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Inducement: Promises made, then broken
“I left a secure, well paid job based on their assurances”
In today’s economic climate, the above statement is becoming more and more of a common experience for many employees. In the search for new talent, employers often turn to head hunters as part of their recruitment strategy. These head hunters and recruiters search for capable talent that often times are already working elsewhere at different organizations.
In an attempt to persuade these candidates to join the organizations, employers offer additional incentives, increased compensation packages, and promises of career advancement. This is often a win-win for both employee and employer! The employee gets an overall better compensation package with the opportunity for advancement and the employer gets new talent to fulfill an experience gap in its organization. But what happens, though, when the employee is dismissed after only a short tenure at the new job?
However, new hires rarely have contractual protections, which means that even if they leave a solid job they can often be terminated easily within the probationary period and given nothing at all. With the employee unable to return to their previous position.
Important for both employees and employers to know is inducing a candidate away from secure employment may have legal implications that affect an employer’s severance obligations to the employee, should the employment relationship come to an end.
What is the Inducement Factor?
Generally, as a baseline, when assessing the reasonable notice period an employee should have been given upon termination of his/her employment, the court looks at an employee’s (1) character of employment, (2) length of service, (3) age, and (4) the availability of similar employment in conjunction with the employee’s experience and training. These factors were set out in the decision Bardal v Globe and Mail Ltd, (1960), 24 DLR (2d) 140 (Ont HC).
Inducement is an additional factor to the classic Bardal factors that may operate to lengthen the notice period awarded by a court. This factor is meant to protect the employee’s reliance and expectation interests arising from the employment negotiations. In the Supreme Court of Canada case Wallace v United Grain Growers Ltd.,  3 SCR 701, at paragraph 85, the Court described the function and purpose of the inducement factor as follows:
In my opinion, such inducements are properly included among the considerations which tend to lengthen the amount of notice required. I concur with the statements of Christie et al supra, and recognize that there is a need to safeguard the employee’s reliance and expectation interests in inducement situations. I note, however, that not all inducements will carry equal weight when determining the appropriate period of notice. The significance of the inducement in question will vary with the circumstances of the particular case and its effect, if any, on the notice period is a matter best left to the discretion of the trial judge.
Impact on Reasonable Notice Entitlement
In the absence of an employment agreement that clearly sets out the terms that will apply in the case of a termination without cause, the common law governs, which puts the determination of the reasonable notice period into the hands of the courts. At this point, whether an employee was induced into accepting the position becomes a fair consideration as to whether the reasonable notice period should be lengthened.
The level of active enticement by an employer using promises of job security, career advancement, greater responsibility and compensation together with the length of time worked in the new job are all factors that affect how much additional time will be added to the notice period. Generally, the stronger the promises made, the greater the benefits, and the shorter the duration of employment in the new position, the more likely it is that a court will significantly increase the notice period.
In Dias v Paragon Gaming EC Co, 2010 ABPC 390, because the Plaintiff was induced to leave secure employment, the Court doubled the notice period awarded. The Plaintiff was targeted by the Defendant employer as a desired employee to work at the new casino it was opening. The Plaintiff had worked for just about a year and a half before being dismissed without cause. The Judge stated that normally in this type of case the notice period awarded should be about 2 months because of the short duration of employment. However, because of the inducement, the Plaintiff was awarded 4 months’ notice.
Another case to note is Rodgers v CEVA, 2014 ONSC 6583. The Plaintiff was awarded 14 months’ notice after working for the Defendant for just under 3 years. The Plaintiff had attended 7 interviews and was even flown to Houston, Texas to meet with the Chief Executive Officer of the Defendant’s global parent company but still he rejected the first offer of employment. Later, the Defendant presented the Plaintiff with a second offer of employment that included a $40,000.00 signing bonus to induce the Plaintiff. This was accepted. The 14-month award amounted to $428,246.00. The Court took into account payments already made by the Defendant and mitigation income received by the Plaintiff and ruled that the Defendant must pay the balance of $345,985.
However, all cases of inducement are not created equal. After an employee has remained in the new position for a significant period of time, it becomes less likely that the inducement factor will largely affect the length of the notice period. How long is too long? That is uncertain and is largely dependent on the facts of the case. Generally, once an employee starts approaching 5 years’ tenure and beyond, it becomes more difficult to have inducement factored in prominently by the courts.
If you were recently let go from your position after being persuaded to leave a secure job, you may be entitled to significant payment in lieu of notice. It is beneficial to have a lawyer review your termination package prior to you signing off on it. Contact Monkhouse Law today for a free consultation.
For more information on how you can make your existing employment agreements more comprehensive or for assistance in creating written employment agreements, contact Monkhouse Law today. Our lawyers are happy to assist you.
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