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Tell the Truth or Face the Consequences: Misrepresentations in Employment Law

Tell the Truth or Face the Consequences:
Misrepresentations in Employment Law

Jody LeWitter
Siegel LeWitter Malkani
1939 Harrison Street, Suite 307
Oakland, CA 94612
(510) 452-5000
(510) 452-5004 (fax)

  1. Summary of Employment Fraud Claims
    1. There are a variety of claims arising out of false statements made to prospective Employees
      1. Intentional Misrepresentation or Fraud (C.C. §, 1710)
        1. Intentionally false/reckless misrepresentation of facts (C.C. § 1710(1))
        2. Concealment of facts (C.C. § 1709(3))
        3. False promise without intent to perform it (C.C. § 1709(4))
      2. Negligent Misrepresentation (C.C. § 1709(2))
      3. Fraud to Induce an Employee to Move, Labor Code § 970
      4. Promissory Estoppel
    2. Fraud Claims Help to Keep Employers Honest in the Processing of Courting amd Retaining Employees
    3. Fraud Claims Require Heightened Levels of Pleading and Proof
    4. Fraud Claims May Arise in Many Employment Situations and Thus Fraud Claims Should be Considered by Plaintiffs’ Employment Lawyers as Part of the Normal Screening Process
    5. Fraud Claims May Result in a Wide Panoply of Damages
      1. Tort damages are often available, but fraud damages may be unique
      2. Other statutory damages are sometimes available
    6. Cal. Civil Code § 1709 defines “deceit” as: “One who willfully deceives another with intent to induce him to alter his position to his injury or risk.”
    7. The law of fraud is based upon both statutes and common law. Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1091.
    8. The General Elements of Fraud
      1. Misrepresentation
      2. Knowledge of falsity (“scienter”)
      3. Intent to defraud
      4. Reliance: actual and justifiable
      5. Damages
  2. Types of Actionable Fraud in the Employment Context
    1. Fraud in the Inducement
      1. Most employment fraud claims are for fraud in the inducement, i.e., falsehoods made to induce an employee to commence working for an employer. Lazar v. Superior Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631 involved fraudulent statements regarding the company’s financial health, the growth of the department the plaintiff was to work in, and the security of his position.
      2. In Lazar, these falsehoods were made prior to the commencement of the employment.
      3. For fraud in the inducement generally, see Agricultural Ins. Co. v. Superior Court (1990) 70 Cal.App.4th 385, 400 (insurance policy).
    2. Fraud During the Course of Employment
      1. Misrepresentations made during the course of employment may constitute fraud
        1. Misrepresentation “…designed to induce the employee to alter detrimentally his or her position in some respect” is actionable. Lazar v. Superior Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631, 640
        2. Example: Misrepresentation regarding continued employment. Wallis v. Farmers Group, Inc. (1990) 220 Cal.App.3d 718
        3. Misrepresentation during the course of employment (by failure to reveal likelihoods that plaintiffs were to be laid off) in order to induce plaintiff to enter into settlement of Title VII claims. Miller v. Fairchild Indus., Inc. (9th Cir. 1989) 885 F.2d 498, 506-509, as cited in Hunter v. Up-Right, Inc. (1993) 6 Cal.4th 1174
      2. This conduct may also give rise to a breach of contract under appropriate circumstances. Scott v. Pacific Gas & Elec. Co. (1995) 11 Cal.4th 454
    3. Fraud in the Termination of Employment
      1. Misrepresentations in the course of termination of employment are not generally actionable
        1. This is true if the employer has the right to terminate the employment relationship, i.e., with an “at will” relationship. Hunter v. Up-Right, Inc. (1993) 6 Cal.4th 1174
        2. The reason is because there is no tort liability for doing what the employer is legally entitled to do: terminate the relationship at will. Hunter v. Up-Right, Inc., supra
      2. Misrepresentations Separate from the Termination: Despite Hunter v. Up-Right, Inc., supra, there is a misrepresentation claims if the misrepresentations is “designed to induce the employee to alter detrimentally his or he position in some respect” Lazar v. Superior Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631, 640; Hunter v. Up-Right, Inc. (1993) 6 Cal.4th 1174, 1185
        1. An example would be to give up a severance package or contractual benefit to which the employee is otherwise entitled
