Most people understand that employment in Oregon, as in most states, is at will, meaning that either the employer or the employee can end the relationship at any time for any reason or no reason at all, absent a contractual, statutory, or constitutional requirement to the contrary. Of course, that last clause provides that there are limits on at-will employment. An employer can’t end the relationship because the employee becomes disabled, or needs to fulfill duty obligations in the armed forces reserves, or files a complaint against the employer, or a myriad of other unlawful reasons. Some plaintiff’s lawyers would argue that the at-will employment doctrine is so riddled with exceptions that it doesn’t really exist. And good employer defense attorneys will advise their clients that, while the doctrine still exists, every termination should be supported by clear, legitimate business reasons – and ideally with good documentation. But it is clear that no employee can have a reasonable expectation of continued employment, since he or she could be fired at any time. But what about an applicant?
Suppose an applicant meets with a hiring manager and, after the interview, the manager shakes the applicant’s hand and says “You’re hired! Come in tomorrow to sign the paperwork.” The applicant has another offer and the hiring manager encourages him to turn it down. The applicant does so and, the next day, shows up at his new employer’s offices. There he is told that they have changed their minds and don’t need him after all. The applicant is devastated because, not only does he not have this job, the other offer he turned down has already been filled. The employer, on the other hand, reasons that it could have fired the applicant anyway on his first day on the job under the at-will doctrine, so where is the harm? The employer argues that, if the applicant has a claim, then how long does an employer have to employ new hires?
The Oregon Supreme Court's Opinion In Cocchiara v. Lithia Motors
Those are the facts presented in Cocchiara v. Lithia Motors, which the Oregon Supreme Court decided on March 7, 2013. In a departure from prior state court cases, the Oregon Supreme Court ruled that the applicant in that situation does have a valid claim and can pursue damages for the lost opportunity.
The technical claims at issue in Cocchiara are promissory estoppel and fraudulent misrepresentation. Promissory estoppel provides a remedy when a person makes a promise that he reasonably should have anticipated would cause the other person to do (or not do) something in reliance on the promise. Enforcement of the promise must be necessary to avoid injustice and the beneficiary of the promise must have reasonably relied on the promise. The Oregon Supreme Court held that the fact that the position was at-will “does not carry with it a conclusive presumption that the employer will exercise that right.” It may therefore be reasonable for an applicant to rely on a promise of employment, depending on the circumstances.
But what damages is the applicant entitled to? Does he get future lost pay and benefits equal to what he would have earned on the job he accepted? Or the job he turned down? For how long, given that he could have been terminated at any time? The Oregon Supreme Court held that the applicant was entitled to try to prove what he would have earned in the job that was offered to him and how long he likely would have remained in that job had he been hired as promised and allowed to start work, although “at-will employment may be a factor that bears on whether the proof is sufficient in a particular case.”
The fraudulent misrepresentation claim turned on the elements of justifiable reliance and damages. The Court’s analysis was the same as for the promissory estoppel claim. The applicant was entitled to put on proof that he reasonably relied on the hiring manager’s representation (for example, by showing that he had been planning to accept the other offer until he was offered the new job). The claim serves an important public policy: “If employers could make misleading statements to prospective at-will employees without liability, business judgments regarding employment would not be protected from deceit. Business judgments regarding at-will employment inherently involve some risk, and a prospective employee (or employer) should be able to evaluate that risk without the interference of fraud.”
What Should Employers Do?
First, if you are not absolutely positive that the job will be available if the applicant accepts the offer, make sure the offer is conditional. Put language in the offer making it clear that, even if the offer is accepted, eventual employment is dependent upon an order being placed, or a background check being cleared, or a contract being awarded, or whatever else may be motivating the new hire. If you make an offer for the same job to more than one candidate, be sure to tell both of them that there is another person in the running and only after you find out who has accepted your offers will you decide who the successful candidate is. Your offer of employment may be conditioned on anything – just make sure the condition is clear.
Second, make sure that your offers are time-limited and subject to withdrawal at any time. Include language like: “This offer will remain open through _____ and is automatically withdrawn if not accepted by that date and time. In addition, this offer may be withdrawn at any time prior to it being accepted.”
Third, train your hiring managers. A promise is a promise, and it doesn’t have to be in writing. Hiring managers should make it clear to an applicant that an offer of employment is subject to approval by a superior, or HR, or whatever other conditions may exist before a new hire actually comes on board.