Employers Can Pay a Heavy Price for What they Say in Interviews

A lot is said in an interview, and sometimes it can come back to bite an employer.

A recent decision of the British Columbia Court of Appeal shows the potential consequences for statements made during an interview, especially if it looks like a promise was made that is later broken.

In the case Feldstein v 364 Northern Development Corporation, a prospective employee asked during the interview process about whether he would be eligible to be included in the company’s Long-Term Disability (LTD) plan.  The prospective employee specifically stated that LTD coverage was important to him because he suffered from cystic fibrosis and he expected that he would need to take advantage of disability coverage at some point.

The employer representative, The Chief Information Officer (“CIO”), then provided the prospective employee with a brochure regarding the LTD benefits which contained a ‘proof of good health’ clause.  The employee asked what the ‘proof of good health’ clause meant.  The CIO responded by stating that the prospective employee would qualify for LTD coverage after 90 days of employment.  The prospective employee then accepted the job and became an employee of the company.

The employee later tried to secure LTD coverage and was denied since he did not meet the ‘proof of good health’ requirement.  The employee later sued the employer for lost benefit coverage.

The British Columbia Supreme Court agreed that the employer was responsible for covering the employee for lost benefits.

In making its decision, the court stated that the employer was negligent and misled the employee into thinking that he would be covered for LTD.  The court specifically pointed to the following factors:

• The employer had a duty to be cautious in representations/statements made to the prospective employee because of the nature of the relationship (employer – employee)
• The statement that the employee would be covered was inaccurate/misleading
• The employer was negligent in making this statement (failure to maintain the standard expected of a prudent person in a similar situation – in this case as an employer representative to a prospective employee)
• It was reasonable for the employee to rely on this statement (since it was a statement from the Chief Information Officer of his prospective employer)
• Because of the importance of his health condition at the time of his hiring, the court believed that the employee did in fact rely on the statement of CIO that he would be eligible for LTD coverage, in making his decision to accept employment with the company

The court also did not agree that an “entire agreement” clause in the employment agreement protected the employer from liability.  The clause stated that the employment contract superseded all prior communications, understandings and agreements between the parties.  In deciding that the clause did not protect the employer from liability, the court noted that the entire agreement clause did not explicitly address the matter of benefits or negligence relating to this issue.

The court then awarded the employee with the lost LTD benefits.

This case makes it clear that employers can be held for significant payments in relation to representations made during the hiring process.