Today’s question comes from Irving M. from Ingleside Terrace who asks, “I was living in New York working with a steady job in e-commerce. I was approached by a company here in San Francisco which was a start-up company. The job sounded great and I wanted to move to the Bay Area. Since I have a ton of student loan debt I needed to make sure that the job was legit so I asked lots of questions about their products and financing. I was told that they had raised money from venture capitalists and had been through the angel and seed rounds of financing and were about to close on another round of financing. I was told they had a solid product line and I was convinced to quit my job and move to San Francisco only to realize that the company is not doing well and is cash starved. I wouldn’t have left New York had I known the truth. While the company is running out of money, the guy who hired me and made the company seem so great is very rich. What can I do?”
Irving, this is a situation which we see all too often here in the Bay Area. Employer fraud runs back to the gold rush where people were misled as to their prospects so that a ready supply of cheap labor could be provided.
In the Great Depression, as characterized in John Steinbeck’s novel The Grapes of Wrath, unscrupulous farm owners advertised plentiful work at good wages deceiving the desperate to come to California where they either couldn’t locate employment or, because of the ready supply of labor generated by the fraud, were paid a small fraction of what they were promised. Families, exhausted physically and financially, had no choice but work for whatever wage they could.
As a result of this unscrupulous business practice California passed several worker protection laws now codified in California Labor Code Section 970.
Section 970 states that if you have been fraudulently induced to leave a job for another job that is not as it was represented you can bring a claim for fraud.
The same is true if you have fraudulently been induced to move your residence in reasonable reliance upon a false or misleading promise of employment.
Section 970 states: “No person, or agent or officer thereof, directly or indirectly, shall influence, persuade, or engage any person to change from one place to another in this State or from any place outside to any place within the State, or from any place within the State to any place outside, for the purpose of working in any branch of labor, through or by means of knowingly false representations, whether spoken, written, or advertised in printed form, concerning either:
(a) The kind, character, or existence of such work;
(b) The length of time such work will last, or the compensation therefor;
(c) The sanitary or housing conditions relating to or surrounding the work;
(d) The existence or nonexistence of any strike, lockout, or other labor dispute affecting it and pending between the proposed employer and the persons then or last engaged in the performance of the labor for which the employee is sought.
There are criminal penalties for this conduct provided for in Labor Code 971 which states that any person or agency that violates Section 970 is guilty of neither a misdemeanor punishable by a fine of not less than fifty dollars ($50) nor more than one thousand dollars ($1,000) or imprisonment for not more than six months or both.
Despite these penalties you will not find this to be crime at the top of the SFPD’s list of priorities.
Labor Code Section 972 provides for a “private right of action” allowing you or someone in your position to bring a civil action. A person found to have violated Section 970 may be held liable to the deceived party for double the damages that they have suffered including lost wages, moving expenses and the value of lost benefits (health insurance) as well as compensation for the emotional distress the deception caused.
One can move forward with a civil action without first establishing criminal liability. In addition to the remedies provided for under Labor Code Section 910, there is a common law cause of action for fraud.
Fraud is established when there is: 1) a false or misleading statement of fact; 2) designed to induce reliance; 3) which induced reasonable reliance and 4) caused harm (economic and non-economic).
Damages include not only economic losses but non-economic damages such as emotional distress, anxiety, etc. as swell as potentially punitive damages to penalize the employer.
The problem we have found in situations such as yours is that most of the companies that engage in this activity have run out of money and, therefore, there is no one to recover from. Depending on the role paid by the person who hired you, and the nature of his ownership interest, you may be able to pursue him individually for the fraud.
Find yourself a good trial lawyer to go over the facts with you.