AT-WILL EMPLOYEES CAN SUE FOR MISREPRESENTATION OF EMPLOYMENT TERMS UNDER CALIFORNIA LAW
Generally, employees hired on an at-will basis can resign or be terminated at any time, either with or without cause or advance notice. The statutory authority for this well-established proposition is found in Labor Code Section 2922. There are, of course, exceptions that prohibit the termination or discipline of employees because of their sex, race, color, religion, national origin, age, disability or any other protected characteristic.
In the January 22, 2022 decision in White v. Smule, Inc., __ Cal. App. 5th __ (2022), a California Court Appeal addressed the question of whether a California statute, Labor Code Section 970, prohibits employers from inducing employees to relocate and accept employment by way of knowingly false representations regarding the kind, character, or existence of work, or the length of time such work will last. Interestingly, the court was asked to determine whether the statutory rules in Section 970 clashed with the right to terminate employees at will.
1. The Employee’s Misrepresentation Claims
The employee’s two-part claim included allegations of (1) false assurances of long-term employment, as well as (2) misrepresentations regarding the role he would fill at the employer’s company. The court of appeal concluded that the employee’s at-will employment provision negated his first claim based on alleged “justifiable reliance” on a representation of long-term employment. But it did not shield the employer from accountability for misrepresentations regarding the role the employee would fill at the company. It therefore reversed the trial court’s summary judgment ruling in favor of the employer.
2. The Lawsuit
The lawsuit was filed by Kenneth White, who accepted a position with Smule, Inc. as a lead project manager. Smule develops and markets consumer applications with a specialty in music social applications. White alleged a violation of Labor Code Section 970 arising out of discussions he had with Smule before accepting the position.
In defending the lawsuit, Smule provided evidence that White had signed an integrated at-will employment agreement that White conceded he read, signed, and understood. Smule argued that the at-will agreement negated any justifiable reliance on allegedly false representations regarding the length of time his work would last. Smule also argued White could not establish that Smule made any other knowingly false representations. The trial court agreed with Smule’s first argument and granted it summary judgment.
3. The Language And Purpose Of The Misrepresentation Statute -- Labor Code Section 970
White’s claims centered on Labor Code Section 970, which states: “No person, or agent or officer thereof, directly or indirectly, shall influence, persuade, or engage any person to change from one place to another in this State or from any place outside to any place within the State, or from any place within the State to any place outside, for the purpose of working in any branch of labor, through or by means of knowingly false representations, whether spoken, written, or advertised in printed form, concerning either: (a) The kind, character, or existence of such work; [or] (b) The length of time such work will last….“
The Legislature enacted Section 970 to protect migrant workers from abuses by unscrupulous employers, especially abuses involving false promises made to induce migrant workers to move in the first instance. However, Section 970 is not restricted in application to farm labor or other mass hiring situations.
To prevail on a Section 970 claim, the plaintiff must prove: (1) the defendant made representations to the plaintiff about the kind or character of work, or the length of time the work would last; (2) the defendant’s representations were not true; (3) the defendant knew when the representations were made that they were not true; (4) the defendant intended that the plaintiff rely on the representation; (5) the plaintiff reasonably relied on the representations and changed his or her residence for the purpose of working for the defendant; (6) the plaintiff was harmed; and (7) the plaintiff’s reliance on the defendant’s representations was a substantial factor in causing his or her harm.
The consequences of violating Section 970 are severe. Any person who violates Section 970 is liable for double damages resulting from such misrepresentations.
4. White’s At-Will Status Did Not Bar His Section 970 Claim Regarding The Position He Was To Fill
The court of appeal concluded that the underlying dispute in the litigation encompassed White’s allegations that Smule made false representations regarding the kind, character, or existence of work White was to perform. The court then turned to the question of whether White’s at-will status rendered any reliance on Smule’s representations unreasonable as a matter of law.
The court determined that an integrated, at-will employment provision did not prevent White from pursuing his claim of misrepresentation regarding being hired to fill the role of lead project manager, as described. It stated: “An at-will employer does not have carte blanche to lie to an employee about any matter whatsoever to trick him or her into accepting employment.” An at-will employment provision does not, as a matter of law, establish that an employee’s reliance on an employer’s promises regarding the kind, character, or existence of work the employee was hired to perform is unreasonable. Because Smule failed to produce evidence showing that White could not establish such justifiable reliance, it was not entitled to summary judgment. The court thus reversed the judgment of the trial court.
5. Lessons Learned
White v. Smule is a significant new case that offers several lessons and reminders for employers. First, there is no question that integrated at-will statements may be extremely helpful to employers who are forced to defend breach of contract and wrongful termination claims. Well-crafted statements should be considered for employee handbooks, job application forms, job offers, employment agreements, confidentiality agreements and other documents. Second, White supports the notion that such agreements can negate many types of breach of contract and wrongful termination claims, such as claims based on employee handbooks, personnel policies, express and implied contracts and the implied covenant of good faith and fair dealing.
Nevertheless, the protection at-will provisions afford is not unlimited. Such statements will not shield employers from liability for any adverse actions taken against applicants or employees in violation of any law, e.g., because of their sex, race, color, religion, age, disability or other protected characteristic, or because of protected activities, such as “whistleblowing” or taking time off or leaves of absence guaranteed by law. Likewise, they will not insulate employers from accountability for various types of misrepresentations, including statements (other than comments regarding the duration of employment) designed to trick an individual into accepting employment and relocating. This includes statements regarding the “kind, character and existence” of the work, such as the position to be filled in the White v. Smule case.
In summary, the value of at-will statements that underscore the mutual right of employees and employers to end an employment relationship that is not meant to continue is important, but not a silver bullet that ends all exposure. In most cases, common sense should guide employers to discuss positions in an open, honest and candid manner. The topic of wrongful discharge and at-will employment is examined in detail in the Wrongful Discharge, Staff Reduction and Employment Practices Manual by Attorney Richard J. Simmons.To read more articles like this one, subscribe to the ALERT Newsletter today!
About The Author
Richard J. Simmons is a Partner in the law firm of Sheppard, Mullin, Richter & Hampton LLP in Los Angeles. He represents employers in various employment law matters involving litigation throughout the country and general advice regarding state and federal wage and hour laws, employment discrimination, wrongful discharge, employee discipline and termination, employee benefits, affirmative action, union representation proceedings, and arbitrations. Mr. Simmons received his B.A., summa cum laude, from the University of Massachusetts, where he was a Commonwealth Scholar and graduated in the Phi Kappa Phi Honor Society. He received his J.D. from Berkeley Law at the University of California at Berkeley where he was the Editor-in-Chief of the Industrial Relations Law Journal, now the Berkeley Journal of Employment and Labor Law.
Mr. Simmons argued the only case before the California Supreme Court that produced a victory for employers and business in 2018. He was recently recognized as the Labor and Employment Attorney of the Year by the Los Angeles Business Journal and was inducted into the Employment Lawyers Hall of Fame. He has lectured nationally on wage and hour, employment discrimination, wrongful termination, and other employment and labor relations matters. He is a member of the National Advisory Board to the Berkeley Journal of Employment and Labor Law, published by Berkeley Law at the University of California at Berkeley. He was also appointed by the California Industrial Welfare Commission as a member of three Minimum Wage Boards for the State of California.