Staff who left secure positions to join you need careful treatment
Remember the executive you lured away from the competition two years ago? If you terminate her employment, and a court finds that you “induced” her to leave her previous job, she may be entitled to significantly more notice than you expect. Furthermore, and perhaps more surprisingly, the same holds true with respect to someone you hired 15 years ago.
In 1997, the Supreme Court of Canada confirmed in Wallace v. United Grain Growers Ltd. that when an employee has been induced to leave previous secure employment, the inducement is a factor to be considered in determining the notice of termination to which he is entitled.
What is most notable about the Wallace decision is that the employee in question was not a relatively recent hire; he had been employed for more than 14 years. This dispels the notion, propounded by some members of the judiciary in previous cases, that inducement is only a factor where an employee is induced to leave a secure job and then terminated shortly thereafter.
While the decision in Wallace attracted a fair amount of attention at the time, it is worth revisiting now as the current economic climate forces companies to downsize. It is particularly relevant to the plethora of companies that recently experienced a period of rapid expansion, at least some of which was achieved through aggressive recruiting.
The “usual” factors to be considered in determining what constitutes reasonable notice of termination were set out in Bardal v. Globe & Mail Ltd. They include the character of employment, length of service, age of the employee and the availability of similar employment. In Wallace, the Supreme Court confirmed this list is not exhaustive and that other factors can be considered based upon the particular circumstances of each case.
Wallace was terminated at the age of 59 after working for the defendant for 14 years. Prior to being hired, he had specifically told the defendant that if he were to leave his current job, he would require a guarantee of job security. In response, the defendant advised Wallace that if he performed as expected, he could work for them until retirement.
He was terminated 14 years later despite having been a top salesperson. The Supreme Court allowed damages equivalent to 24 months’ salary.
It is important to note that the concept of inducement does not apply solely to situations where the employee was approached or pursued by the employer. The particular circumstances of each case must be looked at to determine whether inducement is a relevant factor.
For example, the plaintiff in Isaacs v. MHG International Ltd., while working for a previous employer, submitted his resume to an employment agency. Several months later, the plaintiff accepted a job with the defendant and left what was a relatively secure position.
The court rejected the submission that the trial judge had placed too much emphasis on the “inducement” factor, noting that there was evidence to support the finding that the plaintiff had been lured by the defendant’s promise of career employment. In other words, even if the employee in question was looking for a new job, he can still be found to have been induced to leave his old job based upon promises made by the new employer.
Conversely, the Ontario Superior Court recently heard the case of Easton v. Wilmslow Properties Corp. In that case, the plaintiff alleged she had been induced to leave longstanding employment and was then terminated by the defendant after only two weeks.
However, the evidence was that the plaintiff had expressed an interest in working for the defendant after learning a position was available. There was no evidence of any promises of the variety made in Isaacs, and the court found that there was therefore no inducement.
In Leonard v. Wilson, the court did not find that the plaintiff had been induced to join the defendant’s company, but held that “one must take into account the fact that until June 1986, Mrs. Leonard was in a position that she had held for five years and she left that position to join the (defendant)...She was not unemployed and was not looking for a job.”
The court also referred to the expectation on the part of both parties, perhaps to differing extents, that the plaintiff would be employed by the defendant for the rest of her life.
The employee received six months’ notice, a period longer than the time she actually worked for the company.
Inducement, where it is found to exist, has a significant effect on the amount of notice to which an employee will be entitled. The plaintiff in Leonard had only been employed for four and a half months and was awarded six months’ notice. In Wallace, the plaintiff, with 14 years’ service, received 24 months’ notice. In Isaacs, the Ontario Court of Appeal upheld an award of nine months’ notice where the plaintiff was terminated after only seven months of employment.
It should also be noted that inducement can be found where the plaintiff, instead of being induced to leave a stable job, is induced to leave her own business. Such a claim was advanced in Bureau v. KPMG Quality Registrar Inc., although no actual inducement was found in that case. At no time, however, did the court suggest that a businessperson could not be induced in the same way as an employee.
The impact of a finding of inducement on the length of notice is yet another reason why companies should have new employees sign employment agreements setting out the exact amount of notice to which they will be entitled. By doing so, companies can minimize the possibility that sometime down the road, a court will determine that the employee was induced to leave secure employment and is therefore entitled to an above-average period of notice.
Often, a terminated employee will claim to have been induced and the employer may not have any record of the circumstances of that employee’s hiring. It is therefore quite helpful for companies to make a practice of recording the particular circumstances when a new employee is hired, including any comments the employee may have made about why the person is choosing to leave previous employment. These records may be effective in refuting allegations of inducement several years later.
It is crucial for those involved in hiring and firing to bear in mind the effect that inducement can have upon the applicable notice period. Luring someone away from the competition can be a real boon to a company, but it can also have severe consequences if, for whatever reason, that person must be let go.