  3. Intentional Misrepresentation by Misrepresentation of Fact
    1. Defined in Civil Code § 1710(1) as “the suggestion, as a fact, of that which is not true, by one who does not believe it to be true”
    2. Essential elements of intentional misrepresentation. BAJI 12.31; Lazar v. Superior Court (Rykoff-Sexton, Inc.). (1996) 12 Cal.4th 631, 638; Pulver v. AVCO Financial Services (1986) 182 Cal.App.3d 622, 639
      1. Defendant made a false representation of a past or existing material fact
      2. The defendant knew the representation was false when made and/or made the representation recklessly
      3. The defendant intended to defraud the plaintiff to act in reliance upon the representation
        1. Under appropriate circumstances, third parties may bring such actions. BAJI 12.31, (Use Note); BAJI 12.50, 12.51
      4. The plaintiff was unaware of the falsity of the representation, acted in reliance upon it, and was justified in acting in reliance
      5. The plaintiff was damaged
    3. Types of statements or assertions that are actionable
      1. Generally must be a misrepresentation of fact. C.C. §1710 (1); Schroeder v. Auto Driveaway Co. (1974) 11Cal.3d 908, 917; Hefferon & Freebairne (1950) 34 Cal.2d 715
        1. Misrepresentation inducing employee to take early retirement. Nibbi Bros. v. Home Fed. Savings & Loan Assn. (1988) 205 Cal.App.3d 1415, 1425
        2. Misrepresentation of the financial health of the company, Lazar v. Superior Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631
        3. Misrepresentation to induce employee to take job and move: systems in place and operational; the company was providing customer service and the company had a corporate endorsement Seubert v. McKesson Corp. (1990) 223 Cal.App.3d 1514
      2. Statements of opinion are generally not actionable as misrepresentation. Chavez v. Citizens for a Fair Farm Labor Law (1978) 84 Cal.App.3d 77
        1. There are many exceptions to the rule
        2. Special knowledge: statements of opinion where defendant holds itself out as having superior knowledge, special information, or an expert opinion, may be considered statements of fact B.A.J.I. 12.32(1) This can be applicable in an employment action where the employer is privy to confidential information about the employer’s business plan or finances(2) Query as to whether this would be applicable with a publicly traded company about which the employee could obtain information
        3. Opinions Containing Facts or Stated as Facts are Actionable(1) “When a party states an opinion as a fact, in such a manner that it is reasonable to rely and act upon it as a fact, it may be treated as a representation of fact.” B.A.J.I. 12.32 Crandall v. Parks (1908) 152 Cal.772; Cohen v. S.A.S. Construction Co. (1983) 151 Cal.App.3d 941
        4. Opinions of a Fiduciary are Actionable. Lynch v. Cruttenden & Co. 1993) 18 Cal.4th 802, 808; Bank of America v. Sanchez (1934) 3 Cal.App.2d 238, 242.(1) However, an employer is not considered per se to be a fiduciary Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 687-690 (no special relationship)
      3. Misrepresentation can be implied in fact, i.e., by conduct. Thrifty-Tel v. Bezenek (1996) 46 Cal.App.4th 1559, 1567
      4. Statements of law are not generally actionable
        1. They are treated the same as opinions. Rest., 2d Torts § 545(2)
        2. They are actionable to the extent they include, expressly or by implication, a misrepresentation of fact. Rest., 2d Torts § 545(1)
    4. Scienter: Knowledge of Falsity
      1. The state of mind of the defendant at the time of the misrepresentation
        1. Defendant knew that the representation was false, B.A.J.I. 12.31(3) Gagne v. Bertran (1954) 43 Cal.2d 481, 487
        2. Defendant made the representation recklessly without knowing whether it was true or false B.A.J.I. 12.31(3) Gagne v. Bertran (1954) 43 Cal.2d 481, 487
      2. This is a fact intensive inquiry, analyzing the motive of the defendant and surrounding circumstances
    5. Intention to defraud the Plaintiff
      1. The B.A.J.I. instructions specifically indicate, “You may consider the conduct of a party making a promise, either before or after the promise was made, in determining whether there was an intention not to perform the promise when made.” B.A.J.I. 12.41
      2. Circumstantial evidence of intent to deceive may be used. Some courts have held that the subsequent conduct of failure to honor the promise itself is circumstantial evidence of intent. Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 27; Jarkieh v. Badagliacco (1946) 75 Cal.App.2d 505, 509
