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Selling a Bill of Goods: How Brand Misrepresentation can Lead to Legal Liability for Employers

People at a presentation being sold a bill of goods

This article originally appeared in Lēad Magazine, Issue 15: The Value of Brand Attraction.

By Patrizia Piccolo, BA, LLB, Partner, Rubin Thomlinson LLP

“Employer branding is the perception of qualities that make a company a desirable place to work. Understanding the importance of internal and external employer branding is pivotal in recruiting and retaining top talent”.1

When Misrepresentations about Employer Brand Occur

Recently, I had the pleasure of meeting some individuals who were once very energetic, enthusiastic, creative, driven, and successful. They were pleased with the positions they were in and on an upward trajectory in their careers. As part of that upward trajectory, they had been identified as excellent candidates for “better”, “more financially rewarding,” and “more fulfilling” positions. In fact, they had accepted positions with what they thought were the crème de la crème of organizations.

Unfortunately, the purpose of my meetings with these individuals was to discuss why they have lost their energy, enthusiasm, creativity, and drive, and to discuss the legal issues and remedies that may arise from their situations. They brought to my attention the discussions they engaged in when conducting their due diligence research into the companies that were wooing them. Those discussions typically included promises of greater pay. However, due to the modern practice of impressing upon potential employees the wonderful experience associated with an employer’s brand, the discussions often also revolved around: what makes the company different from others; what a candidate can expect to learn there; the work-life support the company offers; how a candidate will be treated by their manager, their co-workers, the owners, and others in the work environment; the kinds of projects they would be working on; and the likelihood of long-term employment with the organization.

When individuals are identified as desirable candidates, sometimes employers tailor their brand to entice those individuals into an employment relationship. And sometimes, when such enticement is successful, the individual discovers that the representations made were false. In severe cases, the employee discovers that when the representations were made, the employer knew that what they were saying was false. From a human resources perspective, such misrepresentations can produce disgruntled employees who underperform. The individual may even immediately start searching for a different position (perhaps even on company time), and they will also likely seek legal counsel and recourse.

Legal Recourse for Misrepresentations about Employer Brand

Legal recourse against employers can include claims of constructive dismissal and negligent misrepresentation. The law, with respect to the tort of negligent misrepresentation, is described in a 1993 Supreme Court decision2 where the judge established a five-part test as follows:

  1. There must be a duty of care based on a “special relationship” between the representor and the representee;
  2. The representation in question must be untrue, inaccurate or misleading;
  3. The representor must have acted negligently in making the misrepresentation;
  4. The representee must have relied in a reasonable manner, on the negligent misrepresentation;
  5. The reliance must have been detrimental to the representee in the sense that damages resulted.

The case involved negligent misrepresentations made by an employer (an entity who was in a “special relationship” with the potential employee) to induce a person to leave secure employment and join their employ. The plaintiff, a chartered accountant, applied for a position with the defendant to develop a particular line of software and was told that the project was a major one for which the staff would double. However, the plaintiff was not told that there was no guaranteed funding or that the position was subject to budgetary approval. Two weeks after the plaintiff started, the defendant’s management team considered and rejected the funding proposal. The plaintiff received notice of termination in due course. They were later awarded damages for negligent misrepresentation.

Other notable instances of negligent misrepresentation include a case in which a company president gave inaccurate and misleading projections that the plaintiff relied upon in deciding to join the company3, and a case in which an employer’s failure to disclose highly relevant information about the prospects of a thoracic surgery practice cast doubt on representations made to the plaintiff.4

Liability Arising From Negligent Misrepresentation

In yet another notable case regarding negligent misrepresentation5, the Supreme Court of Canada discussed the measure of damages in negligent misrepresentation:

“The plaintiff seeking damages in an action for negligent misrepresentation is entitled to be put in the position he or she would have been in if the misrepresentation had not been made”.

In other words, when a negligent misrepresentation induces a candidate into employment, their position is usually that, had it not been for the negligent misrepresentation, they would not have entered into the employment relationship. For example, an employee could argue that they would have remained with their previous employer and earned a bonus or other incentive. Such rewards are compensation that they forewent because of their current employer’s misrepresentation, thereby entitling them to damages. Also, if a candidate moved to accept employment by an employer who misrepresented themselves, the employer would be responsible for the costs incurred by the employee. Damages awarded against employers in these situations can be significant.

The Takeaway

As noted above, “Employer branding is the perception of qualities that make a company a desirable place to work.”6 In other words, employer brand is synonymous with employer reputation. If the result of employee deception (the deception being the falsities about the workplace or the work) is a very costly, very public lawsuit alleging negligent misrepresentation by an employer, the employer’s entire branding strategy is, in my opinion, all for naught.

Therefore, the key for employers to avoid the negative impact of negligent brand misrepresentation is to present themselves in the most accurate light possible; not to sell a bill of goods.

Endnotes

  1. Haldemann, Alexander PhD and Eiselin, Lucas – sited in: Employer Branding: Winning the Race for the Right People by Molly Davis – June 25, 2013 – published on the Meta Thinking website http://www.metadesign.com
  2. Queen v. Cognos Inc., [1993] 1 SCR 87
  3. Steer v. Aerovox, 1984 49 (NS SC) (Can LII)
  4. Khan v. Vernon Jubliee Hospital, 2008 BCSC 1637 (Can LII)
  5. Rainbow Industrial Caterers v. Canadian National Railway Co., [1991] 3 S.C.R.3 – paragraph 20
  6. Haldemann, Alexander PhD and Eiselin, Lucas – sited in: Employer Branding: Winning the Race for the Right People by Molly Davis – June 25, 2013 – published on the Meta Thinking website http://www.metadesign.com

About Patrizia Piccolo

Patrizia PiccoloPatrizia Piccolo is a partner with Rubin Thomlinson LLP, a boutique law firm specializing in employment law and human rights issues. Patrizia is a trusted advisor to senior executives in transition, and provides strategic advice to both large and small employers and their human resources and management teams. Whether advising an employee or an employer, Patrizia’s practice covers all aspects of the employment relationship from hiring, performance management and workplace restructuring, to termination advice. Patrizia also advises employers on employment-related regulatory issues, including Employment Standards Act, Human Rights Act, Labour Relations Act, and Workplace Safety and Insurance Act compliance.

About Lēad

Since its first issue in 2007, Adecco Canada’s Lēad Magazine has been keeping employers on the cutting-edge of developments, trends, and breakthroughs in workforce management. Featuring articles from some of Canada’s foremost economic, legal, diversity, political, and HR experts, Lēadis an invaluable guide through the dynamic and ever-changing world of employment affairs. To view past issues, please visit our Lēad archive.

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