When an employer deliberately misleads or lies to a prospective employee to induce him or her to accept an offer of employment, the employer can be held liable for negligent misrepresentation. Courts have held that both employers and employees owe a duty of care to each other during the recruitment process. The British Columbia Court of Appeal decision in Feldstein v 364 Northern Development Corporation provided employers with a reminder that negligent misrepresentation during the hiring process can prove to be a costly mistake.
In Feldstein, a prospective employee for an engineering position was misled about the eligibility requirements for the company’s long-term disability benefits plan. Given that the prospective employee suffered from cystic fibrosis, the long-term disability benefits were of critical importance in deciding whether to accept the job. The brochure explaining the benefits plan that was given to Feldstein contained a ‘proof of good health’ clause. Feldstein inquired about the clause given the nature of his health issues. He was assured by the CIO that had interviewed him for the position that Feldstein would qualify for LTD benefits after three months of working for the company. Feldstein accepted the position on this basis and signed an employment contract.
Shortly after accepting the position, Feldstein’s health worsened and his application for LTD benefits was only partially approved. Feldstein was considered eligible for only $1,000 per month in LTD benefits instead of the full coverage $5,000 per month. After applicable deductions, these benefits amounted to $36.56 per month. Feldstein sued the company for negligent misrepresentation.
At trial, the judge found that the company had negligently misrepresented the eligibility criteria for the company’s LTD benefits plan. Feldstein was awarded $83,336.80 in compensation for his lost LTD benefits and an additional $10,000 for aggravated damages. On appeal, the court overturned only the $10,000 in aggravated damages.
The decision emphasizes that employers must be acutely aware of the representations made on behalf of the company by those individuals responsible for recruitment of prospective employees. Employers should be absolutely clear with these individuals that information shared during an interview must be used with caution and verified in order to avoid potentially expensive consequences. Employees should know that they are not necessarily stuck with the consequences of receiving incorrect information during the hiring process.