Caveat Employer: Recruiters Beware!

If a prospective employee intentionally lies on his resume and gets hired, are the misrepresentations grounds for the employer to rescind the employment contract? According to a recent New York trial court decision, the prospective employee’s misrepresentations are only grounds for rescission if the employer has done its due diligence in checking on that prospective employee’s references and work experiences. Otherwise, the employer will not be justified in relying on the prospective employee’s representations.

Plaintiff, National Medical Health Card, Inc. (“NMHC”), argued, among other things, that defendant Josepha Fallarino’s mispresentations on his resume provided grounds to rescind Fallarino’s employment contract. After a trial, the court held:

“Where sophisticated businessmen engaged in major transactions enjoy access to critical information but fail to take advantage of that access, New York courts are particularly disinclined to entertain claims of justifiable reliance.” * * *

The testimony well demonstrated that NMHC, its recruiter, its interviewers and all of those involved in the interview process failed to ascertain the truth about Fallarino’s employment history though it appears to have been readily available via 10-k filings, background checks and calls to former employers. Savage testified that NMHC had not authorized him to check prior employers. He was only authorized to check references.

* * *

Proof that due diligence would have demonstrated the falsity of Fallarino’s resume is found from the fact that after his firing, NMHC determined to look more closely at it in the apparent hope of establishing a justification for claiming that Fallarino was terminated for cause and bolstering its claim that he was not entitled to the benefits otherwise afforded him under ¶ 5.2 of the Agreement.

Based upon the credible evidence presented demonstrating NMHC’s failure to exercise due diligence in the hiring of Fallarino, the first cause of action to have the Agreement rescinded ab initio must be dismissed.

National Medical Health Card Systems, Inc. v. Fallarino, — N.Y.S.2d —-, 2008 WL 3982691 (N.Y. Sup. Ct, Nassau County, Aug. 25, 2008) (Austin, J.).

[Meredith R. Miller]