Employer beware: truth-in-hiring may be the new standard in recruiting.

During the past few years, several courts across the country, both state and federal, have imposed liability on employers who fail to deliver the kind of employment experience that was promised during the hiring or promotion process. Known generally as "Truth-in-Hiring" lawsuits, the legal theories that make up this growing area of employment law include fraud, fraudulent inducement, misrepresentation, negligent hiring, and failure to disclose. As disgruntled employees learn of this potential redress against exaggerating employers, a trend in the law seems to be developing. This area of employment law will most certainly curtail employers who make grandiose representations concerning employment and then fail to live up to those promises. But, the trend is also disturbing to employers who normally describe job opportunities to potential and present employees. As a result, employers and employees alike are beginning to ask what can be promised or described in job or promotion interviews. And, just as employers carefully review prospective employee's resumes, the prospective employees may begin to scrutinize the employer's representations.

This paper will explore the origins of Truth-in-Hiring law, the recent cases holding an employer liable for not being truthful, and the possibility of this trend extending into other jurisdictions. In addition, the paper will examine what employers can do to protect themselves from a claim of fraud in hiring.

Case Development

In most of the cases that have supported claims for truth-in-hiring, employers made promises or statements they knew or should have known were false about a job. These false statements were then relied upon by potential employees who accepted positions and gave up opportunities elsewhere. In many of the lawsuits, however, the employers only exaggerated career opportunities or failed to disclose certain information in order to retain old employees or hire new ones.

Previously, these facts would not have mattered. Employers and employees were bound by the employment-at-will doctrine which allowed an employee to be fired at any time for any reason unless the termination violated public policy or was in breach of an implied contract. However, truth in-hiring lawsuits are not based on the termination of the employee. Such lawsuits would be precluded by the employment-at-will doctrine. Instead, the causes of action are based on the false promises, false claims, or misrepresentations made to the employees during the recruitment or promotion process. These claims also have the element of reliance by the employees. Because they accepted jobs in reliance on the statements made to them, the employees gave up present work or the opportunity to work in desirable jobs elsewhere.

For example, in Navaretta v. Group Health, Inc., the Appellate Division of the New York Supreme Court upheld a fraudulent inducement claim made by an employee of an insurance company, who was induced into leaving her former employer to take a position with Group Health, Inc. Deborah Navaretta had been employed with her previous employer for seven years before interviewing with Group Health for the position of claims examiner.

During the interview, a supervisor for Group Health mentioned that Ms. Navaretta would be tested on materials provided to her during training courses. Ms. Navaretta allegedly replied that she did not test well and that if passing the tests were mandatory for keeping the job, she was not interested in the position at all. According to Ms. Navaretta, Mr. Nicles, the supervisor, responded that the tests were "not that important" and were not pivotal to her employment with the company.

As a result, Ms. Navaretta left her previous employer and took the position with Group Health. On her first day there, she discovered that, in fact, the tests were indeed important and that failure on the tests would result in termination. After Ms. Navaretta failed the tests three times, she resigned because she would have been fired if she had not left on her own.

Thereafter, she filed a claim for fraudulent inducement alleging that Group Health's supervisor fraudulently represented facts crucial to her decision, and that he withheld pivotal information for the purpose of inducing her to terminate her previous employment and take a position with his company. On appeal, the New York court affirmed the trial court's denial of defendant's motion for summary judgment.

The appeals court ruled that Ms. Navaretta's status, which she does not dispute, as an at-will employee who could be fired at any time without cause, was not important. This was due to the fact that Ms. Navaretta's lawsuit was not based wrongful termination, which would be precluded by the employment-at-will doctrine, but on the fact that Group Health's agent fraudulently misrepresented facts to her. As the court stated, "Plaintiff does not allege that defendant was wrong in firing her, but does allege that she would not have taken the job in the first place if the true facts had been revealed to her." As a result, the court ruled for Ms. Navaretta, upholding her truth-in-hiring claim and opening the door to other similar lawsuits.

In another case, Stewart v. Jackson & Nash, the U. S. Court of Appeals for the 2nd Circuit allowed attorney Victoria A. Stewart to proceed with her truth-in-hiring lawsuit. Ms. Stewart was fired from the New York law firm of Jackson & Nash after cutbacks in 1990. Previously, she had worked in the environmental law department of another New York law firm. A partner for Jackson & Nash had contacted Ms. Stewart to offer a job to her.

Ms. Jackson claimed that during an ensuing interview, the Jackson & Nash partner stated that the firm had just secured a major environmental client, the firm was establishing an environmental law department, Ms. Stewart would head the new environmental department, and that Ms. Stewart would be expected to handle the firm's "substantial" existing environmental law clients. In reliance on these statements, Ms. Stewart left her existing practice and began work as an associate with the firm.

However, once she began working at Jackson & Nash, there was little environmental work, no major environmental client, and no developing environmental law department. Instead, Ms. Stewart was put to work on general litigation matters. She worked in an area outside her chosen specialty for two years. In 1990, Ms. Stewart was terminated. She subsequently filed a lawsuit against Jackson & Nash in federal court alleging that she was fraudulently induced into leaving her previous employer and accepting a position with the firm.

The U.S. District Court held that Ms. Stewart could not bring suit because she was an employee-at-will who could be dismissed at any time for any reason. However, on appeal, the 2nd Circuit Court reinstated her claim and ruled that Ms. Stewart's lawsuit was cognizable because the damage to her career, opportunities, and professional reputation was independent of her termination and began while still an associate with Jackson & Nash. This was not a simple case of wrongful termination which would be precluded by the employee-at-will doctrine.

The court stated that although the employee-at-will doctrine would not allow an award of damages from the termination, it did not prevent recovery for injuries that result from reliance on the false statements of a potential employer. In other words, the claim arose not from Ms. Stewart's firing but from her hiring.

In addition, the court pointed out that most of the promises on which Ms. Stewart based her claim were actionable because they misrepresented statements of present fact or circumstance that can cause fraudulent inducement. For example, the Jackson & Nash partner stated that the firm was developing an environmental law department. This was a misrepresentation of present fact. However, the statement about the firm's expectation that Ms. Stewart handle the firm's existing environmental clients was not actionable because it was only a statement about a future potential opportunity. The court also made clear that even future promises may be actionable if the firm making them never intends to perform or keep the promise.

There are also cases which uphold the truth-in-hiring claims in the promotion process. Hanks v. Hubbard Broadcasting, Inc., a Minnesota case, involved an anchorwoman, Ms. Spencer, who filed suit for breach of an employment contract and for fraud in the inducement.

In 1985, Ms. Spencer began work as a television news anchor for a television station owned by Hubbard Broadcasting, Inc. (HBI). In 1986, she signed a three-year contract with her employer. The contract had a "window" period which allowed her to leave during the last year of her contract if she received a written offer to become an anchor from a network affiliate or from any station in one of the top ten markets.

During the contract period, HBI began to search for a co-anchor to be paired with Ms. Spencer. HBI promised her that once a suitable co-anchor was found, it would begin an extensive promotion campaign for the team. In addition, the general manager of the station told Ms. Spencer that when a new anchor was accepted, he already had a plan to do an "extraordinary promotional blitz of the new team ... unlike any you have seen."