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Court Finds At-Will Employee Fails to Plead Fraudulent Inducement

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  • Posted on: Dec 5 2018

Successfully pleading a fraud-in-the-inducement claim in the context of an employment at-will relationship is difficult, if not impossible. This is especially so with regard to promises of future employment. Recently, the Appellate Division, Second Department, reiterated this principle by affirming the dismissal of a fraudulent inducement claim that was predicated on promises of continued employment. Coyle v. College of Westchester, Inc., 2018 NY Slip Op 07699 (2d Dept. Nov. 14, 2018) (here).

Applicable Law

Like most states in the country, New York is considered to be an “employment at will” state.  This means that if there is no written agreement between the employer and employee (such as, a collective bargaining agreement) governing when the employer can fire the employee, the employer has the right to fire the employee at any time for any reason. Smalley v. Dreyfus Corp., 10 N.Y.3d 55, 58 (2008) (here). The Court of Appeals has “repeatedly refused to recognize exceptions to, or pathways around, these principles.” Id.  Thus, when an employee at-will is fired, the employee has no legal recourse even when the termination is arbitrary, unfair or unreasonable.

There are a few exceptions to an “employment-at-will” relationship.  For example, employers cannot discharge an employee in violation of any law that prohibits discrimination.  Additionally, an employer cannot discharge an employee: in violation of the company’s employee handbook; in retaliation for whistleblowing a violation of law to a supervisor or to a public agency; for participation, on his/her own time, in lawful political or recreational activities; in retaliation for filing a Workers’ Compensation or Disability Benefits claim or testifying before the Workers’ Compensation Board; and because of the employee’s absence from work to fulfill a jury duty obligation.  Under any of the foregoing circumstances, an at-will employee may sue his/her employer for damages and/or reinstatement for wrongful termination.

As a general rule, at-will employees may not claim that they were induced to accept their position based on the belief that they would enjoy continued employment (see Montchal v. Northeast Sav. Bank, 243 A.D.2d 452, 453 (2d Dept. 1997)), “even where the circumstances pertain to a plaintiff’s acceptance of an offer of a position rather than his or her termination.” Guido v. Orange Regional Med. Ctr., 102 A.D.3d 828, 831 (2d Dept. 2013).

Where a plaintiff is offered only at-will employment, he/she will generally be unable to establish reasonable reliance on a prospective employer’s representations, an element necessary to the recovery of damages under a fraud-in-the-inducement theory of liability. See Epifani v. Johnson, 65 A.D.3d 224, 230 (2d Dept. 2009); Stone v. Schulz, 231 A.D.2d 707, 708 (2d Dept. 1996).

Coyle v. College of Westchester, Inc.

Background

Coyle involved a typical situation in which an employee is recruited, and agrees, to work for another company.

In December 2013, the plaintiff, Beth Coyle (“Coyle”), who was then employed by DeVry University, was recruited by the defendant, College of Westchester, Inc. (the “College”), to fill a vacant position at the College. Although Coyle expressed concerns about accepting employment without a written contract, she nevertheless did so. Coyle maintained that the College made a number of misrepresentations that induced her to accept the position: namely, that the College was doing well financially, and she would not be separated or laid off without cause or notice.

In February 2014, Coyle commenced her employment with the College as an associate vice president of academic affairs. In August 2015, the College announced that there would be no raises in the upcoming budget, and shortly thereafter, Coyle was “laid off.”

Coyle commenced the action, asserting, inter alia, causes of action alleging fraudulent inducement and violation of Labor Law § 740.

In an order dated May 24, 2017, the Supreme Court granted the defendants’ motion to dismiss the amended complaint. In a subsequent order, dated August 31, 2017, the court granted Coyle leave to reargue her opposition to the dismissal of her fraudulent inducement cause of action, adhered to its prior determination with respect to that claim, and denied her motion for leave to renew her opposition to the dismissal of the cause of action alleging violation of Labor Law § 740. Coyle appealed both orders.

Court’s Decision

The Second Department affirmed.

Regarding the fraudulent inducement claim, the Court found that Coyle did not allege an actionable misrepresentation – that is, she could not claim that she was induced to accept her position based on a promise that she “would enjoy continued employment.” Slip op. at 3. (Citations omitted.) This was especially so since Coyle was an at-will employee.

Moreover, since Coyle could not “allege any injury independent of termination of her employment,” the Court held that “she [could not] recover damages for what is, at most, an alleged breach of contract in the guise of a tort.” Id.

Takeaway

In Murphy v. American Home Prods. Corp., 58 N.Y.2d 293 (1983) (here), the Court of Appeals established the employment-at-will rule discussed above, under which an employer is legally permitted to terminate the employment relationship for any or no reason at all so long as the action is not motivated by “a constitutionally impermissible purpose,” proscribed by statute, or expressly limited by a contract of employment. In Smalley, the Court of Appeals reinforced these principles. 10 N.Y.3d at 58 (noting, “In the decades since Murphy, we have repeatedly refused to recognize exceptions to, or pathways around, these principles.”) (citations omitted) (here).  Based upon the employment-at-will principles, as the plaintiff in Coyle learned, claims seeking recovery for alleged fraudulent inducement in connection with the offer of employment rarely succeed.

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