## Facts

- Andrew Lazar was recruited by Rykoff-Sexton, Inc. to leave a long-term executive position in New York and relocate with his family to Los Angeles.
- Lazar alleged Rykoff made pre-employment representations that he would have a secure job, receive raises and bonuses, and have long-term advancement opportunities.
- He also alleged Rykoff represented it was financially strong and growing.
- Lazar claimed the representations were knowingly false when made: Rykoff was financially troubled, planning a merger that would make his role unnecessary, and intended to treat him as an at-will employee without honoring the promised compensation and security.
- Relying on these statements, Lazar resigned his job, relocated, and purchased a home in California.
- About two years later, Lazar was denied promised compensation and terminated.
- Lazar sued asserting, among other claims, fraud/deceit and negligent misrepresentation based on the pre-employment statements.
- The trial court sustained the employer’s demurrer without leave to amend as to the tort misrepresentation claims; a writ proceeding followed.

## Issues

1. Whether an employee may plead fraud (including promissory fraud) and negligent misrepresentation based on pre-employment misrepresentations that induced acceptance of employment, notwithstanding the at-will nature of the employment.
2. Whether limits on tort remedies associated with termination-related employment claims bar common-law tort recovery for deceit that induces the employment relationship.

## Decision

- The California Supreme Court affirmed the appellate court’s relief and held the complaint stated causes of action for fraud/deceit and negligent misrepresentation.
- The at-will character of the employment did not, by itself, bar tort claims based on pre-employment misrepresentations.
- Allegations that the employer made promises without present intent to perform were sufficient to plead promissory fraud at the demurrer stage.
- Allegations of misstatements about the company’s current financial condition and prospects were sufficient to plead misrepresentation of existing fact.
- Lazar adequately pleaded reliance (resigning, relocating, buying a home) and resulting damages (economic losses and alleged emotional distress), independent of the later termination.

## Legal Principles

- Fraudulent inducement to enter an employment relationship is actionable in tort even if the employment is at-will.
- Promissory fraud is actionable when a promise is made without a present intent to perform; nonperformance alone is insufficient, but specific allegations of contemporaneous fraudulent intent may satisfy pleading requirements.
- Misrepresentations about a company’s present condition or existing plans can constitute actionable deceit if material, false, and made to induce reliance.
- Restrictions on tort recovery for termination-related employment theories do not immunize an employer from liability for deceit that induces the formation of the employment relationship.
- A fraud plaintiff may seek tort damages proximately caused by the inducement, including out-of-pocket losses and, where properly proved, emotional distress.

## Conclusion

The court held that pre-employment misrepresentations, including promises made without intent to perform, can support fraud and negligent misrepresentation claims even when the resulting employment is at-will, and it allowed Lazar’s misrepresentation-based causes of action to proceed past demurrer.


Lazar v. Superior Ct., 12 Cal. 4th 631, 909 P.2d 981 (Cal. 1996)