      3. “Fraudulent intent has been inferred from such circumstances as defendant’s insolvency, his hasty repudiation of the promise, his failure even to attempt performance, or his continued assertions after it was clear he would not perform.” Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 31
    6. Reliance: Actual & Justifiable
      1. In general, plaintiff must plead and prove actual and justifiable (i.e., reasonable) reliance
      2. Actual Reliance
        1. Actual reliance is defined as where the representation was “an immediate cause of . . . [the] conduct which alters his legal relations . . .” and that without the representation he “would not, in all reasonable probability, have . . .” taken the action. Spinks v. Clark (1905) 147 Cal.439, 444. See also, B.A.J.I. 12.51
        2. The fraud need not be the sole cause of the action taken in reliance. B.A.J.I. 12.51(1) (The action in reliance should “substantially influence” the action, “even through other influences operated as well.” B.A.J.I. 12.51
        3. An independent investigation is not required, but it may effect whether there is actual reliance. Bagdasarian v. Gragnon (1948) 31 Cal.2d 744, 748, Seeger v. Odell (1941) 18 Cal. 2d 409, 411
        4. Plaintiff should testify that she relied upon defendant’s misrepresentation in, for example, taking the job
        5. Third Party Reliance May be Permitted(1) In a sexual assault/fraud case, the California Superior Court approved third party reliance. The Court found that a student could avail herself of the fact that her school acted in reliance. Randi W. v. Murol Joint Unified School Dist. (1997) 14 Cal.4th 1066(2) Similarly, a real estate lender was permitted to maintain a third party fraud claim. Alliance Mortgage v. Rothwell (1995) 10 Cal.4th 1226, 1229(3) The B.A.J.I. instructions and Use Notes indicate that third party reliance is permitted. See, B.A.J.I, (pocket part) 12.31 (Use Note), 12.35 (Use Note), 12.40 (Use Note), 12.45 (Use Note)
      3. Justifiable (Reasonable) Reliance
        1. A reasonable person, would accept the defendant’s representations, without an independent inquiry or investigation. Kahn v. Lischner (1954) 128 Cal.App.2d 480, 489
        2. B.A.J.I. evaluates what is reasonable “in the light of the circumstances and plaintiff’s intelligence, experience and knowledge.” B.A.J.I. 12.53. See also, Seeger v. Odell (1941) 18 Cal. 2d 409, 415; Rest. 2d, Torts § 541; 545A; Comment B (reasonableness of reliance dependent upon qualities and characteristics of the plaintiff); Kahn, supra, at 489
        3. Reasonableness should be judged by the particular circumstances of the case. Dow v. Swain (1899) 125 Cal.674, 683; B.A.J.I. 12.52 (Use Note); Rest. 2d Torts § 545A, Comment B
        4. If the defendant knew of plaintiff’s weaknesses, or particular characteristics, and took advantage of it, more leeway is granted to the plaintiff. Seeger v. Odell (1941) 18 Cal. 2d 409, 415; Hartong v. Partake (1968) 266 Cal.App.2d 942, 964
        5. No justifiable reliance where an at will employee relies upon statement of employer regarding availability of other positions within the company, as at will employee may be discharged from any position at any time. Camp v. Jeffer, Mangels, Butler & Marmaro (1995) 35 Cal.App.4th 620, 639
        6. An independent investigation is not required per se, especially where such would not reveal the fraud, the defendant has or holds itself out as having superior knowledge or an expert would be required. Bagdasarian v. Gragnon (1948) 31 Cal.2d 744, 748, Seeger v. Odell (1947) 18 Cal. 2d 409, 411
        7. Some investigation may be required if it seems apparent that the representations were false. Roland v. Hubenka (1970) 12 Cal.App.3d 215, 224-225
        8. It may be reasonable to rely on an employer’s representations, and therefore not investigate. Ramey v. General Petroleum Corp. (1959) 173 Cal.App.2d 386, 400
    7. Examples of False Statements of Fact
      1. False representation of financial stability of corporation, growth of department , etc., Lazar v. Superior Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631
      2. False representation that at will cause in employment agreement did not apply to plaintiffs. Marketing West, Inc. v. Sanyo Fischer (USA) Corp. (1992) 6 Cal.App.4th 603
    8. Damages
      1. For discussion of damages, see § X, infra
  4. Intentional Misrepresentation by Promissory Fraud/False Promise
