Establishes a claim for fraudulent inducement to enter into an employment relationship based on false promises as to wages, benefits, or intentions as to the duration of employment.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A455
SPONSOR: Steck TITLE OF BILL:
An act to amend the labor law, in relation to establishing a claim for
fraudulent inducement to enter into an employment relationship
PURPOSE OR GENERAL IDEA OF BILL:
To allow an employee to state a claim for fraudulent inducement by
entering into an employment relationship based on false promises as to
wages, benefits, or future intentions as to the duration or security of
his or her employment, that were known by the employer to be false at
the time the promise(s) was or were made, regardless of their status of
being at at-will employee or otherwise.
SUMMARY OF SPECIFIC PROVISIONS:
JUSTIFICATION:
Far too often an employee begins an employment relationship based upon
false claims or promises made by the employer that the employer knew
were false at the time. These false claims can range from a false prom-
ise of wages, benefits or the duration of employment.
When employees have filed an action to recoup the last wages, benefits
or durations of employment, courts have utilized the "at-will" status of
the employee to deny the claims. The courts have required that the
employee
plaintiff show an injury separate from the loss of promised
wages, benefits or duration of employment to establish a claim of false
inducement.
For example, in Smalley, appellant v. Dreyfus Corp., et al, Respondents,
an at-will employee heard a rumor that the employer's parent corporation
had made an offer to acquire a fund management company, the employer's
chief executive officer said that no merger had occurred or was being
considered. Relying on the assurance, other at-will employees accepted
employment with one of the employer's departments. When the employer
subsequently acquired the fund management company, it fired every member
of the department. Consequently, the employees sued the employer for,
inter alia, fraudulent inducement to enter into and remain in its
employment. The Court of Appeals found that the core of the employees'
claim was that they reasonably relied on the no-merger promises in
accepting and continuing employment with the employer, and in eschewing
other job opportunities. The employees alleged no injury separate and
distinct from termination of their at-will employment. Absent injury
independent of termination, the employees could not recover damages.
Conversely, in Laduzinski, Appellant, v. Alvarez & Marsal Taxand LLC et
al., Respondents, the appeals court found that the plaintiff pleaded an
injury separate and distinct from his termination, thus his claim
survived defendant's motion to dismiss; the loss being his prior employ-
ment and the pilfering of his client list. This was after defendant's
induced him to quite his prior employment with the promise of "plenty of
work" at their firm and a specific duration of employment. Instead, they
lured him there with these false promises with the sole intent of taking
his clients and summarily fired him. Had the plaintiff not had a sepa-
rate actionable claim related to his losses, it would have been
dismissed due to his "at-will" status
as what happened in Smalley,
appellant v. Dreyfus Corp, et al, Respondents).
In Stewart, Appellant, v. Jackson & Nash, et al, Respondents, the court
reversed a judgment that dismissed appellant attorney's fraud claim
against appellees, law firm and partners, but affirmed the judgment that
dismissed her negligent misrepresentation claim. Appellant was an envi-
ronmental attorney who alleged that she was induced to quit her practice
and to come work for appellees by representations that they had secured
a large environmental client, that they were in the process of estab-
lishing an environmental department, that appellant would work for the
client and head the new department. The client and the new department
never materialized, and appellant was eventually terminated by appel-
lees. The court held that appellant had a valid claim for fraud in the
inducement when the statements that appellees had secured the client and
were starting the new department were not future promissory statements,
but were representations of present facts, and the statement that she
would head the new department was actionable if appellees never intended
to perform that promise. The court held there was no basis for the
negligent misrepresentation claim because appellees did not owe appel-
lant a fiduciary duty
due to her at-will employee status.
An employee should be able to recover damages from the loss of wages,
benefits or duration of employment from an employer that made false
promises, and knew they were false at the time they were made. This
legislation seeks to correct the over-extension of the at-will employ-
ment status to dismiss all claims for false inducement when a separate
and distinct injury claim cannot be shown.
PRIOR LEGISLATIVE HISTORY:
New legislation
FISCAL IMPLICATIONS:
None
EFFECTIVE DATE:
Immediately
