Desperate for workers? Watch your step (On law)

Be careful of what you — or your representatives — say and promise when attempting to lure a candidate from secure employment

When determining the period of reasonable notice of termination, there are always the factors of length of service, age of employee and availability of similar work to be considered. However, the reasonable notice period can also be extended if the employee was enticed away from secure employment.

The usual test involves assessing whether the enticement goes beyond any ordinary degree of persuasion. Where inducement is found to exist, it can offset an employee’s short service in determining entitlement on termination.

Not inducement when employee comes looking

In McCulloch v. IPlatform Inc., the Ontario Superior Court of Justice considered the circumstances under which “inducement” or “allurement” applies.

Paul McCulloch had been working for Shawk Herzig Somerville Limited for nearly a decade. As a result of the loss of a key customer, McCulloch and his supervisor entered into discussions with IPlatform about leaving their current employer and joining it. IPlatform told both of them it wanted to grow its business and develop a packaging division.

On Oct. 26, 2001, McCulloch received a fax outlining IPlatform’s offer of employment and the following day he received a nine-page employment agreement with a note saying: “We would like to wrap this up tomorrow.” McCulloch signed the agreement, resigned his employment with Shawk Herzig Somerville and started working for IPlatform on Dec. 3, 2001.

Because of financial problems, IPlatform terminated McCulloch’s employment on March 15, 2002, 105 days after his start date. McCulloch sued for 18 months’ notice, relying on what he claimed was inducement by IPlatform.

The court described recruitment as a “dating game where employers and employees both preen themselves, put on their best faces, sometimes overstate themselves and try to look attractive to the other.”

It noted not every move from one employer to another will attract a longer notice period by reason of inducement.

The court found no assurances of long tenure were given. In fact, the evidence was such that McCulloch was able to negotiate himself a lucrative increase in remuneration and confirmed “it was a good offer.”

“Paul McCulloch changed employers to obtain a higher current pay package and to continue to work with his friend,” the court said. “At the age of 54, his focus was not on job security. I find little or no reliance or expectation interest relating to promises of longevity.”

There was uncertainty at the previous employer because of the loss of a customer and McCulloch and his supervisor were looking at their options, including a move to IPlatform. McCulloch was able to negotiate favourable compensation and moved to IPlatform. The court determined the applicable period of reasonable notice was three months.

Inducement brings long notice

More recently, the Ontario Court of Appeal discussed the effect of inducement on the notice period in Egan v. Alcatel Canada Ltd. Mary Egan had worked for Bell Canada for about 20 years, most recently in a senior marketing position. She resigned her employment with Bell to accept a senior management position with Alcatel. She asked for and received a base annual salary of nearly 50 per cent more from Alcatel, which she felt she needed to make up for her pension loss at Bell. She also received a $5,000 signing bonus.

Two of Egan’s colleagues at Bell had previously transferred to Alcatel and were instrumental in her resigning from Bell. Alcatel terminated Egan’s employment after 21 months.

The trial judge concluded Egan had been encouraged by Alcatel and its employees to leave Bell and join Alcatel. The issue for the Court of Appeal was whether Egan had been induced by Alcatel or its representatives from secure employment with Bell Canada.

“(Egan) left a secure position with the Bell family of companies where she held a senior marketing position to become director of global marketing programs, broadband networking division,” the court said. “Her colleagues told her about the ‘tremendous opportunities facing the company’ and a large company like Alcatel provided security.”

The court upheld the trial judge’s decision to award Egan nine months’ notice, despite the fact that Alcatel had employed her for less than 21 months.

What employers can do

In deciding whether there has been inducement, a court will consider not only the statements made by the employer or its agent in the course of the hiring process, but the circumstances surrounding the employee’s departure from the former employer. So what can employers do to minimize the risk of a finding of inducement?

Employers can weaken the inducement argument through the use of employment contracts. Probationary periods and termination provisions can be suggestive of insecure or at least uncertain employment. Furthermore, an employment contract establishes that the contract represents the entire agreement between the parties, there were no representations by the employer or its agent upon which the employee relied in leaving her employment and, in effect, there was no inducement. If the employee was an active participant in the negotiation of the contract, that should be specified in the document itself. Keep all drafts of the employment agreement demonstrating the “back and forth” in the negotiation. Keep detailed notes of the meetings and interviews.

Document everything when using an agency. Where the employer has hired an agency to assist with the recruitment, it should set out in writing the terms of the agreement, the agency’s mandate and the consequences if the agency’s conduct leads to a successful claim against the employer.

Employers must be sensitive to the line between legal inducement and merely “selling” the position and the organization. Don’t overstate the position or its security. Often employees who are leaving a position will note during the interview that they are giving up a lot. Employers should be prepared for this comment and not use this as an opportunity to guarantee the employee security.

For more information see:

McCulloch v. IPlatform Inc., 2004 CarswellOnt 5342 (Ont. S.C.J).

Egan v. Alcatel Canada Ltd., 2006 CarswellOnt 28 (Ont. C.A.).

Michael P. Fitzgibbon is a partner in the labour and employment law group at Borden Ladner Gervais in Toronto. He can be reached at (416) 367-6140 or [email protected].

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