    1. Defined in Civil Code § 1710(4) as, “A promise, made without any intention of performing it”
    2. Promissory fraud is a subspecies of intentional fraud
      1. A promise to do something one does not intend to do is a current misrepresentation of the defendant’s state of mind. Lazar v. Superior Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631, 638
    3. Essential Elements of Promissory Fraud B.A.J.I. 12.40; Lazar v. Superior Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631
      1. The defendant made a promise as to a material fact which, at the time it was made, defendant did not intend to perform
      2. The defendant made the promise with the intent to defraud the plaintiff, i.e., with the purpose of inducing the plaintiff to act in reliance upon it
      3. The plaintiff was unaware of the falsity of the promise, acted in reliance upon it, and was justified in doing so
      4. Damages
    4. Promissory fraud is a false statement of present intent
      1. This is an implied misrepresentation of fact. Cal. Civil Code § 1710(4), Locke v. Warner Bros. (1997) 57 Cal.App.4th 354, 367; Service by Medallion v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1816
      2. This is distinguishable from a mere failure to fulfill a promise, a broken promise, or changed circumstances. Edmunds v. Valley Circle Grates (1993) 16 Cal.App.4th 1290, 1301; Magpali v. Farmers Group (1996) 48 Cal.App.4th 471, 480
      3. This requires proof that the defendant, at the time the promise was made, either did not intend to keep it or was reckless in making it, See § III(E), supra
        1. Bondi v. Jewels by Edwar Ltd. (1968) 267 Cal.App.2d 672 (false promise of job security in order to induce plaintiff to close his business and work for defendant)
      4. Promises as to what a company will do in the future are actionable
        1. Promises that the employee “…would be employed by the company so long as he performed his job, he would receive significant increases in salary, and the company was strong financially.” Lazar v. Superior Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631, 639
        2. This is actionable especially if the statement implies superior knowledge. Smith v. Swenson (1930) 105 Cal.App.60, 63; Dyke v. Zaiser (1947) 80 Cal.App.2d 639, 652
        3. See 16 A.L.R.2d 1311, for discussion of misrepresentation regarding employee’s future earnings
  5. Intentional Misrepresentation by Concealment
    1. Statutory Definition
      1. The suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact.” Civil Code § 17.10(3)
    2. Essential Elements of Concealment. B.A.J.I. 12.35
      1. Defendant concealed or suppressed a fact
      2. Defendant was under a duty to disclose the fact
      3. Defendant intentionally concealed the fact with the intent to defraud the plaintiff
      4. Plaintiff was unaware of the fact, and would have acted differently had she been aware of it
      5. Damages
    3. Duty to Disclose Required
      1. This claim generally requires a duty to disclose. B.A.J.I. 12.35
      2. Fiduciary relationship: a duty to disclose occurs with a fiduciary relationship. B.A.J.I. 12.36; Reed v. King (1983) 145 Cal.App.3d 261, 264-265
        1. An existing employment relationship may give rise to a duty to disclose certain facts. Foster v. Xerox Corp. (1985) 40 Cal.3d 306, 309-310 (duty to disclose contraction of disease in course of employment). This is a worker’s compensation case
        2. The fact that parties are about to enter into an employer- employee relationship alone is probably not a fiduciary one. Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 687-690
        3. Examples of fiduciary relationships include stockbrokers-customer Black v. Shearson, Hammell & Co. (1968) 266 Cal.App.2d 362, 367; real estate broker-customer, Cooper v. Jevne (1976) 56 Cal.App.3d 860, 866; corporate director-corporation, Hobart v. Hobart Real Estate Co. (1945) 26 Cal.2d 412, 433
      3. Exclusive Knowledge: A duty to disclose arises where a defendant -employer has exclusive knowledge of material facts, which are not available to the prospective employee. B.A.J.I. 12.36
        1. Most cases on this involve the sale of real estate. Rothstein v. Janss Investment Corp. (1941) 45 Cal.App.2d 64, 68; Barnhouse v. City of Pinole (1982) 133 Cal.App.3d 171, 188
        2. There are many situations in which an employer has exclusive knowledge of facts, such as the financial well-being of a privately held corporation, the needs of a corporation, past earnings of employees, etc.
