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“At-will” Employers Can Still Be Held Liable for Fraudulent Inducement of Contract Claims

Volume 3, Issue 13
September 8, 2004

A recent California Court of Appeals case, Agosta v. Astor, should serve as a reminder to Nevada "at will" employers that they can be held liable is not controlling in the Nevada courts, such prohibitions have long been a part of Nevada's statutes governing labor and industrial relations.

In Agosta, the owner of two San Diego radio stations, Arthur Astor, offered Len Agosta a position as general sales manager of KFSD. At the time, Agosta was employed by Clear Channel, a fact that Astor knew. Agosta declined Astor's initial offer, but ultimately negotiated for employment terms he found acceptable. Agosta insisted on receiving a written offer letter before giving notice to his current employer. Astor provided such a letter, which summarized Agosta's title, base compensation and various other terms of Agosta's compensation. This initial letter did not address the length of Agosta's employment. The day after Agosta gave notice to Clear Channel, he received a second letter from Astor that contained different compensation terms and emphasized the "at will" nature of the employment relationship. Various other material terms of Agosta's employment were also changed just after he commenced working for Astor. Agosta was dismayed and informed Astor that he had recently purchased a home and would have never changed employment had he known that Astor would repudiate their deal.

After less than a month from the day he started work for Astor, Agosta was terminated. It should come as no surprise that Agosta sued. The trial court granted summary judgment in favor of Astor on the basis that Agosta was employed at-will. The Court of Appeal, however, reversed the trial court's ruling and held that an employer cannot lure an employee to enter into an employment contract by intentionally promising compensation terms it never intended to honor and seek to avoid legal liability just because the contract contained an "at-will" provision. As a result, the case has been sent back for trial.

In Nevada, such actions, as well as other deceptive practices, are prohibited by NRS 613.010. This statute imposes both criminal and civil liability on an employer that makes false or deceptive representations, engages in false advertising or creates false pretenses as to the kind of work to be done, the amount and character of compensation to be paid for such work, and the conditions of employment, as well as the existence or non-existence of a strike or other labor dispute. Employers engaging in such conduct are guilty of a gross misdemeanor. They are also subject to a civil suit for all damages suffered by any person as a consequence of such false inducements, including the payment of the person's attorney's fees and court costs.

The Agosta case and NRS 613.010 should serve as a reminder to Nevada employers that they are not protected by the "at-will" doctrine when they offer terms of employment they do not intend to honor once a person begins employment. As a preventative measure, employers should carefully identify the terms and conditions of employment for new employees at the time of the offer of employment, preferably in writing with adequate at-will disclaimers, so there is no confusion, which could later turn into allegations of false pretenses by a discontent employee.

Agosta v. Astor, 120 Cal. App. 4th 596 (Ct. App. 2004).

Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.