Highly desirable employees are often recruited directly by other employers or by head-hunters when they are already employed elsewhere. Often these employees are ultimately induced to join the new employer either by promotion opportunities, job security, salaries, signing bonuses etc. Sometimes for a variety of reasons these new hires do not work out and the new employer subsequently terminates them within a year or two of employment. In these circumstances it is common for the court to find that the employee was induced. The court may in some cases include the entire notice period that would have been applicable for their prior employer as well in calculating the reasonable notice period.

This can create a significant cost for the new employer when they face a claim for inducement that is longer than the period the employee even worked for them. Imagine the scenario where Bob a software executive of 15 years at a company that is 55 years old leaves to join a new company after being headhunted and offered a signing bonus, pay raise etc. The new company ultimately dismisses Bob after 6 months after realizing Bob is not the all-star employee they thought they were hiring. Bob may commence a lawsuit alleging inducement and seek 12-24 months pay.

In Firatli v. Kohler Ltd., 2008 CanLII 35266 (ON SC) Justice Allen clearly outlined the test to determine whether an employee has been induced in paragraph 25. The test for inducement requires a balancing of the following six factors:

• The reasonable expectations of the employee and employer.
• Did the employer seek out the employee or vice versa? If the employer sought out the employee, it is more likely that inducement has occurred than if the employee sought out work with the employer.
• Were assurances made of long-term employment? If assurances were made of long-term employment it is more likely that an inducement has occurred.
• Whether the employee performed due diligence prior to accepting the job. The employee should in an ideal world have received independent legal advice, thoroughly reviewed the company, had representations documented and signed etc.
• Whether the discussions between the employer / employee were more than the persuasion or normal courtship that occurs between an employer and prospective hire. The more an employer attempts to persuade a prospective hire the greater the chance that it will constitute inducement.
• The length of time the employee remained with the new company. Typically, the longer an employee remains employed by the company, the lesser the element of inducement. There are cases in which an inducement has been found to be weakened or non-existent in less than 2 years. See Bishop v. Beefeater (Niagara) Ltd., 2002 CanLII 15789 (ON SC) at paragraph 49.

Where an inducement occurs, the following factors are weighed by the Courts and by Counsel in determining the amount of reasonable notice (sometimes referred to as severance pay) required to be paid:

• Character of the Employment: Higher level employees typically will take longer to find new work than clerical workers and as a result are typically entitled to a longer notice period.
• Age of the Employee: Older employees are entitled to a longer notice period.
• Length of Employment: Longer term employees are entitled to longer notice periods. In the case an inducement occurs the Courts may also utilize the length of time the terminated employee worked with their prior employer. A 2-year employee could be found to be a 20-year employee for notice period calculations if they were employed 18 years with their prior employer prior to the inducement.
• Availability of Similar Employment: The less available similar employment opportunities the longer the notice period.
• The Inducement Which Occurred: The nature and scope of the inducement can increase or decrease the notice period.

The court will balance and weigh these factors and may perform a larger contextual analysis looking at the state of the economy, job market etc. in determining the reasonable notice period where an inducement has occurred. For more information on calculating the reasonable notice period please refer to our “Wrongful Dismissal” article.

Companies frequently headhunt, directly approach and poach employees rather than seek employees through open applications. Often, in order to sway a gainfully employed individual some level of inducement will occur. A company who intends to induce an employee may which to consider speaking with an Employment lawyer about their situation and consider taking some of the following steps: 

• Put a probationary period in the contract. In Nagribianko v. Select Wine Merchants Ltd.,2017 ONCA 540 Nagribianko signed a contract which included a 6-month probationary period. About a week prior to 6 months employment Nagribianko was terminated due to being unsuitable for regular employment. The Ontario Court of Appeal determined that as the termination occurred during the probationary period that Nagribianko was only entitled to statutory notice which was 1 weeks pay. This is particularly relevant in situations where an employee leaves another job as the employer will then have the argument that employee was only hired on a provisional basis and there was no guarantee of long term employment.
• Limit an employee’s entitlement to common law reasonable notice and severance in the employment contract. An employer can limit an employee’s right to common law reasonable notice / severance to the statutory minimums provided in the ESA. The best way to achieve this is by having an employment lawyer carefully draft a contract which limits employee entitlements to the statutory minimums.
• Explicitly state in the employment contract that any financial incentives / bonuses are not an inducement. Often in situations where the courts have found that inducement has occurred there was a financial incentive which influenced the employee to accept the job offer. A properly drafted employment contract can help protect an employer.
• Explicitly state in the employment contract that the employee acknowledges he or she has not been induced to leave their past employment. A properly drafted employment contract including clause(s) denying an inducement occurred can assist in limiting an employer’s potential exposure to a claim of inducement.
• Do not provide advice regarding an employee’s current employer. Do not advise them on how to provide notice, what their obligations are, whether a non compete is valid etc. The potential hire should seek independent legal advice.
• Consider not terminating the employee. Typically, the affect of inducement declines and / or diminishes the longer the employee works for the new company. If the employee was previously employed for a long period of time and may be entitled to a lengthy notice period it may be worth considering not immediately terminating the employee.

Every situation involving inducement is different. Both employees and employers should obtain the services of an employment lawyer to assist them in understanding and protecting their rights.