If you read my blog posts, you know I often use a Taylor Swift reference as a hook. This time, we’re diving right in and getting a little nerdy (while providing important practical advice). In my last post, I wrote about seasonal employment as a factor that extends notice periods; this made me curious about another factor that can have this effect: inducement.
Inducement is when an employer (or recruiter) lures an employee from secure employment to entice them to work for the new company. We’ll discuss the legal test shortly, but in brief inducement captures conduct geared towards convincing an employee to switch jobs and leave their current employer.
Inducement encompasses a wide range of conduct. For instance, simply offering a pay raise could constitute inducement in the right circumstances. On the other end of the spectrum, more aggressive strategies, such as headhunting and targeted recruitment, could also be considered inducement.
Employees who are induced, then subsequently dismissed, are entitled to an extended notice period, similar to how seasonal employment would extend a notice period. As such, employers must exercise caution when recruiting talent – if the candidate is currently employed, there is a risk that convincing them to move is inducement.
Impact of Inducement on the Notice Period
Courts assess four primary factors (commonly known as the Bardal factors) to determine an employee’s notice period:
- The employee’s age;
- Length of service;
- Character of employment; and
- Availability of similar employment.
This list is not exhaustive, and courts often consider additional factors. One common “fifth” factor that courts consider is inducement. To establish that their former employer induced them, an employee must show that the employer’s conduct went beyond ordinary persuasion.
In assessing inducement, courts consider:
- Whether the employer or recruiter made the first move;
- Whether the employee was actively looking for a different job;
- The number of offers made by the employer;
- Offering financial incentives for the employee to move (this could be a simple raise, or an elaborate compensation package);
- Making promises about promotions and career advancement;
- Making representations about job security (e.g.: hiring for the long haul, prepared to commit to the candidate); and/or
- Making the role attractive to the individual candidate.
If inducement is established, courts will extend the employee’s notice period to compensate them for having been induced to leave “secure employment.” A recent decision saw an employee with 2.5 years of service receive a 12 month notice period; the reason is that he had been induced to leave a job he worked at for 27 years.
Inducement: Out of Whack?
You might think that it makes sense to extend the notice period of employees who were induced, then dismissed a relatively short time after. But how long does the inducement period last? Even two and a half years may seem unreasonable. The answer is that it depends.
Some cases have found inducement relevant even after five years, while in Wallace v. United Grain Growers Ltd., a leading decision on inducement, it was relevant 14 years after the fact. In sum, courts have ample discretion to decide whether there is inducement and the degree to which it impacts the notice period. With that in mind, the impact of inducement will generally be lower the longer that the employee is with the new employer, and vice versa.
It’s interesting to consider whether it is appropriate to address inducement by extending the notice period. Reasonable notice is a bridge between jobs and is meant to estimate the time it will take to find comparable employment. However, inducement does not speak to one’s ability to find comparable employment. You could argue that the opposite is in fact more likely, as an employee who has employers go out of their way to recruit them may find new work more readily. Inducement stands in contrast to other factors that extend notice periods, such as seasonal work, and extremely niche skillsets, as these clearly have an impact on an employee’s ability to find new work. Thus, it’s strange to address inducement by extending notice periods.
Perhaps inducement would be better addressed by special damages, not unlike aggravated damages for bad faith. At the end of the day, compensating an employee who was induced also seems to be punishing the employer who induced the employee for presumably falling short on their promises, and dismissing an employee who previously had secure employment.
Under this approach, inducement would not extend the employee’s notice period, but they would be awarded additional damages to reflect the fact they were induced. This would not necessarily impact the final dollar amount substantially but it would make more sense from a logical perspective. The idea would also be consistent with how wrongful dismissal damages have evolved. It wasn’t that long ago that bad faith damages were referred to as “Wallace damages,” the effect of which was to, you guessed it, extend the notice period. Today, bad faith is compensated by special damages, not by extending the notice period.
Practical Advice: Make it Purely Academic
Employers reading the above do not need to worry about inducement if they implement good employment agreements. An enforceable termination clause displacing the employee’s entitlement to reasonable notice makes inducement purely academic. This is because inducement applies to employees who are entitled to reasonable notice at common law. As such, employers operating with good employment agreements can recruit talent as they wish while knowing that they will not be on the hook for inflated entitlements should the employee not be a good fit. In closing, while inducement hits different, it won’t hit at all where there is an enforceable termination provision.
If you’re an employer, we are happy to prepare well drafted employment agreements with enforceable termination clauses. We can also assist in ensuring that they are properly implemented.
If you’re an employee, we would be happy to assist you in determining whether you were induced by your employer, and how that impacts your entitlements. We can also provide strategic advice as you navigate situations such as being approached by recruiters, maneuvering for an exit package, or enforcing your rights.
