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The California Supreme Court ruled that an employer who uses misrepresentations to induce an employee to take a job may be liable for fraud if the company later terminates the employee.
In Lazar v. Rykoff-Sexton, Inc., the employee was intensely recruited to leave his long-term employment to accept a job in California. The company made promises of job security, significant and regular pay increases and bonuses. Based on these promises, the employee accepted the job and moved to California. Two years later, the employee was terminated, having failed to receive the promised bonuses or salary increases. The California Supreme Court ruled that making false assurances of a secure position and significant increases in pay amounted to fraud on the employer’s part.1
The employee can sue for fraud, and the Ninth Circuit Court of Appeals ruled that the employee’s spouse also can file their own fraud claim. In Meade v. Cedarapids, the court noted that “because spouses usually make decisions as a family unit rather than as separate individuals, it is likely that the process of deciding whether to relocate for a new job involves convincing the spouse that the positive qualities of the new job outweigh the difficulties caused to the family.”2
1. Lazar v. Rykoff-Sexton, Inc., 12 Cal. 4th 631 (1996)
2. Meade v. Cedarapids, 164 F.3d 1218 (9th Cir. 1999)