      4. Active concealment/voluntary partial disclosure: A duty to disclose also arises where there is active concealment or partial voluntary communications which may mislead the employee
        1. Active concealment by an employer to conceal information from a prospective employee may result in a claim for misrepresentation by concealment. See generally, 6 Witkin, Torts § 697 (9th Ed.); 29 So. Cal. L.Rev. 378; 37 Am. Jur. 2d Fraud and Deceit, § 145. Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 609, (hospital concealed that physicians not licensed in California)
        2. If an employee gives some information which, by its failure to provide other information, leaves an employee with an impression that is likely to mislead, a claim for concealment arises. See generally, Cal. Civil Code § 1710(3)(1) Where, the employer is under no duty to speak, but when the employer voluntarily does so, the employer must not suppress some facts which make the statements, voluntarily provided, misleading. Cal. Civil Code § 1710(3); B.A.J.I. 12.37(3); McCue v. Bruce Enterprises (1964) 228 Cal.App.2d 21, 27; 6 Witkin, Torts, § 703 (9th Ed.)(2) Where company voluntarily stated that they were asking independent salespeople to sign at will agreements solely for consistency in a corporate merger and that the agreements had no meaning, claim is stated for concealment of the fact that company had already decided to terminate salespeople. Marketing West, Inc. v. Sanyo-Fischer (USA) Corp. (1992) 6 Cal.App.4th 603, 612-613
        3. Actively preventing investigation and discovery of material facts constitutes actionable concealment. B.A.J.I. 12.37(2)
  6. Labor Code § 970: Prohibition Against Misrepresentation to Induce an Employee to Move
    1. Statutory Definition
      1. Cal. Labor Code § 970 prohibits any action to influence an employee to change his or her locale by knowingly misrepresenting the kind, character, existence of work: length of time or compensation of work; sanitation or housing conditions, existence or non-existence of a strike, or other labor dispute
      2. This legislation was originally enacted to protect agricultural employees, but covers all employees. Tyco v. Industries, Inc. v. Superior Court (1985) 164 Cal.App.3d 148, 155; Seubert v. McKesson Corp. (1990) 223 Cal.App.3d 1514, 1521; Munoz v. Kaiser Steel Corp. (1984) 156 Cal.App.3d 965, 980
    2. Essential Elements
      1. The elements of the claim are the same as intentional misrepresentation except the fraud has to do with nature of work as defined in Labor Code § 970. See § III(B), supra, and § VI(A)(1), supra; Tyco Indus., Inc. v. Superior Court (Richards) (1985) 164 Cal.App.3d 148, 156-157; Finch v. Brenda Raceway Corp. (1994) 22 Cal.App.4th 547, 553
      2. Relocation for purposes of work. Tyco, supra.
        1. Moving locations does not require moving in or out of state, although such conduct is covered by the statute. Labor Code § 970
        2. Relocation while working for same employer covered. Tyco, supra, at 157
    3. Examples
      1. Defendant made false representations to plaintiff regarding long term security (had long term commitment to employees and if anything should happen, defendant would find her a position at another project, this was “lifetime employment”) so that she would take a position as general manager, which required her to relocate. At the same time defendant told others he was hiring plaintiff temporarily until his first choice candidate could take the job. Finch v. Brenda Raceway Corp. (1994) 22 Cal.App.4th 547
      2. Employer misrepresented status of company and products in order to induce sales manage to take job and move. Seubert v. McKesson Corp. (1990) 223 Cal.App.3d 1514, 1522
    4. Overlap with other fraud claims
      1. Labor Code § 970 often covers the same conduct as covered by other fraud claims. Plaintiffs should plead both violation out of caution, and because, inter alia, Labor Code § 970 has a double damages provision
  7. Negligent Misrepresentation
    1. Statutory Definition
      1. Defined in Civil Code § 1710(2) as “The assertion, as a fact, of that which is not true, by one who has no reasonable grounds for believing it to be true.” See also, Gagne v. Bertan (1954) 43 Cal.2d 481
    2. Essential Elements
      1. The defendant makes a representation as to a past or existing material fact. B.A.J.I. 12.45. B.A.J.I. 12.45; Byrum v. Brand (1990) 219 Cal.App.3d 926, 942; Huber, Hart & Nichols v. Moore (1977) 67 Cal.App.3d 278, 304
        1. The representation cannot be implied. B.A.J.I. 12.45 (Use Note); Huber, Hunt & Nichols, Inc. v. Moore (1977) 67 Cal.App.3d 278, 303-304
      2. The defendant made the misrepresentation without any reasonable grounds for believing it to be true. B.A.J.I. 12.45, L.Cal. Civil Code § 1710 (2)
      3. The representation was made with the intent to induce the plaintiff to rely upon it. B.A.J.I. 12.45
