We’re all familiar with the idea of corporate headhunters – businesses and consultants dedicated to scouting and hunting for top talent to work for companies who hire these consultants just for that purpose. But whether they hire a third-party provider or handle recruiting themselves, employers in Canada should be aware that there can be a risk if they actively recruit individuals who are still employed with another employer and it doesn’t work out in the end.
A key to business success – particularly when trying to establish a new location in a new market – is to recruit the best talent available. If that talent is working with another company, the employer will probably have to make an extra effort and perhaps sweeten the pot in order to convince the employee to quit their existing job and join the employer. While that kind of inducement can ultimately lead to strengthening the employer’s workforce, it could make it more expensive to sever ties with the employee.
For the purposes of Canadian common law, a recruiting practice is considered inducement if an employer convinces an employee to leave secure employment by actively seeking them out and offering them a new job, or promising better conditions or rewards to help the employee decide whether to make the move.
Why worry about whether a new employee was induced from their previous job? It can become an issue if the employer decides to terminate the employee’s employment. Another important principle in Canadian common law is reasonable notice of dismissal – employer must provide notice or pay in lieu of notice if terminating employment without cause.
Reasonable notice of dismissal
The length of reasonable notice entitlement for an employee dismissed without cause is calculated by what is known as the Bardal factors – factors established by the Ontario High Court in 1960 that relate to how much time a fired employee should need to find comparable employment. The most common Bardal factors are the employee’s age, length of service, character of the employment, and the availability of similar employment with consideration of the employee’s experience and knowledge.
If an employee is successful in a wrongful dismissal lawsuit, some Bardal factors can warrant more consideration than others, but they are all in play. However, if the dismissed employee was induced from secure employment, that inducement can become another factor in the calculation of the notice period that can add on to the length. While some employers might be surprised at the length of reasonable notice entitlement for employees dismissed without cause, it could get even longer if inducement is a factor.
In a 2024 British Columbia case – Ferweda v. Mercer Celgar Limited Partnership, an employer discovered the cost of not sticking with an employee it induced from a good job. A recruiter, on behalf of a sawmill company, contacted a worker about a top management position. The company invited the worker, who was already in a high management position at another sawmill, to tour the facility and stay at a hotel with his wife at the company’s cost. The wooing continued with dinner and travel expenses and, after the worker expressed reluctance, the company increased the salary offer and made promises about better benefits and overtime pay.
The worker relented and left his existing management position for the new one. However, two-and-a-half years later, he was fired as part of a downsizing initiative and provided with five months’ pay in lieu of notice. However, a court determined that the company had gone to great lengths to create an expectation that the position would be “advantageous to him to leave his secure long-standing employment” that would last for a long period of time, and awarded the worker damages equal to 12 months’ pay, despite the worker’s relatively short service.
Inducing a big move
Inducement doesn’t have to be significant to affect the reasonable notice period. In another B.C. case – Tanner v. Great Canadian Gaming Corporation – a worker was dismissed in a cost-cutting move while still on a six-month probationary period. The employer hadn’t actively recruited the worker in the beginning as the worker had been looking for another job, but the worker left a secure job in the US to join the Canadian employer. Given the employer’s encouragement of this big move, along with the fact that the worker had a high level of responsibility and experience, the court found 10 months was an appropriate notice period.
It’s not all bad news for employers, though. In Nagribianko v. Select Wine Merchants Ltd., an Ontario court found that a worker who had been recruited and then fired while still on their probationary period could not have been induced. The court’s reasoning? A reasonable person leaving an existing job to take a position with a clearly set out probationary period knew permanent employment wasn’t guaranteed while the employer evaluated their suitability during the probationary period.
Reducing the risk
So how can employers avoid the risk of inducement adding to the notice entitlement in a without-cause dismissal? As Nagribianko decision demonstrates, setting out a probationary period in the employment contract and indicating that permanent employment isn’t guaranteed until its completion is one way.
It’s also good to remember that the effect of inducement – as with all the Bardal factors – is on the common law reasonable notice period. It’s possible to contract out of the common law entitlement with a well-drafted termination clause in the employment contract, as long as it provides for at least the statutory minimums outlined in employment standards legislation in the relevant jurisdiction.
Headhunting for and recruiting top talent can be exciting and effective way to build up a business but, as is often the case in Canadian employment law, there can be pitfalls ahead when it comes time to ending the employment relationship.