Fraud and Misrepresentation in the Workplace

This week’s question comes from Arthur B.

Dear Chris, I was contacted via Linkedin by the Chief Financial Officer of a San Francisco-based start-up.  He offered me an opportunity to join the start-up as a program director with an annual salary of $120,000 plus a $30,000 raise by the end of the year.  I was flattered by the offer but was concerned about job security and the start-up’s financial stability.  The CFO assured me that the position is permanent and long-term and that the start-up is in the midst of receiving a capital injection from an investor.  Based on the CFO’s statements, I uprooted my family and moved from Portland to San Francisco last August.  

At the end of the year,  I did not receive the raise I was promised and instead learned that I was being terminated because my position was being eliminated due to a “restructuring due to an impending acquisition”.  I protested that the CFO assured me that my position was long-term and permanent.  The CFO responded that my position was in fact “at-will”.  I have been unsuccessful obtaining comparable employment.  Do I have a claim for wrongful termination?

Thank you for your question, Arthur.  It can be difficult to establish a cause of action for wrongful termination for employees who were not terminated on the basis of discrimination or retaliation.  However, employees who were enticed to relocate their residence based on representations made about the job that later turned out to be false may have a claim pursuant to California Labor Code section 970, as well as other tort claims such as negligent misrepresentation.

California Labor Code section 970 was enacted in 1937 to protect migrant farm workers.  Experienced farm workers were often offered higher wages to entice them to relocate.  However, once they get there, they learn that the wages would be much lower than what was promised or the hours they would work would be considerably less.  The law therefore recognizes that after spending considerable resources to move and/or turning down other job offers, these workers would have no choice but to accept terms that were different from what they were promised.

Often, experienced farm workers were offered higher wages and/or clean housing to induce them to relocate. Many times these employees would turn down other job offers and spend a lot of money to relocate. However, once they would get there, the job would not be anything like what was promised. For example, their wages would be much lower than what was promised and/or the duration of their job would be much shorter. Many times, because these employees had already spent considerable amounts of time and money, they would have no choice but to accept these less favorable terms.

Today, the statute applies to all classes and types of employment. California Labor Code section 970 prohibits employers from enticing employees to relocate to, from, or within California by falsely representing the:

– Kind, character, or existence of work;

– Length of time work would last;
-Compensation for work;

– Sanitary or housing conditions relating to work;

– Existence or nonexistence of any pending strike, lockout or other labor dispute affecting work.

California Labor Code section 970 is supplemented by sections 971 and 972.  Section 971 provides criminal penalties (fine up to $1,000 and/or 6 months of jail time) against employers who violate section 970, while section 972 provides a for a “private right of action” allowing the employee to bring a civil action as well as an entitlement to recover double damages.  These damages may include but are not limited to moving expenses, rejecting other job offers, loss of income due to inabilities to find another job, sale/purchase of a home, a lease, transportation, buying furniture, etc.

A claim for fraud under the labor code must be filed within one year from the date of the misrepresentation so we recommend that you contact a trial attorney and/or the Department of Labor Standards Enforcement immediately.

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