The Michigan Court of Appeals in a 2-1 decision recently affirmed a jury's award of lost wages to an at-will employee who alleged that he was fraudulently induced to accept the employer's offer of employment when it gave him outdated financial information during a job interview. Hord v Environmental Research Institute of Michigan ("ERIM").
During an interview held in September or October of 1992, ERIM gave Mr. Hord a copy of its operating summary for the fiscal year ending September 30, 1991. Mr. Hord and ERIM did not discuss the summary at that time. Because Mr. Hord was interviewing for a new program, ERIM representatives and Mr. Hord discussed the length of time ERIM would be willing to support product development before it became self-sustaining, but there were no definite statements. Mr. Hord was hired in January of 1993.
Sometime between 1991 and 1994, ERIM suffered financially, and in January 1994, Mr. Hord's employment was reduced to 80%, and he was notified of an impending lay off in June of 1994. The next month, Mr. Hord resigned, and later filed an action alleging that ERIM made fraudulent representations regarding its financial position and ability to fund long-range product development. A jury awarded Mr. Hord $175,000. On appeal, ERIM argued that it had not made a material representation to Mr. Hord and that as an at-will employee, Mr. Hord was not entitled to lost wages. ERIM's arguments did not persuade the Court of Appeals.
With regard to the material representation argument, the appellate court said that even though the summary was clearly marked "For Fiscal Year Ending September 30, 1991," ERIM's furnishing of the report to Mr. Hord in 1992 was an implied representation that the summary reflected ERIM's then current financial strength, and it permitted the jury to conclude that ERIM intended that Mr. Hord rely on it. There was also evidence that ERIM knew that it was in a much weaker financial position at the time of the interview than the 1991 summary suggested.
The appellate court also upheld the award of lost wages. In so doing, it distinguished between breach of contract cases, where lost wages are too speculative when there is an at-will employment relationship and tort cases where nominal damages would not provide a meaningful remedy to a defrauded employee and would not deter unscrupulous employers.