The sexy topic of fraudulent misrepresentation by a worker was in the news this week, just as we are covering the topic in my Employment Law course. How convenient. The story involved the chief spin doctor for Walmart, who ‘resigned’ [read, quit rather than be fired] when the employer learned he had lied about having received a Bachelor’s degree from the University of Delaware. There is no such degree. This happened in the US, where employers can usually fire employees for no reason at all and with no notice (“at will” employment), so the legal issues that arise are different than in Canada. But let’s review the law governing employees who lie to their employers about their qualifications.
If an employee lies in an interview or on their c.v., and the employer catches the lie before an offer of employment is made, no legal issue would usually arise. The employer would just not offer the employee the job. However, often the employer does not learn of the dishonesty until after the worker has already been hired. That’s what happened in the Walmart situation. So now we are dealing with the discovery by the employer of a lie made sometime in the past. It might be that the employee has turned out to be a very good worker, with no problems at all. Still, the employer may be disturbed by the lie. In some cases, the employee may not have been hired at all but for the embellishment by the employee of their academic or work history. How should the law deal with this?
Dishonesty is a treated as among the most serious types of employee misconduct. When the employer learns that the employee was dishonest during the recruitment process, it may decide to terminate the employment contract ‘for cause’. That means the employer terminates the employee without notice, alleging that the employee had committed a fundamental breach of the contract by his dishonest behaviour. In essence, the claim is that the contract was based on a foundation of dishonesty and that, having now learned of the lies, the employer’s trust in the employee has been irreparably destroyed. The employee may respond to being sacked without notice by suing the employer for ‘wrongful dismissal’, which is a lawsuit seeking damages resulting from the dismissal without notice. Now the court has to decide whether the employee’s dishonesty during the recruitment process was sufficiently serious to justify dismissal without notice.
Often the courts apply torts known as fraudulent misrepresentation or deceit. This tort occurs when one party tells another something they know to be untrue with the intent to deceive, which the other party relies on to their detriment. If an employee or prospective employee commits a fraudulent misrepresentation by lying to the employer about their credentials, then the employer may treat the contract as having been voided. If the contract is voided, then the employer’s obligation to provide notice of termination is also voided.
Consider for example the case of Clark v. Coopers & Lybrand Consulting Group. The employee lied about his academic qualifications, and the lie contributed to the decision of the employer to hire him. Two years into the employment relationship, the employer learned of the lie and fired the employee without notice. The employee’s wrongful dismissal lawsuit failed, because the court ruled that the deception amounted to a fraudulent misrepresentation. Since the lie induced the employer into entering into the contract in the first place, the employee could not claim a benefit from that contract (in the form of notice of termination).
Contrast that decision with the decision of the B.C. Court of Appeal in Islip v. Coldmatic Refrigeration of Canada, where a job applicant lied about the amount of money he was earning in a prior job and was fired when the employer learned of the lie. The Court found that all of the elements of fraudulent misrepresentation were made out, except for one: the employer had not relied on the misrepresentation to its detriment. The court found that the employer would have hired the employee even if it had known the correct amount of the salary from the old job. Moreover, although dishonesty by an employee is serious, not every instance of dishonesty is grounds for summary dismissal without notice (as we learn in the Supreme Court of Canada case called McKinley v. B.C. Tel. The employee’s dishonesty here was not serious enough to create grounds for summary dismissal. The employer was ordered to pay damages.
This topic will be considered in greater depth in Chapter 6 of my forthcoming text, The Law of Work.
Issues for Discussion
1. Do you think that an employer should be able to fire an employee who has been a good employee for two years on the basis of a lie made two years earlier during the hiring process?
2. What distinguishes the two cases summarized in this post, and do you agree with the logic of this distinction?