Have You Committed Fraud Lately? – Your omission could turn out to be expensive.

Be wary of job applicants, especially for key positions, asking about your company’s financial well being or asking you for current financial statements.

The Michigan Court of Appeals recently determined that an employer fraudulently induced a job applicant to accept an offer when the employer was financially unstable because it gave the applicant a financial summary of its operations for an earlier period when it was successful. Financial reverses that occurred subsequent to that operating summary were not disclosed.

When the employee was laid off after a year on the job, he sued. A sympathetic jury was allowed to estimate his future lost wages and awarded him $75,000. Although there had been discussions in the pre-employment interviews about how long the job might last (the employer needed someone for a software development project), these discussions were not the basis for the lawsuit.

Some time ago, Michigan courts warned employers that pre-employment discussions about future job security could be used against them by employees who might otherwise have been treated as at-will employees. We presume you are not having these kinds of discussions unless you are using a strong at-will employment agreement. Now, there is a further caution. Do not fail to disclose your weak or unstable financial condition to an inquiring job applicant. If you do, that employee may later claim that he would not have accepted your job offer had he known your true financial picture. Your omission could turn out to be expensive.