Employers who are eager to poach top talent could be on a collision course with a potentially expensive legal concept known as “inducement.”
That’s because, when jobseekers are wooed away from stable roles with promises of brighter prospects or better pay, they can later seek a longer notice period if their job is eliminated — even sometimes years after the hiring date, according to Stuart Rudner, a lawyer and mediator and founder of Rudner Law.
“People often get much lengthier notice periods than you would assume,” Rudner said. “They may have only been with your company a short time before they were let go, but if they were induced to leave a secure job, courts will rely on that to increase the notice period, sometimes substantially.”
Inducement comes into play when an employer’s recruiting tactics cross the line from standard hiring into actively persuading — or even “luring” — someone to leave a secure position. While the well-known Bardal factors of age, length of service, character of employment, and availability of similar work are the typical starting points for calculating notice periods, Rudner said employers too often forget other criteria.
“I think a lot of people are really too focused on the Bardal factors,” he said. They forget that there are actually dozens of other factors that courts can consider. And probably the most prevalent is inducement. Many so-called “severance calculators” don’t even mention those factors.”
Long-term risk
The risks of inducement aren’t short term. They can linger far longer than many employers expect, he said — in some cases for a decade or more
“If you let them go in the first year, that’ll be a big factor,” he said. “But what they don’t realize is that it can be a factor for years thereafter.”
Rudner pointed to the Supreme Court of Canada’s seminal ruling in Wallace v. United Grain Growers as a cautionary tale: In that case, Jack Wallace — who was 45 years old — raised concerns about leaving his long-term job. He received such assurances and was told that “if he performed as expected, he could continue to work… until retirement,” the Supreme Court said.
“Wallace is probably the best example of that,” Rudner said. “Inducement was still a factor 14 years after the hiring.”
While a court might not treat a verbal pledge of “you can retire here” as a binding contract, it can see that promise as evidence the employer made sweeping assurances to entice the candidate to come on board, he said.
This issue resurfaced recently in Shelp v. GoSecure Inc., an Ontario case involving an employee who claimed he had been induced by a senior manager who said there was a vacancy at his company.
But because the employee took the initiative to apply — rather than being vigorously pursued or promised future security — the court decided there was no inducement.
“I am unable to conclude the plaintiff was induced or actively recruited to join (the defendant),” the Ontario Superior Court of Justice said. “Rather, he was advised of an opportunity by a… senior manager, a person he knew professionally and he chose to follow up this opportunity.”
“If the individual was actively looking for work, and you can demonstrate they were applying for other jobs, it’ll be harder for them to successfully prove inducement,” said Rudner. “But if you deliberately contact someone for the purpose of convincing them to leave their job, then inducement is going to be easier to demonstrate.”
Recruitment agencies
Many employers will use recruiters to help fill positions, but Rudner said that does not absolve employers from legal risks around inducement should they promise secure employment.
“You can’t insulate yourself by using a third party,” he said. “They’re essentially acting as the agent of the organization, so you are liable for their actions.”
Employment contracts
But what employers can do is use contracts to eliminate — or at least reduce — their exposure. That’s because inducement is a common law concept, said Rudner, and a strong employment agreement is the best line of defence.
“If you have a valid termination clause, the common law is completely irrelevant,” he said.
Other considerations
When scrutinizing for inducement, courts examine the entire hiring process — including who was the first to approach, how many interviews took place, how secure the person’s old job was, and whether they were actively looking and applying to other roles as well, said Rudner.
And while a valid termination clause might be bulletproof in court, it can also turn off a star candidate the employer really wants to hire. In those cases, contracts can be worked to give the employee some assurances of a larger payout should things not work out in the short term.
“When we act for the individual being asked to leave a secure job, we will negotiate a termination clause with a floor,” Rudner said. “It’ll say something like, ‘If we let you go, you’ll be entitled to 12 months of notice, plus one month for every year of service.’”
When both sides agree to that, they effectively bypass arguments over inducement if the relationship ends, he said.
Words matter
Rudner also advised caution in how employers phrase job offers.
“If you basically say, ‘You’ve got a job for life if you come on board,’ you’re landing in the zone of inducement,” he said.
Even if such remarks are made casually and never formalized in writing, they can come back to haunt an employer.
“You can’t use a blanket statement in the contract that says, ‘I acknowledge I was not induced,’ if in reality, you were actively luring the person and making promises. Courts will look at the factual reality.”
From a practical standpoint, documented hiring processes and explicit email records go a long way toward preventing misunderstandings should things deteriorate down the road.
“Document, document, document,” Rudner said. “The more of this that can be captured in emails, the better, or the more that you can send emails summarizing conversations, the better.”
By laying out in writing exactly what was discussed — whether it was an indication of job security or compensation increases — an employer can later show it never overpromised. Conversely, an employee may produce email or text messages showing the opposite.
Probation clauses can also help undercut claims of guaranteed longevity, he said.
“If there’s a probation clause that allows them to be let go in the first few months … that would really suggest that they weren’t being promised secure employment,” Rudner said.
An employer that has a standard multistage hiring process, interviews other candidates, and requires a formal application is likewise less vulnerable than one that essentially snaps someone up on the spot and makes sweeping assurances.
For HR professionals and C-suite leaders navigating Canada’s often tight labour market, it might feel tempting to make grand gestures to land star candidates. While that approach can be a calculated business decision, Rudner said employers must think long and hard about their tactics.
“It can be a very strategic business move to go after your competitors’ top people,” he said. “If you do that, you need to have that strong contract with the strong termination clause to protect yourself.”
For more information about Rudner Law’s Alternative Dispute Resolution, visit https://www.rudnerlaw.ca/alternative-dispute-resolution/. Stuart Rudner can be reached at 416-864-8500 (phone or text) or [email protected].
