Hot on the heels of the UK High Court’s decision in Attrill (see post on 16 May), Reuters reports the same issue arising in the US. This time it is in relation to recruitment rather than retention, but the same principles apply.
A Wall Street arbitration panel ruled last month that Morgan Stanley Smith Barney must pay $5 million to two brokers for making false promises when recruiting them from rival brokerage UBS. Those promises related to upward career progression within specified timescales plus the concomitant financial gain, in particular a promise of a promotion within six months, which was still unfulfilled after 4 years. That commitment was visible from documents within MSSB’s own possession and was both clear and unconditional enough to found a decent breach of contract claim, very much the same problem as sunk Dresdner in Attrill.
Just like retention, recruitment often involves an element of over-selling, whether by the employee of himself or (less often) of life at the company by the recruiting managers. Many such promises by employers relate to intangibles such as morale, ethos and environment, and they are no more enforceable at law than the employee’s wholly false promise at interview that he is a good team player or really calm under pressure. This is not an employment law concept but the application of an old Latin tag, commendatio non obligat, the principle of law which protects used car salesmen and others with a tendency to hype or “sales puffery” from liability should their “good little runner ” turn out not to be. On that basis, there could be no claim arising to a new employee from his would-be employer’s assertion that “it’s like one big family here” if what he actually means is that the working day is riven by arguments, resentment and mutual backstabbing. Have you ever heard of the Borgias? However, if the employer’s promise at interview or via the recruitment agency is clear and its prospective financial consequences ascertainable, then a breach of contract claim could certainly get off the ground.
Your best solution as employer? Obviously you cannot simply tell the unvarnished truth that any issues of progression or remuneration in your company are in the uncaring hands of a faceless group of senior management who could not tell any particular junior employee from a hole in the ground. That would be legally unimpeachable, but not exactly employer-of-choice material. Instead, just make sure that the actual written contract states clearly that its terms override anything which may previously have been said to the employee about pay, title, promotion, resources, etc., and that any such prior representations are of no effect once the contract is signed. Very simple, very effective (unless and until some over-eager manager feels compelled to repeat them post-signing) and very surprising how many employers still do not do it.