Kathleen McCarthy faced a difficult situation: her employer, a subsidiary of AT & T, was supposedly eliminating her position, and she needed to keep up her healthcare insurance because of a "critically ill" husband. She had two choices: (1) take a buy-out of about $38,770, leave the company and, according to the employer, lose the healthcare insurance; or, (2) continue working at her supposedly eliminated position at 85% of her pay rate up to when she either made $38,770 or found another job in the company, while keeping the healthcare insurance. So, McCarthy chose the latter. She later found out the employer had lied about the loss of the healthcare insurance if she had left employment.
So the company had misinformed McCarthy, and, as a result, she worked essentially for free for about nine months in her supposedly to be eliminated position and then retired. The Sixth Circuit held that McCarthy could make out a claim of fraudulent inducement in McCarthy v. American Publishing Inc, No 12-4510 (August 13, 2014).
A fraudulent inducement claim under Ohio law has five elements:
(1) a false representation concerning a fact or, in the face of a duty to disclose, concealment of a fact, material to the transaction; (2) knowledge of the falsity of the representation or utter disregard for its truthfulness; (3) an intent to induce reliance on the representation; (4) justifiable reliance upon the representation under circumstances manifesting a right to rely; and (5) injury proximately caused by the reliance.” Metro. Life Ins. Co. v. Triskett Ill., Inc., 646 N.E.2d 528, 532 (Ohio Ct. App. 1994).
The Sixth Circuit found the third element -- the employer's intent -- the most difficult. Why would it intentionally make a misrepresentation to McCarthy about the healthcare insurance? What did it stand to gain? The answer was 9 months of essentially free work from McCarthy, since she would have been paid the $38,770 whether she worked or not and, in truth, would (or should) have kept up the healthcare insurance either way. That was enough, the Sixth Circuit ruled, for a rational jury to conclude that the employer had intentionally lied to McCarthy about the healthcare insurance to get her to continued working for free.
Kentucky law recognizes fraudulent inducement claims in the employment context, the best example being Rickert v. UPS, 996 S.W.2d 464 (Ky. 1999).
