When the facts support it, particularly after an early termination, an inducement can lead to a meaningful increase in wrongful dismissal damages
It’s so nice to be wanted, isn’t it?
Many employees and executives reading this have been on the receiving end of recruitment efforts by headhunters or employers. Recruitment efforts can range from a message on Linkedin to a full court press courtship like meals and all-expense paid trips to visit with the hiring team.
The legal term for recruitment is inducement, that is, company A induces an employee to jump ship from Company B for a role.
Company A may make a series of promises or representations to lure said employee to accept an offer. The question is, what happens if the promises don’t pan out and the employment relationship ends soon after inducement?
Take for example the recent Ontario case of Miller v. Alaya Care where Justice Carroccia considered the fact surrounding the termination of a 62-year-old vice president of Client Services.
Moyra Miller was working at Wellsky, a competitor for Alaya Care, when she was approached by the company’s co-founder in the fall of 2021. At the time, she had been employed with Wellsky for 12 years and had no intention of leaving.
The court found Alaya Care contacted Miller on Linkedin, introduced her to the CEO by phone, and invited her to the company’s office in Toronto.
The various discussions culminated in a job offer that included an increased base salary, bonus and equity. Miller stood to lose over $400,000 USD in equity when she left Wellsky.
Miller accepted an offer to join AlayaCare in 2022 but was terminated just seven months later with the company citing a reduction in workforce.
At a summary judgment motion, Miller claimed she was induced and that her 12 years at Wellsky should be considered by the court in determining her reasonable notice period.
On this the judge found, in part, “I agree with the plaintiff that although she was only employed by AlayaCare for a short period of time, some credit must be given for the fact that she had 12 years of secure employment in the software-as-a-service health care industry.”
Ultimately, the court awarded Miler 14 months in wrongful dismissal damages.
The moral of the story here is that executives who are sought-after should be mindful of the steps they take when thinking about taking a leap to a new role.
When being recruited, consider the following factors:
Assess what you’re leaving on the table – If taking a new role means you’re leaving behind a bonus, long-term incentive, or commission, consider asking your new employer to cover the difference in a signing bonus;
Previous years of service – When drawing up your new employment agreement, ask your new employer to recognize your previous years of service in the offer letter;
Probationary Periods – If your new offer of employment contains a probationary period, you may not want to take the risk of leaving your current role given the risk of early termination;
Termination Clauses – If your new employment contract contains a termination clause, take steps to understand the implications of it and consider discussing its impact with your new lawyer.
Inducements are traditionally difficult to prove. But, when the facts support it, particularly after an early termination, an inducement can lead to a meaningful increase in wrongful dismissal damages in court.
If you are a sought-after executive looking to take a leap, you may be well served by keeping this article in your back pocket.
Have a workplace problem? Maybe I can help! Email me at sunira@worklylaw.com and your question may be featured in a future column.
The content of this article is general information only and is not legal advice.
Tags: Employment , Recruitment
