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Employee / Labor Relations

Can An Employer Wrongfully “Hire” Someone? Case Highlights Potential Pitfalls of the Hiring Process

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chadmoellerA federal jury recently awarded a former Seagate Technology engineer $1.9 million on his claim that he
was wrongfully “hired” by the company.

The case, Vaidyanathan v. Seagate U.S. LLC, No. CV-09-1212 (D. Minn. Nov. 19, 2010), highlights two
valuable considerations for employers:

 

(1) location, location,location – where an employer conducts its business may play the determinative
 role in a case’s nature and outcome; and
(2) the importance of good employee relations practices, including well-documented and
well-supported reasons for hiring, disciplining and terminating every employee.

 

In his lawsuit, Chandramouli Vaidyanathan alleged that after being offered an engineer position with
Seagate in November 2007, he left his job with Texas Instruments in Dallas and moved his entire family
to snowy Minnesota. Nine months later, Vaidyanathan was laid off. Vaidyanathan alleged that Seagate
knew that the position for which he was hired did not actually exist, but falsely represented that it did so
in order to use Vaidyanathan’s credentials to better market one of its divisions to be sold to another
company. Based on this, Vaidyanathan claimed that he was wrongfully hired, in violation of a rather
obscure Minnesota statute – which was enacted in 1913 – entitled “False Statements as Inducement to
Entering Employment.” Vaidyanathan’s case went to trial and the jury agreed with him, to the tune of
$1.9 million.

The Minnesota statute prohibits businesses from knowingly inducing individuals to come to the state for
work through false representations. As for penalties, the statute provides for the recovery of past and
future economic damages as well as attorneys’ fees and costs. The statute is unusual in the sense that
anti-discrimination laws typically prohibit the failure to hire someone, as well as the wrongful discipline
or termination of employees, based on protected characteristics such as race, gender, age or disability.
The Minnesota statute, however, essentially penalizes employers for actually hiring someone and then
employing and paying that person for a substantial period of time, if it can be shown that the hiring was
done fraudulently or under false pretenses.

Vaidyanathan was able to convince the jury that Seagate knowingly misled him about the position that he
was offered. Even though he ended up working for the company and was paid for nine months before he
was laid off, Vaidyanathan claimed that he sustained severe losses in future compensation and benefits.
To boost his claim for damages, Vaidyanathan alleged that his former position with Texas Instruments
was filled and that ongoing technological changes made it difficult for him to stay current in his field.

The Vaidyanathan case serves as an important reminder that an employer must take care in considering
what it represents to a prospective employee about the future of the position for which the individual is
being hired. Although the Minnesota statute at issue in Vaidyanathan is unique, other similar causes of
action, such as common law fraud and negligent representation, are available throughout the country,
meaning that any employee or applicant can bring a lawsuit against an employer claiming that the
employer made misrepresentations about the material terms or conditions of employment and/or
fraudulently induced the individual to accept the position. To minimize exposure to such claims,
employers should carefully plan out their hiring decisions and related communications, and be conscious
of avoiding potentially misleading statements during the interview and employment negotiation process.

If you have any questions regarding this Alert, please contact Chad W. Moeller (312-269-5370), Sonya
Rosenberg (312-827-1076), members of the Neal Gerber Eisenberg Labor & Employment Practice
Group, or any other member of the Group for more information.

 

****

Biography

Chad W. Moeller represents corporations and not-for-profit organizations of all sizes in employment matters in federal and state court litigation, including in non-competition, trade secrets, employment discrimination, wage and hour, and contract matters. Chad counsels employers on preparing non-competition agreements and executing “lift-outs” of competitors’ employees in a lawful manner. Chad also advises employers on a daily basis how to avoid, address and/or remediate employee relations issues.

If you have any questions regarding this Alert, please contact Neal Gerber Eisenberg Labor & Employment Practice Group partner Chad W. Moeller (cmoeller@ngelaw.com, 312-269-5370).

***

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