Material Representations in Employment Law

False representations made recklessly and without regard for their truth in order to induce action by another are the equivalent of misrepresentations knowingly and intentionally uttered. Yellow Creek Logging Cor v. Dare, 216 Cal.App.2d 50, 55 (1963), Engalla v. Permanente Medical Group, Inc., 15 Cal.4th 951, 977 (1997).

A misrepresentation may be a false representation of material fact or concealment or nondisclosure of material fact. Lazar v. Superior Court, 12 Cal.4th (1996) at 638.

A misrepresentation is material if a reasonable person would attach importance to its existence or nonexistence in determining their choice of action. Engalla v. Permanente Medical Group, Inc., 15 Cal.4th 951, 977 (1997) citing Rest.2d Torts, § 538, subd. (2)(a). As such, materiality is a question of fact for the jury unless the “fact misrepresented is so obviously unimportant that the jury could not reasonably find that a reasonable [person] would have been influenced by it.” Id.

The materiality standard does not require that the misrepresentation made by the employer be the “but for” cause of the employee’s decision, but merely that the misrepresentation influenced the employee’s decision. Engalla, supra, 15 Cal.4th at 977 citing Rest.2d Torts, § 546.

To establish reliance, an employee must show (1) that they actually relied on the employer’s misrepresentations, and (2) that they were reasonable in doing so. OCM Principal Opportunities Fund v. CIBC World Markets Corp., 157 Cal.App.4th 835, 863–64 (2007).

Because of the extra measure of blameworthiness inhering in fraud, and because, in fraud cases, courts are not concerned about the need for “predictability about the cost of contractual relationships” fraud plaintiffs may recover “out-of-pocket” damages in addition to “benefit-of-the-bargain” damages. Lazar, supra, 12 Cal.4th at 646.

An employee may be able to recover in tort for damages such as loss of security and income from former employment. Agosta v. Astor, 120 Cal.App.4th 596, 606-7 (2004). Further, future lost income may be recoverable if the damages are not speculative or remote; e.g., loss of salary and benefits that would have been earned in former employment. Helmer v. Bingham Toyota Isuzu, 129 Cal.App.4th 1121, 1130 (2005).