Oklahoma Court adopts claim for fraud in hiring
Oklahoma Court adopts claim for fraud in hiring
In Stehm v. The Nordam Group, Inc., 2007 OK CIV APP 94, www.oscn.net/applications/oscn/deliverdocument.asp, employee claimed that he was recruited by Nordam while employed with another company. Employee was concerned about the financial stability of the airline industry, and was told that the company was financially secure due in part to substantial revenue under a specific contract. Based in part on these assurances, Employee quit his job and went to work for defendant/Employer. Plaintiff quickly learned that the specific contract had been terminated and that the person who had assured him of the company’s stability based on that contract was aware of the contract’s termination during the interview process. The trial court granted summary judgment, and the Court of Civil Appeals reversed.
There was no direct Oklahoma precedent for the claim, but the court relied upon a Colorado Court of Appeals case, Berger v. Security Pacific, 795 P.2d 1380 (1990) which found that a claim could be considered viable. Berger recognized an action brought by a terminated employee against the former employer for fraudulent concealment of a substantial known risk that a project for which the employee was being hired would be discontinued in the near future. Berger held the employer had a duty to disclose to the prospective employee facts that "in equity or good conscience should be disclosed." This is generally in line with Oklahoma law on fraud as stated in Varn v. Maloney, 1973 OK 133, 516 P.2d 1328:"It is equally well settled that the concealment of material facts which one is bound under the circumstances to disclose, may constitute fraud." . . . “A duty to speak may arise from partial disclosure, the speaker being under a duty to say nothing or to tell the whole truth. One conveying a false impression by the disclosure of some facts and the concealment of others is guilty of fraud, even though his statement is true as far as it goes, since such concealment is in effect a false representation that what is disclosed is the whole truth.”
The elements for the claim for fraudulent misrepresentation and/or concealment in hiring are (1) the employer misrepresented or concealed a material fact during the hiring process, (2) the employer had knowledge of the falsity of the fact or lacked reasonable grounds for believing it to be true, (3) the employer intended to induce the employee's reliance, (4) the employee justifiably relied upon the misrepresentation, and (5) damages resulted. Since there was some evidence on each of the required elements, and the evidence was disputed, summary judgment was improper.
The court then went one step further and found that the employer’s waiver defense (employee had continued working for 8 months after learning of the claimed fraud) was improper. There was no evidence that the employee ratified his continued employment under new terms or subject to additional benefits, therefore, the waiver defense was not sufficient as a matter of law.
This case is particularly interesting because Oklahoma is an employment at will state. Thus, although employers may fire an employee for any reason or no reason (except for reasons against public policy), the case indicates that employers must be careful in what they say to prospective employees during the interview process.
