Legal Bulletins

In a 5-2 split decision issued this past July, the Maryland Court of Appeals held that an applicant for a rank-and-file job could bring a claim of negligent misrepresentation in connection with an offer of employment that was withdrawn after it had been accepted, notwithstanding the fact that the employment would have been at-will. Griesi v. Atlantic Gen. Hosp. Corp.,360 Md 1 (2000).

The Facts

James Griesi, a physical therapist and resident of Montgomery County, Maryland, applied for a position with Atlantic General, located in Berlin, Maryland. At the time, the Hospital was relying upon an outside contractor to provide physical therapy services. Following some negotiation, the Hospital's then CEO, Earl Slater, made an oral offer of employment to Griesi. Griesi, who made it known to Slater that he was weighing from other potential employers, accepted the offer. Slater followed up with written offer letter and specified a start date of November 2, 1998. Griesi responded with an unconditional written acceptance.

On November 2, 1998, Griesi reported to the Hospital and met with several members of management. During the meeting, the management officials professed to have no knowledge that physical therapy services were to be changed from its present outside contractor to in-house employee and that Slater, who had since been replaced as CEO, had not consulted them about Griesi's hiring. The management officials conceded that Slater, with the approval of the Board of Directors, probably make the decision to hire Griesi; however, the officials maintained that their approval was required as well. On November 6, 1998, Griesi was advised that the Hospital had decided not to hire him.

Griesi filed suit alleging that Slater, as the Hospital's agent, had negligently represented several facts regarding the Hospital's need for, and desire to employ Griesi. In response to a motion to dismiss, the trial court dismissed Griesi's negligent misrepresentation claim on the ground that Maryland does not recognize the cause of action in employment at-will situations.

The Law

The Court of Appeals reversed the trial court's dismissal, holding that there was a duty to speak with reasonable care where there was a business or professional relationship between the parties or there was a pecuniary interest at stake. Specifically, the Court of Appeals held that a duty to care exists where there is an "intimate nexus," such as contractual privity, between the parties, and that "Maryland has found the equivalent of contractual privity in special relationships consummated during the course of pre-contract negotiations." Likening the employer-employee relationship to a business transaction, the court stated that:

Pre-contractual employment negotiations manifestly require the employer to impart, and the prospective employee to digest, relevant and accurate information concerning the place of employment and the position to be occupied by the employee. A prospective employer has a great stake in obtaining accurate information from his or her potential future employer and an employer reasonably should foresee that negligent misrepresentations of employment information may result in economic harm to the prospective employee.

In reaching its conclusion, the court gave great weight to the fact that the Hospital had exclusive control of "vital and material information necessary for Griesi to fully understand the situation, and that it never disclosed such information to Griesi.

The court declined the Hospital's invitation to find that a duty of care in connection with employment negotiations only applies where high-level executives or fixed term contracts are involved. Characterizing the Hospital's argument as an assertion that that the employment at-will doctrine is "a bar to accountability for what may be its negligent conduct," the court opined that the argument "likely will have a substantial bearing on the amount of any damages, but it has no effect whatsoever on whether [Griesi] has plead a cognizable claim."

In a stinging opinion, the dissent characterized the majority's holding as "nonsensical," since under the majority's reasoning, "had the hospital put Griesi … on the payroll and then terminated him the next day, it may have been insulated from suit." Predicting that "[t]his decision will open the flood gates," as "[a]nyone who applies for an 'at will' position will have a cause of action if not hired, based solely on allegations of misrepresentation," the dissent concluded that "[w]ith the filing of the majority's opinion, the existence of the employment 'at will' doctrine in Maryland has entered its terminal stage."

Conclusion

While the majority opinion has created another path for a rejected applicant to challenge his or her nonselection, even the majority suggests that measure of damages which the plaintiff can recover in such cases will be limited by the fact that the ensuing employment would have been at-will. Moreover, failure to hire claims represent a very small percentage of employment related litigation and that percentage is unlikely to increase during the present period of near full employment.

Only time will tell, however, whether the decision will have the dire impact predicted by the dissent. In the interim, employers should continue the practice of including disclaimers on applications and in job offer letters, disavowing any intent to be bound by oral representations made during the hiring process and, thereby, precluding an unsuccessful applicant from making a showing of reasonable reliance upon any claimed oral representations.