Stuart Rudner practises civil litigation and employment law in Toronto with Miller Thomson LLP. For more information contact (416) 595-8672, [email protected] or www.millerthomson.com.
In 1997, the Supreme Court of Canada confirmed in Wallace v. United Grain Growers Ltd. that when an employee has been induced to leave previous secure employment, the inducement is a factor to be considered in determining the notice of termination to which he is entitled.
What is most notable about the Wallace decision is that the employee in question was not a relatively recent hire; he had been employed for more than 14 years. This dispels the notion, propounded by some members of the judiciary in previous cases, that inducement is only a factor where an employee is induced to leave a secure job and then terminated shortly thereafter.
While the decision in Wallace attracted a fair amount of attention at the time, it is worth revisiting now as the current economic climate forces companies to downsize. It is particularly relevant to the plethora of companies that recently experienced a period of rapid expansion, at least some of which was achieved through aggressive recruiting.
The “usual” factors to be considered in determining what constitutes reasonable notice of termination were set out in Bardal v. Globe & Mail Ltd. They include the character of employment, length of service, age of the employee and the availability of similar employment. In Wallace, the Supreme Court confirmed this list is not exhaustive and that other factors can be considered based upon the particular circumstances of each case.
Wallace was terminated at the age of 59 after working for the defendant for 14 years. Prior to being hired, he had specifically told the defendant that if he were to leave his current job, he would require a guarantee of job security. In response, the defendant advised Wallace that if he performed as expected, he could work for them until retirement.
He was terminated 14 years later despite having been a top salesperson. The Supreme Court allowed damages equivalent to 24 months’ salary.
It is important to note that the concept of inducement does not apply solely to situations where the employee was approached or pursued by the employer. The particular circumstances of each case must be looked at to determine whether inducement is a relevant factor.
For example, the plaintiff in Isaacs v. MHG International Ltd., while working for a previous employer, submitted his resume to an employment agency. Several months later, the plaintiff accepted a job with the defendant and left what was a relatively secure position.
The court rejected the submission that the trial judge had placed too much emphasis on the “inducement” factor, noting that there was evidence to support the finding that the plaintiff had been lured by the defendant’s promise of career employment. In other words, even if the employee in question was looking for a new job, he can still be found to have been induced to leave his old job based upon promises made by the new employer.
Conversely, the Ontario Superior Court recently heard the case of Easton v. Wilmslow Properties Corp. In that case, the plaintiff alleged she had been induced to leave longstanding employment and was then terminated by the defendant after only two weeks.
However, the evidence was that the plaintiff had expressed an interest in working for the defendant after learning a position was available. There was no evidence of any promises of the variety made in Isaacs, and the court found that there was therefore no inducement.
In Leonard v. Wilson, the court did not find that the plaintiff had been induced to join the defendant’s company, but held that “one must take into account the fact that until June 1986, Mrs. Leonard was in a position that she had held for five years and she left that position to join the (defendant)...She was not unemployed and was not looking for a job.”
The court also referred to the expectation on the part of both parties, perhaps to differing extents, that the plaintiff would be employed by the defendant for the rest of her life.
The employee received six months’ notice, a period longer than the time she actually worked for the company.
Inducement, where it is found to exist, has a significant effect on the amount of notice to which an employee will be entitled. The plaintiff in Leonard had only been employed for four and a half months and was awarded six months’ notice. In Wallace, the plaintiff, with 14 years’ service, received 24 months’ notice. In Isaacs, the Ontario Court of Appeal upheld an award of nine months’ notice where the plaintiff was terminated after only seven months of employment.
It should also be noted that inducement can be found where the plaintiff, instead of being induced to leave a stable job, is induced to leave her own business. Such a claim was advanced in Bureau v. KPMG Quality Registrar Inc., although no actual inducement was found in that case. At no time, however, did the court suggest that a businessperson could not be induced in the same way as an employee.
The impact of a finding of inducement on the length of notice is yet another reason why companies should have new employees sign employment agreements setting out the exact amount of notice to which they will be entitled. By doing so, companies can minimize the possibility that sometime down the road, a court will determine that the employee was induced to leave secure employment and is therefore entitled to an above-average period of notice.
Often, a terminated employee will claim to have been induced and the employer may not have any record of the circumstances of that employee’s hiring. It is therefore quite helpful for companies to make a practice of recording the particular circumstances when a new employee is hired, including any comments the employee may have made about why the person is choosing to leave previous employment. These records may be effective in refuting allegations of inducement several years later.
It is crucial for those involved in hiring and firing to bear in mind the effect that inducement can have upon the applicable notice period. Luring someone away from the competition can be a real boon to a company, but it can also have severe consequences if, for whatever reason, that person must be let go.
Stuart Rudner practises civil litigation and employment law in Toronto with Miller Thomson LLP. For more information contact (416) 595-8672, [email protected] or www.millerthomson.com.
