Inducement and Wrongful Termination: ExplainedIan
In the competitive job market, employees may encounter situations where they are enticed or persuaded by a new employer to leave their current position. This practice, known as inducement, can have significant implications for the employee and the employer. Understanding the concept of inducement and its potential consequences is crucial for both employees navigating their careers and for employers.
In this article, we will explore what employees in Ontario need to know about inducement, including its definition, the legal test, its effect on calculating entitlements, and some tips for employers.
What is Inducement?
Inducement refers to an employer actively recruiting an employee to resign from their current secure job and join their organization, typically through incentives of better pay, job security, promotions, signing bonuses, or other attractive benefits. However, inducement arises when the employee is terminated abruptly after joining the new company. This not only strips employees of job security, but also raises doubts about the assurances made by the company during its recruitment.
The Test for Inducement and Calculating Entitlements
The legal test for inducement considers six non-exclusive factors to evaluate if the employers’ actions amount to inducement:
- The reasonable expectations of the employee and employer
For example, if the employer promises the employee a specific job title or a certain level of responsibility, that influences the employee’s decision to join the company.
- Who initiates the contact between the employer and the employee
If the employer actively seeks out the employee and initiates the recruitment process, it suggests a higher likelihood of inducement.
- Whether there were assurances of long-term employment
If the employer makes explicit promises of job security, including guaranteeing employment for a specified duration or discussing long-term career prospects within the organization, that may be considered inducement.
- Whether the employee did their due diligence into the company before accepting the position
If the employee took reasonable steps to research and investigate the company’s background, culture, financial stability, or reputation before accepting the job offer, it is less likely for inducement to be found.
- The nature and extent of persuasion during the hiring process
If the employer goes beyond typical recruitment efforts, such as offering additional perks and incentives, or making exaggerated claims about the company’s future prospects, that may be considered inducement.
- Length of time the employee remained with the new company
The duration of the employee’s employment with the new company can influence the finding of inducement. If the employee remained employed for a relatively short period of time before termination, it might indicate a stronger case of inducement compared to longer-term employment.
- The nature and character of the employment;
- The age of the employee;
- The length of employment;
- The likelihood of securing similar employment; and
- Other relevant factors.
This means that the length of time the employee spent working for their previous employer before being recruited by the new company can influence the amount of notice period to which they are entitled.
Tips for Employers to Understand Inducement
Companies often engage in direct recruitment strategies to attract talented employees who are already employed elsewhere. However, employers must be mindful of the legal implications surrounding inducement. It is best practice for an employer to reach out to an experienced employment lawyer before contacting any prospective employees.
Employers should implement certain safeguards, such as:
- Conducting at least one formal interview
This shows the employer is attempting to investigate whether the potential candidate is a good fit.
- Including a probationary period clause in the employment contract
This allows the employer to assess the suitability of the employee during an initial trial period before committing to a long-term employment relationship.
- Incorporating explicit provisions in the employment contract to address financial incentives and bonuses
Including a clause that clearly states any financial incentives or bonuses offered are not intended as inducement can help clarify the terms of the employment agreement.
- Including a specific clause in the employment contract to address the issue of inducement
Including a clause where the employee acknowledges that they have not been induced to leave their previous employment can provide further protection for the company against potential claims of inducement.
By taking these steps, employers can potentially reduce their exposure to liability.
Inducement occurs when an employer persuades or entices an employee to leave their secure job with promises of better pay, promotions, signing bonuses, or other benefits, and then terminates the employee shortly after being hired. Assessing whether an employee has been induced is based on a non-exhaustive list of factors, which may entitle employees to additional termination pay.
For employers, it is important to be mindful of the legal implications of inducement and take preventive measures, such as speaking to an employment lawyer during the recruitment process. Seeking legal advice when necessary and maintaining open communication throughout the hiring process can help protect the rights and interests of all parties involved.