        1. Unlike intentional fraud, there is no liability for third party reliance. Rest. 2d, Torts § 552; Comments (g) and (h); Hawkins v. Oakland Title Ins. & Guarantee Co. (1958) 165 Cal.App.2d 116, 128
      4. The plaintiff was unaware of the falsity of the representation, acted in reliance upon it, and the reliance was justifiable. B.A.J.I. 12.45
      5. The plaintiff was damaged. B.A.J.I. 12.45
        1. Damages must arise from the particular, or substantially similar, action which the defendant intended to induce. Rest., 2d, Torts, § 552
        2. Damages are limited to negligence damages. See § X, infra
    3. The standard for negligent misrepresentation is lower than for intentional misrepresentation. Sabbo v. Deitsch (1997) 55 Cal.App.4th 823
    4. Some courts have held that the representation should be made in the course of a business or professional relationship. Hawkins v. Oakland Title Ins. & Guarantee Co. at 125; De Zemplen v. Home Fed. Savings & Loan Assn. (1963) 221 Cal.App.2d 197, 215
  8. Promissory Estoppel
    1. Elements of Promissory Estoppel; Rest., 2nd Contracts, § 90(1); Hill v. Aetna (1982) 130 Cal.App.3d 188, 195; Busse v. Pacific Employers Ins. Co. (1974) 43 Cal.App.3d 558, 570, fn. 11; Venture v. LMI Insurance Co. (1998) 66 Cal.App.4th 478
      1. A misrepresentation or concealment of a material fact
      2. Reasonably expected to induce action or forbearance
      3. Made with the intent that the other party act
      4. That does induce action or forbearance by the promisee or a third party
      5. Injustice can be avoided only by enforcement by the promise
    2. Promissory estoppel is a useful remedy as an alternative to fraud or contract claims
      1. In some cases, a plaintiff may be entitled to promissory estoppel relief, while unable to prove other claims
    3. Promissory estoppel is an equitable remedy. C & K Engineering Contractors v. Amber Steel co., Inc. (1978) 23 Cal.3d 1, 8
      1. Promissory estoppel claims are heard and decided by the court, not a jury
      2. As such, promissory estoppel, in conjunction with other legal claims, legitimately entitles a plaintiff to more than one bite of the apple (i.e., both a judicial and a jury determination)
      3. The requirement of avoiding injustice leaves much discretion to the judge in a promissory estoppel claim
  9. Cal. Labor Code § 1050-False References
    1. Prohibits ex-employer from preventing a former employee from obtaining employment through a misrepresentation
      1. Only applies to statements to prospective employers, not to employees of defendant. Kelly v. General Telephone Co. (1982) 136 Cal.App.3d 278, 278-289
      2. May not protect current employees (i.e., covers “former employee”). Labor Code § 1050
      3. Does not prohibit truthful statement about employee, upon a “special request.” Labor Code § 1053
      4. Requires intentional conduct (“knowingly…”) Labor Code § 1052
    2. Privileges
      1. The same privileges available to an employer in a libel or slander action (Civil Code § 47) are available here. O’Shea v. General Telephone Co. (1987) 193 Cal.App.3d 1040, 1047
    3. Evidentiary Rules
      1. A statement which furnishes any mark, sign, or other means of conveying information different than what is said, is a prima facie “evidence of a violation. Labor Code § 1053
    4. Employer Liability for Employees or Agents
      1. Guilty of a misdemeanor if knowingly causes, suffers or permits an agent, supervisor, manager or employee to violate Labor Code § 1050. Labor Code § 1052
      2. Guilty of a misdemeanor if failed to take all reasonable steps to prevent a violation of Labor Code § 1050. Labor Code § 1052
    5. Plaintiffs should also look at Alternative Claims for Slander or Libel
  10. Damages for Misrepresentation Claims
    1. Defendant liable for “any” damages. Civil Code § 1709; Gagne v. Bertran (1954) 43 Cal.2d 481, 490, fn. 6, or “all the detriment proximately caused.” Cal. Civil Code. § 33333
    2. Damages must be proximately caused by the misrepresentation
      1. Traditional notions of tort damages determine whether the harm caused was foreseeable and the damage proximately caused. See generally, Randi W. v. Muroc Joint Unified School Dist. (1997) 14 Cal.4th 1066, 1068; Rest. 2d, Torts § 5498(1); Lazar, supra
    3. Type of Damages Generally
      1. Intentional misrepresentation results in all tort damages: compensatory (economic and emotional distress) and punitive Lazar, supra
      2. There is no attorney fee provision
    4. Economic Damages
      1. Mearsure of Economic Damages Generally
        1. Economic damages, past and future are to be awarded, Walker v. Signal Companies, Inc. (1978) 84 Cal.App.3d 982, 995-996; O’Hara v. Western Seven Trees Corp. (1997) 75 Cal.App.3d 798, 805
        2. In most wrongful termination or discrimination cases, damages are measured by what plaintiff would have earned had the wrongful termination/ discrimination not occurred, minus what plaintiff did/should have earned in mitigation
