What effect does a misrepresentation, made by an employee during the recruitment process, have on the employment contract? Can an employer terminate an employee for lying during an interview or on a resume?
Generally speaking a misrepresentation made by an employee during the recruitment process may allow the employer to terminate the lying employee and may be used as a defence in a wrongful dismissal case. In some cases the misrepresentation may allow the employer to sue the employee for damages resulting from the misrepresentation.
Whether termination is warranted depends on whether the misrepresentation is “substantial”, “material” or “goes to the root of” the contract ( see Guarantee Co. of North America v. Gordon Capital Corp. (1999) 178 D.L.R. (4th) 1 (S.C.C.)). A material representation is one that has induced or been one of the primary factors in inducing the aggrieved party to enter the contract where he or she might not otherwise have done so.
An employer may sue an employee for damages resulting from the misrepresentation. In Queen v. Cognos  1 S.C.R. 87, the Supreme Court of Canada held that statements made by an employer to an employee during the recruitment process can be the basis for the tort of negligent misrepresentation. The required elements for the tort are:
- there must be a duty of care based on a “special relationship” between the representor and the representee,
- the representation in question must be untrue, inaccurate, or misleading,
- the representor must have acted negligently in making said misrepresentation,
- the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and
- the reliance must have been detrimental to the representee in the sense that damages resulted.
In Leacock v. Whalen, Béliveau & Associés Inc. (1998) the British Columbia Court of Appeal applied the Cognos analysis to statements made by a would-be employee to an employer. At paragraph 5 Southin J.A. said:
When one looks closely at the events leading up to the commencement of hiring, what emerges is a picture of a would-be employee with an exaggerated opinion of his own money making ability, which opinion he imparted to the officers of the appellant, a Montreal private brokerage house with a branch here. They, for their part, were pursuing with blinkers on the idea of adding commodity trading to their lines of endeavor in the stock market. They believed that he was a “hot-shot” with the qualifications to build such a business for them.
In assessing damages, the Court applied the “but for” test and asked, “what would have happened if the misrepresentation had not occurred”. The Court held that the employer would have hired the employee but at a reduced salary.
It should be noted that not all misrepresentations have legal consequence. Misrepresentations relating to the following types of statements will not give rise to the remedy of rescission or a cause of action:
- Intentions – The general rule is that a mere statement of intention (as opposed to a misstatement of fact) is not actionable on the basis that such intention was not carried out. However to state one’s intention as being X, when in fact it is Y, is really a misstatement of fact or a misstatement of intention and is actionable.
- Mere puffing
In conclusion, substantial or material lies made by an employee during the recruitment process can be the basis for an action in negligent misrepresentation.