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App Developer’s “At-Will” Offer Letter Did Not Defeat Employee’s Labor Code Section 970 Lawsuit
In July 2018, Kevin White and Smule, Inc. discussed the possibility of White working for the company. Smule, Inc. (Smule) develops and markets consumer applications with a specialty in music social applications. Smule told White it had significant problems with its development process, it was not operating efficiently, and it lacked an experienced project manager. Smule wanted White to restructure the company’s project management operations and develop a functional project management team that would enable Smule to grow its business. Smule hoped White could: identify major deficiencies and start bringing incompetent personnel within 30 days; complete a reorganization in one to two years; and develop training protocols and manuals over the next couple of years. Smule indicated that if While could successfully reorganize the project management operations, the need for White’s skills would continue to evolve and his role would expand. White requested a director title. Smule agreed to the title of “lead project manager” and indicated it would revisit the title in one year. White said he was only interested in a secure, long-term position, and Smule said that was exactly what they were offering.
White alleged that Smule’s representations led him to conclude his job was long-term. White then resigned from his employment in Washington and moved his family to the Bay Area. White signed an employment offer that stated: “Smule maintains an employment-at-will relationship with its employees. This means that both you and Smule retain the right to terminate this employment relationship at any time and for any reason. . . This offer letter constitutes our complete offer package. Any promises or representations, either oral or written, which are not contained in this letter are not valid and are not binding on Smule.”
Five months after White began work and only two weeks after he submitted an improvement plan, Smule terminated him on the grounds that his job was being eliminated.
White sued Smule, alleging the company violated California Labor Code Section 970. White alleged that Smule knew its statements to him were false. White alleged Smule merely wanted “to experiment with [him] and to determine what immediate recommendations he would make.” Labor Code Section 970 prohibits employers from inducing employees to relocate and accept employment with knowingly false representations regarding the kind, character, or existence of work, or the length of work. The trial court entered judgment in Smule’s favor finding that as an at-will employee, White unreasonably relied on any representations to the contrary. White appealed.
To win a Section 970 claim, the employee must prove: 1) the employer made representations about the kind or character of work, or how long the work would last; 2) the employer’s representations were not true; 3) the employer knew when it made the representations that they were not true; 4) the employer intended that the employee relies on the representations; 5) the employee reasonably relied on the representations and changed his or her residence for the purpose of working for the employer; 6) the employee was harmed, and 7) the employee’s reliance on the employer’s representations was a substantial factor in causing his or her harm.
The trial court granted Smule’s motion for summary judgment. The California Court of Appeal reversed. The court concluded that an at-will acknowledgment does not, as a matter of law, defeat a Section 970 claim. Even with an at-will provision, an employee can establish that reasonable reliance on an employer’s promises regarding the kind, character, or existence of work the employee was hired to perform. Because Smule failed to produce evidence that White unjustifiably relied on its statements, it was not entitled to judgment.
Further, the court determined that Smule was not entitled to keep its trial court victory on the grounds that White failed to establish either a knowingly false representation, or actual reliance, in White’s opposition to Smule’s motion for summary judgment. Smule did not show that White did not possess, and could not reasonably obtain, evidence that Smule made promises with no intent to perform. While White may have lacked personal knowledge of the intent at issue, that did not conclusively establish that he could not prove such intent. Instead, all of the evidence in the record established that a reasonable trier of fact could infer that Smule never intended to employ someone in the lead project manager position, and wanted nothing more from White than a consultation or improvement plan on how Smule could enhance its operations.
The court also found that Smule could not prove White lacked actual reliance on its representations because the parties did not have adequate opportunity to address that argument in the trial court.
The court found there was a triable issue of fact regarding whether Smule violated Section 970, and reversed the trial court ruling.
White v. Smule, Inc., 2022 WL 503811 (Cal. Ct. App. Jan. 27, 2022).
Generally speaking, most Labor Code sections do not apply to public entities. However, this case demonstrates that it is a bad idea to make promises about long-term employment to an applicant, regardless of whether an applicant later receives an offer of “at-will” employment.