Employer misrepresentations, such as overstating the benefits program, in an attempt to induce a candidate to take a job can have negative legal consequences.
Negligent Misrepresentations by the Employer
Occasionally, employers might make representations about a job or benefits at the hiring stage that later turn out not to be true. Usually these will not be outright lies, but reflect assumptions, or a lack of accurate information, on the part of the hiring team.
Conversely, the candidate might ask questions that the hiring team is not fully qualified to answer. This was the situation in the British Columbia case, Feldstein v. 364 Northern Development Corporation.
In the Feldstein case, the company made a representations about their disability benefits plan to a sought after candidate. The candidate in question had cystic fibrosis, and anticipated the need for long term disability benefits at some point in the future. He inquired in detail about the company’s plan because this was a very important aspect of his employment compensation, given his condition.
The employer misrepresented the plan, and the employee was later unable to get the LTD benefits he had been assured existed. The company was found liable for the tort of negligent misrepresentation.
Negligent misrepresentation will be made out where:
1. A duty of care is established between the parties:
Employers do owe a duty of care to employees so this is easily established.
2. The representation or statement in question was untrue, inaccurate, or misleading:
The statement with respect to the benefits was inaccurate.
3. The employer acted negligently in making the representation:
The employer should not have answered a detailed question about benefits, but deferred to the benefits provider for clarity.
4. The employee reasonably relied on the negligent misrepresentation:
The candidate in this case took the job only after assurances were provided with respect to the benefits plan. The court concluded that the reliance on the information provided was reasonable.
5. The reliance resulted in damages to the employee:
The employee was unable to get the LTD benefits that he anticipated. The court concluded that he would not have accepted the job but for the inaccurate information provided.
The trial judge awarded Feldstein C$83,336.80 as compensation for lost LTD benefits and $10,000 for aggravated damages.
The British Columbia Court of Appeal upheld the damages award for loss of benefits, but overturned the $10,000 aggravated damages award.
Tips for the Hiring Process
The takeaway from this case is to be careful what you say to candidates during the hiring process. When in doubt, information should be verified before is it shared, and in some cases the hiring team may need to outsource specific questions to ensure that the information provided is accurate.