Question: If a company is interested in recruiting someone from another company, what precautions should it take to avoid potential claims of inducement in the future?
Answer: Inducement in this context is presumed to be a claim from an employee around the time her employment is terminated. In this context, inducement arises when an employee is gainfully employed with secure employment and leaves that employment to join a new company. At some point later, the employee is terminated.
If the employee successfully claims she was induced, then the appropriate notice period may be substantially increased to account for the period of employment at the past employer.
Employers should be aware of particular circumstances when recruiting someone from another company. Inducement can cause the past employment to be considered a continuous period of employment for assessing the common law notice period.
To avoid these claims, employers must be attentive from the start of recruitment as to the employee’s circumstances. If the employee has secure employment at a close competitor, then certain precautions should be taken.
First, the recruitment process should not be too aggressive. To assess your risk, consider whether the employee is applying to an open advertisement or has been specifically head-hunted.
Applications are easier to defend against inducement claims than targeted recruitment. When recruiting prospective hires, companies should avoid making grandiose promises about the employment opportunity.
Another point of risk for inducement in the hiring process is signing bonuses and other financial incentives. Any cash provided at this stage should come with the express exclusion from inducement.
Consider withholding these benefits until a certain target is achieved, or attaching them to a discrete reason such as a car allowance.
If signing bonuses are normal for the industry or expected in the particular hiring phase a company is doing, then ensure that nobody from the company makes any representations that the money is offered to induce the person to leave his past employment.
Consider the industry of the hire. The more comparable opportunities that exist in the market, the less likely a claim for inducement could be successful, whereas employees who hold unique roles and have unique experiences may have a greater claim for inducement.
Most importantly, the employment contract must be drafted carefully and purposefully. The contract should have the employee explicitly acknowledge that he was not induced to leave past employment. The choice of the employee should be clear.
The contract will also require a clear termination clause, which should set out a provision to expressly limit the notice period required at termination and exclude the common law entitlement.
The company should be clear and concise in the terms of the contract, ensuring the employee understands the meaning of the termination clause.
Avoid giving advice to a prospective hire regarding his current employment obligations and encourage him to seek independent advice.
It helps to use a third-party recruitment firm to create a degree of separation between your own business activities and the new hire, but if this is not feasible, then exercise caution.
Remember that the risk level is higher with gainfully employed hires making lateral moves into similar positions and industries.
Tim Mitchell practises management-side labour and employment law at Norton Rose Fulbright in Calgary. He can be reached at (403) 267-8225 or email@example.com.
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