        3. Economic damages in fraud claims can be measured by two methods: reliance damage or benefit-of-the-bargain damages
      2. Reliance Damages
        1. Reliance damages generally are measured by what the plaintiff gave up. B.A.J.I. 12.56. They are intended to put the plaintiff in the position she would have occupied had the misrepresen-tation not occurred
        2. Reliance damages include, but are not limited to, out-of-pocket damages
        3. Reliance damages include damages such as expenses in relocating, Lazar, supra, at 648
        4. Reliance damages include loss of income from what the plaintiff gave up-usually his former job. Lazar, supra, at 648
        5. B.A.J.I.’s reliance damages also include what could be considered to be a broader measure of damages, including lost profits. B.A.J.I. 12.56
      3. Benefit-of-the-Bargain Damages
        1. This is generally considered what plaintiff would have been entitled to had defendant’s representation been true, instead of false. B.A.J.I. 12.57; Salahutdin v. Valley of California, Inc. (1994) 24 Cal.App.4th 555 (case involving fiduciary fraud by a real estate broker)
        2. “The benefit-of-the-bargain measure…is concerned with satisfying the expectancy interest of the defrauded plaintiff by putting him in the position he would have enjoyed if the false representation relied upon had been true.” Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1240 (quoting Stout v. Turney (1978) 22 Cal.3d 718, 725)
        3. Whether benefit-of-the-bargain damages should be awarded in some or all employment cases is not clearly established
        4. Argument for Benefit-of-the-bargain Damages as an Option to Reliance Damages(1) The measure for damages are for “all” and “any” damages proximately causes Cal. Civil Code §§ 1709, 3333(2) This is broad measure of damages. Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1241; Overguard v. Johnson (1997) 68 Cal.App.3d 821; Stout v. Turney (1978) 22 Cal.3d 718(3) Lazar v. Superior Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631, 646 stated that “because of the extra blameworthiness inherent in fraud, and because in fraud cases we are not concerned for the need for predictability about the cost of contractual relationships, fraud plaintiff may recover out-of-pocket in addition to benefit-of-the-bargain damages.”(4) The cases which limit fraud damages to reliance damages erroneously rely upon cases interpreting Cal. Civil Code § 3343 [which are real property fraud cases only] rather than Cal. Cal. Civil Code. § 3333(5) Historically the measure of damages for fraud was benefit-lf-the bargain. Wood v. Niemeyer (1921) 185 Cal. 526, 532; Rogaff v. Bartles (1931) 115 Cal.App.429 (1931); Coleman v. Ladd Ford Co. (1963) 215 Cal.App.2d 90, 93; Hines v. Broder (1914) 168 Cal.507, 510(6) When the California Legislature passed Cal. Civil Code § 3343, dealing with fraud in real estate transactions, it intended to provide a narrower remedy for these transactions only. Alliance Mortgage, supra, at 1240-1241; Overguard, supra; Stout, supra. Also see Cal. Civil Code 3343(b)(1)(7) Even with the limitations in Cal. Civil Code § 3343, benefit-of-the-bargain damages are available with a breach of a fiduciary duty. Ward v. Taggart, (1959) 51 Cal.2d 736, 741; Salahutdin v. Valley of California, Inc. (1994) 24 Cal.App.4th 556(8) However, in actuality, Cal. Civil Code § 3333- covering employment fraud-has the broader measure of damages. Alliance Mortgage, supra, 1240-1241 (real estate victim defrauded by fiduciary, has “‘broader’ measure of damages provided by §§ 1709 and 3333 apply.”)(9) The Restatements of Torts provides for such damages. Rest. (2nd) Torts, § 549. See, Comment, subsection (2)(g)(10) Some federal court cases have held that damages are limited to reliance damages. Eckert Cold Storage, Inc. v. Behl (N.D. Cal. 1996) 943 F.Supp. 1230, 1234; Auble v. Pacific Gas & Electric Co. (N.D. Cal.1999) 55 F.Supp.1019
        5. To be cautious, if the plaintiff has a contract claim, it is important to preserve that claim, to clearly entitle the plaintiff to benefit-of-the-bargain damages
    5. Emotional Distress Damages
      1. Such damages are recoverable with intentional fraud. O’Hara v. Western Seven Trees Corp. (1977) 75 Cal.App.3d 798, 805; Sprague v. Frank J. Sanders Lincoln Mercury, Inc. (1981) 120 Cal.App 3d 412; B.A.J.I. 12.31, Use Note; Finch v. Brenda Raceway Corp. (1994) 22 Cal.App.4th 547
      2. Not normally recoverable with negligent misrepresentation. Branch v. Homefed Bank (1992) 6 Cal.App.4th 793, 798; Finch v. Brenda Raceway Corp. (1994) 22 Cal.App.4th 547
    6. Punitive Damages
      1. Are available with intentional misrepresentation. Civil Code § 3294; Lazar at 649
