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

During this period, Ms. Spencer's agent found out that an NBC affiliate in Los Angeles, the nation's number two market, was interested in his client. However, she told her agent, against the agent's advice, not to pursue this or any other opportunity because she believed that HBI would institute the promotional campaign. As a result, she gave up the opportunity to exercise the window option.

When HBI finally hired a co-anchor, there was no promotional campaign for the team. Instead, there was a promotion for the new anchor only. Ms. Spencer's co-anchor was in essence promoted while her role on the news was reduced. Ms. Spencer was assured that the situation was only temporary. Again, she did not exercise her option. Finally, she was terminated. It took a year for her to find another anchor position, one with less prestige and a lower salary.

Shortly after her termination, Ms. Spencer filed a lawsuit alleging breach of contract and misrepresentation. The contract claim was dismissed but the trial court awarded Spencer $82,000 in compensatory and $300,000 in punitive damages on the other claims. The Minnesota Court of Appeals affirmed.

The appellate court agreed with the jury that HBI made false representations of its intent to promote Spencer, that she relied and acted upon the representations, and that she was fraudulently induced into staying with HBI and giving up the other job opportunities.

As in the other truth-in-hiring cases, the court found that even if Spencer had been an employee-at-will who could be fired at any time for any reason, she would still have a cause of action against HBI because the claim did not come out of her termination. The claim arose out of the misrepresentations made to Spencer before the termination. Her injuries were caused while still employed with HBI.

A Vermont case, Pearson v. Simmonds Precision Products, Inc., involved an engineer who accepted a position with Simmonds, to work on the design of the fuel system for the Boeing B-2 bomber. At his interview, Pearson was assured that his employment was not tied into the Boeing project and that only 40% of Simmonds' total work was military, In reality, about 70% of the work was military, and the Boeing project was facing serious cutbacks.

Although Pearson signed a contract saying that he could be terminated at any time and was, therefore, an employee-at-will, Simmonds did not tell Pearson that his position was specifically tied to the Boeing project and that his job could be eliminated. Only four months after beginning work at Simmonds, Pearson was laid off. He filed suit on negligent failure to disclose and negligent misrepresentation.

Pearson won his case because Simmonds breached the duty of care it owed to Pearson to disclose the information before he signed the contract. Once again, a court allowed the truth-in-hiring claim because, even though Pearson was an employee-at-will, the claim did not allege wrongful termination. Instead, the claim arose out of the misrepresentations and failure to disclose essential elements at the time of hiring and prior to any agreement. Simmonds' misrepresentations and failure to disclose induced Pearson into accepting an offer of employment. In accepting the job, Pearson gave up the opportunity to accept work elsewhere.

Extension of Truth-in-Hiring Claims

Employers in many states are now facing the reality of lawsuits based on false representation or promises made during the hiring, recruitment, and promotion process. Even more important is the fact that as disgruntled employees learn of this potential remedy, they will be attempting to extend this type of lawsuit into jurisdictions which have not yet addressed the issue. If the facts and circumstances of a particular case are strong enough, courts appear willing to accept the theory as redress for damaged employees.

In order for an employee to win a truth-in-hiring lawsuit, the employer or potential employer must make an intentional or negligent misrepresentation, or fail to disclose an essential fact which it has a duty to disclose. The representations must be false and must deal with a past or present fact.

Additionally, as set forth in Hanks v. Hubbard Broadcasting,, Inc., to establish a claim,

a plaintiff must show ... the fact was material; the fact

was susceptible of knowledge; the representor knew the

represented fact to be false, or, in the alternative, asserted

it as his or her own knowledge without knowing

whether it was true or false; the representor intended to

have the other person induced to act ...; that person was

so induced to act ...; that person's action was in reliance

upon the representation; that person suffered damage;

and the damage was attributable to the misrepresentation.

All courts that have upheld the truth-in-hiring claims have made it clear that mere promises of future opportunity are not actionable. Actionable promise must go beyond statements of intent. For example, in Hanks, HBI's representations were that it already had a plan to promote the anchor team. This was a statement of present fact, not future intent.

There must also be true reliance by the injured employee. As the court stated in Hanks, "We recognize that where an at-will employee continues to work and does not claim to have turned down any offers of employment based upon an employer's representations, no reliance will be found." In that case, Ms. Spencer turned down the opportunity to pursue a career in the nation's number-two television market because she relied upon the promises made to her by her employer.

There are some situations in which courts have refused to find a cause of action for fraudulent inducement/truth-in-hiring claims. This can occur when the employer makes claims about career development possibilities or generally praises the employee's job performance; when an employee bases his or her reliance on a company's good reputation for retaining employees; or when an employee couches his or her contract or wrongful termination claim as a fraudulent inducement claim.

Implications for Employers

If an employer makes false representations to a potential employee which are intended to induce the employee to accept a position with the company, the law may recognize a remedy for the employee even it he or she is a traditional employee-at-will. As stated by Michael C. Lasky, a partner in the New York City law firm of Davis & Gilbert, the best way for an employer to avoid truth-in-hiring lawsuits is to take preventative measures to insulate itself.

Although truth-in-hiring claims can affect any business, preventive measures are especially important for professional associations such as accounting firms, medical associations, law firms, and the entertainment industry. These professions are unique and, as The Wall Street Journal says, "frequently engage in puffery and in exaggeration to keep people from leaving or induce them to come in the first place." Some strategies for prevention are listed below.

Provide Training

Training sessions for partners, associates and staff that include role playing in the interview, promotion, and hiring process are essential in order to minimize the threat of truth-in-hiring lawsuits. Firms should teach their employees the importance of distinguishing between statements of fact and promises of future opportunity. They should learn to point out that certain situations may be only possible and not a sure thing. In addition, training sessions should be used to discourage exaggeration, puffery and "sales talk" when speaking to potential employees. Only the actual facts about advancement, promotion, job responsibilities, and job security should be given. Otherwise, interviewees may believe that all the statements made about the position are promises or guarantees.

If potential employees were to ask questions about companies' plans, percentage of work in a certain area, or tenure of certain managers/supervisors whom the individuals might want to work with, employers should be truthful in answering the questions. If employers are unsure about one of the areas discussed, this must be disclosed. In addition, silence or half-truths can be as misleading as outright misrepresentation.

Create Written Agreements

All employers should tender written offers to potential employees. The offer should completely outline the terms of employment. It should also contain a disclaimer or renunciation of any outside promises or representations. The terms and disclaimers could be incorporated into an employee manual or handbook.

Employers should also make sure that new employees understand the terms of the employment agreement and disclaimer. It might be wise to have both employers and employees sign written offers or employee manuals.

Document Everything

Companies should begin to document all aspects of the interview, hiring, promotion, and firing processes to protect themselves from truth-in-hiring claims. Richard J. Reibstein, a labor and employment lawyer with the law firm of McDermott, Will and Emery, says for example, that before any offer is made, the employer should ask whether any representations have been made about the employment. Any promises made should be confirmed or renounced in writing and signed by both employers and employees. All terms and conditions of employment should be documented and made available to the employees. These documents should be retained in the employees' files.