Caution to Employers: Inducing Someone to Work for You May Increase Severance Payout!

Short-term employees (less than 2-3 years) are generally entitled to 1-3 months’ notice or pay in lieu for employee termination notice periods if terminated without cause, unless there is an employment contract with a termination clause that limits notice. However, when an employee is induced to leave secure employment, this can significantly alter their entitlements under employment law. Consider this scenario:

• Steve has had long-term employment with stable conditions for a reasonable amount of time.
• New Company approaches Steve with better working conditions and induces him to leave his previous job to join them.
• They verbally agree on terms, and Steve joins New Company and leaves his secure employment.
• Nine months later, New Company terminates Steve without cause.

What is Steve entitled to under employment law?

Inducement: Employee Termination Notice Periods Without a Written Contract

Without a written employment contract, Steve’s entitlements for employee termination notice periods are determined by common law notice period inducement principles. The Employment Standards Act requires at least one week’s pay for termination without cause. But under common law, Steve, as an employee who was induced, may be entitled to 1-3 months’ pay in lieu of notice. Courts often award longer notice periods to short-term employees who were wrongfully dismissed after being induced to leave a previous employer, as inducement increases the notice period.

Inducement Case: Younesi v Kaz Minerals Projects B.V, 2021 BCSC 614

Mr. Younesi, an engineer in his 50s or 60s with 20 years of experience, had long-term employment as a project manager in the USA and Vancouver since December 2016. In 2018, KMP headhunted him via LinkedIn, offering a better employment package including better compensation, 22 22-month Vancouver assignment, and more vacation days. These assurances of long-term employment were very compelling. KMP terminated him three months later in January 2019.

The court noted that employee inducement termination notice is a key factor in increasing the common law notice period. Key considerations include:

• Inducement occurs when an employer lures an employee to leave secure employment, increasing the required termination notice.
• Inducement can involve implicit assurances of long term employment or better compensation even without explicit promises.
• Whether inducement occurred depends on the evidence and the employee’s decision to leave their previous job.* The amount of inducement varies by case, considering the inherent risks of changing jobs and the expectations of both parties.
• The trial judge has discretion to determine the amount of notice increase due to employee inducement termination notice.

The judge awarded Mr. Younesi two months’ additional notice due to inducement, given the unique circumstances of the employment relationship.

Other Inducement Cases

• Hooker v. Audio Magnetics Corp. of Canada Ltd.: A one-year employee received 14 months’ pay in lieu of notice due to inducement.
• Murphy v. Rolland Inc.: A short-service employee was awarded eight months’ notice.

These cases show that when an employee is induced to leave a previous employer the length of time the employee was with the new employer does not solely determine their entitlements. Courts consider the inducement and the employee’s reasonable expectations.

Steve and New Company

Since New Company induced Steve to leave secure employment his notice period may be longer than the typical 1-3 months. Based on case law Steve as an employee who was induced may be entitled to 5 or more months of reasonable notice under common law. This reflects the employment relationship’s reliance on the assurances made by New Company and the risks Steve took in leaving his previous job.

Conclusion and Insights

Even a short period of employment can lead to significant employer liability when inducement is present. The traditional “rule of thumb” for notice periods tied to the length of time employed is heavily influenced by circumstances like inducement.

Employers have more financial exposure when terminating induced employees early especially if the employee was wrongfully dismissed. This is why due diligence is important before accepting an offer as employees must weigh the risks of leaving secure employment. But inducement requires more than standard recruitment efforts – it involves specific assurances that shape the expectations of both parties.

For Employers

Employers must exercise caution in the representations made when recruiting employees from long-term employment. A well-drafted employment contract with a clear termination clause limiting severance to Employment Standards Act minimums can mitigate risks. Such a contract ensures common law principles, like employee inducement termination notice, do not apply, reducing potential liability.

For Employees

Employees should document the employer’s promises during hiring. If the new role is presented as secure with better pay and benefits, and termination occurs shortly after, the employee may be entitled to longer notice due to inducement. Do your due diligence before accepting an offer – evaluate the employment relationship and assurances of long-term employment to know your rights if wrongfully dismissed.

Practical Considerations

Employees considering a job change should assess the stability of the new employer and the details of any employment contract. Employers should ensure their recruitment practices don’t create unrealistic expectations of long-term employment. Both parties benefit from clarity in the employment relationship to avoid disputes over employee inducement termination notice.

Call YLaw today to book a consultation. We can help you navigate complex employment law issues, such as employee termination notice periods, protect your rights as an employee, or defend your business in termination disputes in BC.