      2. Since one manner in which punitive damages can be proven is by “fraud,” a good argument can be made that liability in an intentional fraud case should result in a punitive damages finding. The standard, however, is different, as punitive damages requires “clear and convincing evidence.” Cal. Civil Code § 3294
    7. Damages Unique to Violation of Labor Code § 970
      1. Violation is a misdemeanor, with a fine of between $50.00 to $1,000.00 and/or imprisonment for up to six months. Labor Code § 971
      2. Double damages are required. Labor Code § 972
      3. Punitive damages are available, but if plaintiff is awarded both punitive and double damages, plaintiff must elect his remedy. Marshall v. Brown (1983) 141 Cal.App.3d 408, 419
    8. Damages Unique to Labor Code § 1050
      1. Violations is a misdemeanor Labor Code § 1054
      2. Treble damages are required. Labor Code § 1054; Marshall v. Brown (1983) 141 Cal.App.3d 408, 417-418
      3. Punitive damages are available, but if plaintiff is awarded both punitive and treble damages, plaintiff must elect her remedy. Marshall, supra, at 419
    9. Prejudgment Interest
      1. The court has the discretion to award in actions for breach of noncontractual obligations and in punitive damages cases
  11. Procedural Issues in Misrepresentation Claims
    1. Pleading Issues
      1. A misrepresentation claim must be pled with specificity. Lazar v. Superior Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631, 645 (and cases cited therein)
    2. Questions for the Court or the Fact Finder
      1. Many of the elements of a fraud claim are factually intensive. Fact issues are generally for the fact finder, not the court.
      2. Example: Whether a plaintiff’s reliance is justifiable is ordinarily a question of fact for the fact finder. Blankenheim v. E.F. Hutton (1990) 217 Cal.App.3d 1463, 1473
    3. Burden of Poof
      1. Plaintiff must prove her case by a preponderance of the evidence. B.A.J.I. 2.60; Liodas v. Sahadi (1977) 19 Cal.3d 278, 287 (disapproving standard of clear and convincing evidence)
    4. Verdict Form Issues
      1. A plaintiff is entitled to a general verdict if the appropriate number of jurors agree that the elements of fraud were established. They need not agree on the theory of liability Stoner v. Williams (1996) 46 Cal.App.4th 986, 993
      2. Thus, a jury may simply answer the questions of whether there was intentional fraud, without specifying as to whether the fraud was statement of fact concealment, or false promise.
  12. Other Claims to Examine
    1. Breach of Contract
      1. Always a good idea to plead a breach of contract claim if possible
      2. Although damages are more limited, in some circumstances a contract claim is easier to prove
    2. Slander and Libel
      1. Consider as an alternative to Cal. Labor Code § 1050
    3. Violation of Public Policy
      1. A violation of Labor Code § 970 may serve as the statutory basis for a violation of public policy claim. Lazar v. Superior Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631; Finch v. Brenda Raceway Corp. (1994) 22 Cal.App.4th 547
  13. Defenses
    1. Contributing Negligence
      1. Negligence or contributing negligence are not defenses to intentional misrepresentation. Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239
      2. Negligence or contributing negligence are not defenses to negligent misrepresentation. Van Meter v. Bent Const. Co. (1956) 46 Cal.2d 588; Carroll v. Gava (1979) 98 Cal.App.3d 892, 897
    2. Statute of Limitations
      1. Fraud statute of limitations are generally three years. C.C.P. § 338(d)
      2. The date the statute of limitations starts to run may be the date the plaintiff discovers the facts constituting fraud. C.C.P. § 338(d)
      3. Negligent misrepresentation may be considered to have a one year statute. C.C.P. § 340(3)
      4. Public policy claims are one year. Barton v. New United Motor Mfg. (1996) 43 Cal.App.4th 1200
      5. Violations of statutes, other than a penalty or forfeiture, have three year statute of limitations, C.C.P. § 338(d)
      6. If in doubt about the statute of limitations, always act conservatively and use the earliest possible date
    3. Workers Compensation Preemption
      1. Generally fraudulent conduct is not preempted as it is not considered to be part of the workers compensation bargain as it violates fundamental public policy. Thus, it is not within the scope of the risks of employment covered by the statute. Cal. Labor Code § 3200, et seq.; Lazar v. Superior Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631
      2. This is because conduct where an employer steps outside its proper role or engages in conduct which has a questionable relationship to employment, is not part of the employment bargain and not preempted. Fermino v. Fedco, Inc. (1994) 7 Cal.4th 701
      3. Not a defense to fraud in the inducement as there is no employer-employee relationship, Lazar v. Superior Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631

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