It is not uncommon for employers to entice prospective employees with representations about job security, career growth, and compensation. However, when an employer uses such representations to lure an individual away from a stable job, courts may apply the principle of inducement, potentially increasing the employer’s liability. The Ontario Superior Court of Justice’s (“ONSC”) decision in Miller v. Alaya Care Inc. [Miller] serves as a reminder that employers should be mindful of representations made during recruitment, as they may increase the organization’s obligations upon dismissal.

Background

The employee worked as an executive for a technology company for 12 years before being actively recruited by a new organization. The prospective employer offered her the role of Vice President, Client Services, which she accepted due to the greater total compensation package and the employer’s promise that she would have the opportunity to help grow the organization.

However, after just seven months, the employee was dismissed due to a workforce reduction and organizational restructuring. She subsequently filed a claim for wrongful dismissal.

Decision

Wrongful Dismissal and Termination Clauses

The ONSC ruled that the employee was wrongfully dismissed because the termination clause in her employment agreement was unenforceable. The clause violated the Employment Standards Act, 2000 [ESA] by allowing the employer to dismiss her for cause and without notice for a “serious reason”, which did not meet the ESA’s stricter standard of “wilful misconduct, disobedience, or wilful neglect of duty.”

While the employer also provided the employee with an offer letter containing a different termination clause, it was similarly unenforceable because it limited her entitlements upon dismissal to four months’ salary, failing to account for other statutory entitlements, such as benefits and bonuses, as required under the ESA.

As the termination clauses were unenforceable, the employee was entitled to common law reasonable notice.

Reasonable Notice Period

The ONSC awarded the employee 14 months’ notice, offset by the income she earned during the notice period due to the principle of mitigation.

The ONSC determined the employee’s notice period by considering the Bardal factors, including that the employee was 62 years old and worked in an executive role. While she had only worked for the employer for seven months, the ONSC found her 12-year tenure with her previous employer to be a relevant factor.

Based on the principle of inducement, an employee’s notice period may be lengthened if they were induced to leave secure employment. In Miller,the ONSC outlined the following key factors to assess the relevance of inducement:

• The parties’ reasonable expectations;
• Whether the employee sought out work with the new employer;
• Whether the employee was assured long-term employment;
• Whether the discussions between the parties went beyond standard recruitment efforts; and
• The employee’s length of service with the new employer.

In this case, the ONSC extended the employee’s notice period because she was induced to leave her former employer. The ONSC found that the employer engaged in the following conduct:

• Sought out the employee and requested meet the team;
• Communicated that she would help grow the organization;
• Requested the employee to disclose her current compensation so the employer could “lure” her;
• Offered an increased compensation package;
• Revised the employment agreement at the employee’s request; and
• Reassured the employee that the employer would pay for legal representation if her former employer took legal action.

While the employee had expressed dissatisfaction with her former employer, she had not intended to leave before being approached. Accordingly, the ONSC lengthened the notice period based on the employer’s inducement.

Takeaways for Employers

Miller serves as a reminder to employers that their conduct before the start of the employment relationship can impact their obligations when the relationship ends. While wrongful dismissal claims can be costly, the cost to the employer is even greater if they have induced the employee to leave their previous job. Employers can mitigate these risks by adopting the following best practices:

• Be Cautious with Pre-Employment Communications: Employers should refrain from recruitment efforts that effectively “lure” a job candidate away from stable employment, as such conduct may increase termination obligations.
• Address Inducement with Contractual Language: Employers can reduce the risk of a successful inducement argument by including a clause in the employment agreement stating that the employee was not induced to leave a prior role. While such a clause is not determinative, it provides useful evidence of the parties’ understanding at the time of hiring.
• Review Termination Clauses Regularly for Enforceability: A properly drafted termination clause will limit an employer’s costs to the notice prescribed under the ESA. In Miller, the employee would have been owed just one weeks’ notice under the ESA,rather than 14 months of common law notice, if the employment agreement had contained an enforceable termination clause.

This blog is provided as an information service and summary of workplace legal issues.

This information is not intended as legal advice.