California Labor Code Prohibits Inducing Workers to Relocate to CA With Misrepresentations

In California, it is illegal for employers to make false representations to prospective employees from out of state in an effort to get the candidates to rely on those misrepresentations and move to the state based on them. In White v. Smule, Inc., Cal. Ct. App., Case No. A161858, the court considered whether a signed at-will employment agreement negated an applicant’s reasonable reliance on misrepresentations made to him about his employment when he moved his family from out of state to California based on them.

Factual and Procedural Background

Smule, Inc. had several conversations with Kenneth White in July 2018 about Smule’s need for an experienced project manager like White to develop a project management team by recruiting, training, and supervising other project managers. The company told White its growth had been inhibited by its lack of a project manager, the company’s operations were inefficient, and it was experiencing development problems. Smule told White it wanted White to join its company to reorganize and develop its project management team to facilitate the company’s growth.

The Vice President of Engineering at Smule, Alan Shang, stated that Smule hoped that White could identify problems within 30 days and begin bringing on competent project managers. He stated that he hoped the process could be completed within one year but understood that it could take up to two years. White told Shang that he wanted to be given the title of director, but Shang told him his title would be the lead project manager and they would discuss the director title after one year. White told Shang that White was only interested in secure, long-term employment, and Shang told him that was what Smule was offering. Shang also told him that Smule would be making an initial public offering (IPO) within the next couple of years and wanted White to make the company more efficient so that the IPO could become a reality.

Based on the representations made to him by Shang and Smule, White resigned from his position in Washington State and moved his family to the San Francisco Bay Area to take the position at Smule. After he had worked for Smule for five months, Smule told him his position had been eliminated and terminated him. White filed a lawsuit against Smule, arguing that the company had made knowing misrepresentations about the longevity of his job and about the scope of the duties he would perform for the company.

Smule filed a motion for summary judgment and argued that White could not show that he justifiably relied on any alleged misrepresentations by Smule or that Smule had made any knowingly false representations to him. It submitted its written employment agreement with White in which he acknowledged he had read and understood it. The employment agreement stated that his employment would be at-will, meaning that he could be terminated at any time and for any reason by Smule. They argued this showed that he could not have justifiably relied on any statements previously made to him about the length or duration of his employment with Smule.

White filed an opposition to the motion. He argued that the misrepresentations that were made to him about the position included the character, kind, and nature of the work for which he was hired and how long it would take to complete that work. He argued that a jury could reasonably find that Smule never intended for White to perform that work and instead intended to transfer those duties to an office it had recently opened in Bulgaria. He did not argue that he was not an at-will employee. Instead, he argued that Shang had made representations that the job would be long-term. He said that he would not have accepted a short-term assignment to quit his former job and relocate his family to a new state unless it was for long-term work.

The trial court granted the motion for summary judgment. It ruled that the employment agreement clearly showed that White was an at-will employee and that he could not rely on any representations that might have been made to him outside of the at-will employment agreement. White filed an appeal of the trial court’s judgment.

Issue: Does an employee’s acknowledgment of at-will employment status prevent a finding of justifiable reliance on representations made about job duration or work duties?

The California Court of Appeal considered whether an employee’s acknowledgment of his or her at-will employment status negated his or her justifiable reliance on any representations made by an employer about the duration of employment or the specific types of duties that the job would include. Smule argued that White’s signature on the at-will employment agreement negated the element of justifiable reliance, so the court should find as a matter of law that summary judgment was appropriate.

Rule: It is unlawful for individuals or companies to make false representations to coerce or induce someone from out of state to move to California for a job about either the duration of the employment or the duties of the job.

Under Cal. Lab. Code § 970, it is illegal for a company or its agent to make false representations to someone from out of state to try to induce them to move to California to accept a job. The types of misrepresentations that are prohibited include those about the length of employment, the existence, character, or nature of the work, the sanitary conditions, and the existence of any strikes or lockouts. The relevant sections involved in White’s appeal included those involving Shang’s alleged misrepresentations about the nature, type, and existence of the job and the duration of employment.

Analysis

The court noted that Sect. 970 was initially passed by the California Legislature to protect migrant workers who might be induced to come to California for work based on false representations made to them by prospective employers. However, the court also noted that the application of the law was not restricted to migrant workers. To prove a claim under Sect. 970, a plaintiff must present evidence proving each of the following elements:

• The defendant made representations to the plaintiff about the nature or type of work or its duration.
• The representations made by the defendant were false.
• At the time the defendant made the representations, he or she knew that they were false.
• The defendant made the false representations to get the plaintiff to rely on them.
• The plaintiff reasonably relied on the false representations made by the plaintiff and moved to California based on them.
• The plaintiff suffered harm.
• The plaintiff’s harm was substantially caused by his or her reasonable reliance on the false representations.

White argued that Smule made false representations to him to induce him to accept employment and move to California through Shang in the following three categories:

• Representations that the Bulgaria office would only assist the San Francisco office instead of replacing the job
• Representations that the work would be long-term
• Representations that Smule needed to hire White as a lead project manager who would recruit, train, and supervise project managers in the San Francisco office and build a project management team

White argued that Smule, through Shang, made misrepresentations to him during the hiring process about the tasks he would perform, the goals Smule expected him to achieve, and how long it was expected to take for him to achieve them. The Court of Appeal found that these misrepresentations dealt with the kind, nature, and existence of the job instead of its duration.

Smule argued that he could not reasonably rely on the misrepresentations made to him because his at-will employment contract negated any reliance he might have made based on them.

The Court of Appeal found that the at-will employment contract did negate White’s reasonable reliance on any misrepresentations made about the duration of his employment. However, it found that it did not negate his Sect. 970 claims about the misrepresentations made to him about the type, kind, and nature of his work.

Conclusion

The court reversed the trial court’s summary judgment order and returned the case for further proceedings.

Talk to an Employment Attorney

If you believe that you were illegally coerced by your employer to move to California based on false representations the employer made about your job, you should speak with an experienced employment attorney at the law firm of Steven M. Sweat, APC. Call us today to schedule a consultation at 866-966-5240.