False promises made during a pre-hire interview about compensation to be paid to prospective employee proves costly to the employer

Employers, be careful what you have to say about your company’s compensation and benefits during a job interview! Even casual remarks on the subject may lead applicants and other prospective employees to sue if, after coming to work for you, their expectations about compensation have not been met.

A case in point is Helmer v. Bingham Toyota Isuzu, which was decided on May 27, 2005. Helmer, who had been employed for several years as a parts and service manager for a car dealership, interviewed for a similar capacity with Bingham. During his job interview, he told Bingham’s director of parts and service that he needed to earn at least $5,700 per month if he were to work for Bingham. In response, the director allegedly pulled out a financial statement, made some calculations, and told Helmer that had he been employed with Bingham since January of that year, “[he] would have made $70,000 up to that point.” The director neither showed Helmer how he made the calculations nor the documents upon which they were based; however, the clear implication was that Helmer would have been making at least $7,700 per month, based on the nine-month period from January to September, the month of Helmer’s interview.

Helmer left his then current employer and went to work for Bingham. A dispute later developed over his compensation after a number of pay cycles had gone by in which Helmer consistently received less than $5,700. Helmer attempted to resolve the dispute, first with the director and then with Bingham’s controller. These efforts were unsuccessful, and Helmer was terminated. He filed a lawsuit alleging, among other things, a claim for “promissory fraud.” The basis for the claim was that Bingham, in order to induce Helmer to come work for it, had made a promise it had no intention of honoring with respect to his compensation.

A jury found in Helmer’s favor and awarded $450,913 in compensatory damages and $1.5 million in punitive damages, although the trial court reduced the punitive damages award to $675,000. On appeal, Bingham argued that even accepting Helmer’s version of what transpired during his job interview, there was no evidence that Bingham made any specific promise to Helmer about his compensation. The appeals court disagreed. While recognizing that under the law “promises too vague to be enforced will not support a fraud claim any more than they will one in contract,” the court concluded that the statement made by Bingham’s parts and service director during Helmer’s job interview amounted to a promise that if he went to work for Bingham he would be paid a monthly salary of at least $7,700. According to the appeals court, this statement was sufficiently specific and definite to be enforced, particularly because it came from someone occupying a “superior position at Bingham;” therefore, Helmer had a valid claim for promissory fraud.

The Binghamcase is by no means the first case to permit recovery against an employer based on pre-hire promises that allegedly were made but not honored; however, the case provides a sobering illustration of how general discussions of compensation and benefits, made before any contractual understanding of those subjects has been formalized, can give rise to substantial exposure to the company. The court in Bingham upheld a punitive damages award in part because there was evidence from which a jury could conclude that the service and parts director knew that the kind of salary allegedly promised to Helmer during the job interview was unprecedented at the company, which in turn suggested that the director knew that Helmer would never be paid that amount.

Persons wishing further information or who have questions or comments about either this case or any of the cases that have appeared on this website can contact any of the attorneys at Epstein, Turner & Song.