Friday, January 07, 2011

Ontario Employment Law: Inducement and Reasonable Notice

At common law, when an employee is terminated without cause, he or she is entitled to reasonable notice of this termination or pay in lieu thereof.

The determination of what constitutes reasonable notice in any case is dependent on a number of factors. As noted in a previous post, a judge normally begins with the factors identified by McRuer C.J.H.C. in Bardal v. The Globe and Mail Ltd. (1960), which includes, among other important factors, length of service.

In Wallace v. United Grain Growers Ltd. (1997) 152 D.L.R. (4th) 1 S.C.C., the Supreme Court of Canada addressed an additional factor that is important in determining notice entitlements - whether the employee has been induced to leave previous secure employment.

In Wallace, the Supreme Court explained the concept of inducement as follows:

...many courts have sought to compensate the reliance and expectation interests of terminated employees by increasing the period of reasonable notice where the employer has induced the employee to “quit a secure, well-paying job . . . on the strength of promises of career advancement and greater responsibility, security and compensation with the new organization."

The case of Egan v. Alcatel Canada Inc. is a good example of how a finding of inducement can signficantly increase a wrongfully dismissed employee's notice entitlement.

In that case, a forty-year old woman had been induced to leave a secure, high-paying job at Bell Canada by Alcatel and its employees, two of whom happened to be former colleagues of Ms. Egan's at Bell Canada. While Ms. Egan had been with Bell Canada for twenty years, she was terminated after less than two years by Alcatel, despite the assurances she had received at the time she was recruited from Bell.

In agreeing with the trial judge's finding of inducement on the facts of this case, the Court of Appeal noted:

...she [the plaintiff employee] was encouraged to join Alcatel by Ms. Stott and Ms. Espinosa; both sides anticipated a lengthy term of employment; and she hired on at a substantial increase in salary. Caution must be exercised to avoid a conclusion of inducement in virtually any new hire and while this case may be close to the line, it reaches a level beyond that inherent in every hiring process because the persuasion came from two former colleagues of Ms. Egan at Bell Canada who were long-time friends and who, unknown to Ms. Egan, knew that if they succeeded in getting her to leave Bell Canada, they would receive a substantial bonus. This is far different than a prospective employee being recruited by a head-hunter, who is not a former colleague and long-time friend, and who is known to the employee to be getting paid for his or her efforts.
While Ms. Egan was a short-term employee when she was wrongfully terminated by her new employer, she was awarded nine months of pay in lieu of reasonable notice

While it is clear from Egan that a finding of inducement will not be made lightly and that the significant of inducement will vary with the circumstances of the particular case, there is no question that this a factor that can bear heavily on a trial judge's determination on the amount of reasonable notice owed to a wrongfully terminated employee.

If you have been wrongfully terminated, please contact a lawyer to be advised as to your rights and entitlements.

- Robert Tanha, Toronto

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