Avoiding Negligent Misrepresentation in the Hiring Process

A good employment relationship begins at the hiring stage. In their desire to make a favourable impression, it is natural for both job candidates and employers during the hiring process to put their best foot forward and do everything in their power to avoid negligent misrepresentation.

However, it is important that in their enthusiasm to attract the best candidates, employers do not stray into making representations or promises about the job, such as salary or job conditions, which are untrue, inaccurate or misleading.

Employers should be aware that in doing so, they may find themselves in breach of the Employment Standards Act or even facing a claim in tort for negligent misrepresentation.

Requirements of the Employment Standards Act

The British Columbia Employment Standards Act prohibits employers from making false representations when hiring employees. Specifically, the Act states that an employer must not “induce, influence, or persuade a job candidate to become an employee, to work or to be available for work” by misrepresenting:

• the availability of a position;
• the type of work;
• the wages;
• the conditions of employment.

Under the Act, employees can file a complaint with the Director of Employment Standards if they feel a misrepresentation has occurred in the hiring process. If the complaint is found to be justified, among other remedies, an employer may be required to compensate the employee for wages lost as a result of the misrepresentation.

What is Negligent Misrepresentation?

An employer who gives misleading or false information to a potential employee may also risk incurring liability under tort law. The tort of negligent misrepresentation applies to an untrue, inaccurate or misleading statement or promise made carelessly or without taking reasonable care that the representation is true.

A leading case dealing with negligent misrepresentation during hiring is Queen v. Cognos, [1993] 1 SCR 87. The Supreme Court of Canada indicated that an employee seeking to establish a claim for negligent misrepresentation is required to show that five elements are present:

• a duty of care owed by the employer;
• a representation or statement that was untrue, inaccurate or misleading;
• negligence by the employer in making the statement;
• the employee reasonably relied on the representation;
• the employee suffered harm as a result.

A duty of care is a legal obligation to act with reasonable care based on the existence of a “special relationship” between the parties. A “special relationship” may arise where a party provides information or advice to another, knowing the person receiving the information will rely on it. Such a relationship is typically considered to exist between employers and employees, and is likely to be found where an employer has provided information to a job candidate during the hiring process.

A misrepresentation may be overtly made, for example, by intentionally providing inaccurate information. However, intention to misrepresent is not necessarily required. Liability can also arise through less deliberate conduct, such as by simply neglecting to provide relevant information, or where a person carrying out the hiring is mistaken or misinformed and inadvertently gives wrong information.

Case in point: Feldstein v. 364 Northern Development Corporation

A claim for negligent misrepresentation in the hiring process was successfully made out in Feldstein v. 364 Northern Development Corporation, 2017 BCCA 174.

The employer extended an offer of employment to Feldstein for a software engineering position. Prior to accepting the offer, Feldstein, who had cystic fibrosis, asked about the eligibility requirements for long-term disability coverage under the employer’s benefits plan. The information provided to him led him to believe that he could satisfy the “proof of good health” requirement in the benefits summary by passing a three-month continuous employment waiting period without being ill. Feldstein would not have accepted the job if the benefits plan did not provide him with adequate long-term disability benefits with acceptable eligibility requirements.

When Feldstein subsequently applied for long-term disability benefits, he discovered he was not eligible for the full benefits he had anticipated receiving because he failed to fill out a medical questionnaire upon being enrolled in the benefits program. The trial judge found the employer liable for negligent misrepresentation and awarded Feldstein $83,337 for lost long-term disability benefits and $10,000 for aggravated damages.

On appeal, the decision was affirmed, except for the aggravated damages award. The Court of Appeal found that “it was not controversial that 364 owed Mr. Feldstein a duty of care”, and that Chief Information Officer of 364 who provided the inaccurate information to Feldstein was “operating under an honest but mistaken belief” as to the circumstances that would trigger his entitlement to full LTD benefits. The CIO in fact knew little about the terms of the group benefits plan, but failed to take steps to verify the accuracy of the information he provided. The Court observed:

[66] [The employer’s] duty of care with respect to representations made during pre-contractual negotiations included not only a duty to be honest in making those representations, but also to exercise reasonable care in ensuring that the representations made were accurate and not misleading.

In determining that Feldstein had reasonably relied on the statement made by the CIO, the Court took into account his past employment experience, the trust he placed in the CIO’s hiring experience and knowledge, and the apparent confidence with which the CIO answered Feldstein’s inquiries about the LTD benefits.

Can a subsequent employment contract bar liability for pre-employment conduct?

In Cognos, Iacobucci J indicated that in some cases, the terms of a contract of employment subsequently entered into with the candidate “may play a very important role in determining whether or not, and to what extent, a claim for negligent misrepresentation shall succeed. […] such a contract can have the effect of negating the action in tort and of confining the plaintiff to whatever remedies are available under the law of contract.”

Whether this is the case, however, depends on several factors, including the nature of the misrepresentation, and specific terms of the employment contract. In Cognos, for example, the Court found that the employment contract concluded with the employee had no impact on the employer’s liability for the misrepresentation at issue.

Similarly, in Feldstein, the Court of Appeal held that the “entire agreement” clause in the employment contract was not effective to exclude Feldstein’s claim for the pre-contractual negligent misrepresentation, since no term in the contract addressed the eligibility requirements for long-term disability coverage. The Court also noted the general rule that exclusion clauses will be strictly interpreted against the party seeking to invoke them.

Conclusion

Communications between an employer and prospective employee may affect the relationship for years to come. An employment lawyer has the experience and expertise to advise employers on how to appropriately communicate during the hiring process, and can assist in drafting employment agreements responsive to the needs and expectations of both the employer and employee. Contact one of our lawyers today for a consultation.

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