate with job candidates.  Don’t exaggerate and don’t make promises you can’t keep regarding job security or career prospects.  Ensure that the job candidates understand everything you tell them and are clear as to what you are and are not promising them.

2.  Document communications.  Make sure to take detailed notes of all interviews and conversations you have with the job candidate . Put your employment agreements in a writing which completely describes the duties, salary, and benefits entailed with the job.  Moreover, include an at-will statement, as well as a clause mentioning that no other agreements have been made.  Require the job candidate to sign the offer.

Need more information?
ESKRIDGE LAW may be contacted by phone (310/303-3951), by fax (310/303-3952) or by email (geskridge@eskridgelaw.net).  Please visit our website at eskridge.hv-dev.com.

This article is based on the law as of the date posted at the top of the article.  This article does not constitute the provision of legal advice, and does not by itself create an attorney-client relationship with Eskridge Law.