Fraud in the Inducement in the Employment Context

North Carolina does recognize a cause of action for employees who fall prey to an employer’s promise to employ without an intent to do so.  However, the plaintiff bears the burden of proving that the employer did not intend to honor its promises regarding employment at the time they were made.

One North Carolina case demonstrates why these kinds of claims are hard hills to climb.  In February 2007, Eli Research, Inc. engaged Lyn Hittle in employment discussions in which Eli offered Hittle an annual base salary of $150,000 and a guarantee of 12 months of employment.  In reliance on Eli’s promises, Hittle resigned her former employer and began employment at Eli in March 2007 as Vice President of Finance.  In July 2007, Eli began to experience cash flow problems.  Consequently, in an effort to save money, Eli terminated the employment of some of its highly compensated employees, including Hittle.

Hittle alleged in her complaint that Eli offered her employment without intending to follow through.  She also alleged that she was employed with Eli for three months before beyond terminated for “financial reasons.”  The Superior Court found it patently inconsistent for Hittle to both allege that Eli did not intend to perform on its promise and that Eli in fact employed Plaintiff and then terminated her for reasons unrelated to its intent.  As a result, the court dismissed Hittle’s claim for fraud in the inducement.  The case is Warren v. Eli Research, Inc., 07 CVS 006306 (N.C. Super. Ct. April 28, 2008).

This case demonstrates that just because an employee gives up other opportunities and spends money moving for a new job doesn’t mean that she will later have a claim against the employer if the relationship just doesn’t work out.  The evidence must show that the employer never really intended to follow through on its promises.  If the employer decides they don’t like an employee on day one (as long as it isn’t for a discriminatory reason), employees generally have no recourse under a theory of fraud.

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