Promising the Moon: Risk Management in Employee Recruitment
As an employer in a competitive market, there may be a strong business case to actively recruit top-performing employees from other companies. While there can be clear advantages to attracting talented and qualified employees, an aggressive recruitment strategy targeting workers in otherwise stable employment can also lead to unintended liability.
Inducement
The Ontario courts have acknowledged that where an employer (or recruiter operating on its behalf) persistently and aggressively pursues an employee, promising career advancement, higher pay and/or greater job security, such efforts may cross the line from recruitment and become instead an inducement to join the employer’s operations.
When assessing whether an inducement has occurred, Ontario courts will consider:
the reasonable expectations of the parties;
whether the employee sought out work with the employer;
whether there were assurances of long-term employment;
whether the discussions between the parties amounted to more than the persuasion or the normal “courtship” that occurs between an employer and a prospective employee; and
the length of the employee’s tenure with the employer. See: Firatli v. Kohler Ltd., 2008 CanLII 35266 (ON SC).
Inducement often becomes relevant when the parties’ employment relationship falters and the employer terminates the worker’s employment, potentially resulting in a wrongful dismissal.
In such circumstances, the courts have discretion to consider inducement as a relevant factor (along with other factors including the employee’s age, length of service, and the availability of comparable employment) in assessing the length of the applicable notice period. Generally speaking, where there is evidence of a strong inducement (i.e. the employee was solicited away from long-term stable employment) it will serve to lengthen the notice period that will be awarded.
Employees should be aware that inducement only becomes a relevant consideration in the event that the parties have not otherwise agreed an enforceable contractual termination provision that governs in the event of a without cause dismissal.
Negligent Misrepresentation
Ontario employers should also be mindful of the promises made around the time of hire. It is important for employers to be honest and forthright when representing to a potential employee the types of benefits and advantages that will accompany their proposed employment.
An employer that over-promises and under-delivers may be exposed to additional liability in tort for negligent misrepresentation. Essentially, if an employee relies on a false promise to her detriment in accepting employment, she may have recourse to seek damages for negligent misrepresentation. These types of damages exist outside of the contractual relationship and can be costly. This may prove especially true where an employee is relocating from another jurisdiction to take up the job offer. Accordingly, employers should be cautious in ‘guaranteeing’, for example, a certain career trajectory or annual bonus payment.
Contractual Considerations
A written contract is advisable in all employment situations. When carefully drafted and implemented, a written employment agreement can provide the parties with certainty, which in turn may reduce the risk of potential disputes down the road.
Whether you are an employer looking to recruit a star employee, or a worker being pursued to accept a position with a new employer, it is good practice to address the following in any employment agreement that you may ultimately execute:
Ability to Work: An ability to work clause essentially requires an incoming employee to represent that, in accepting the offer of employment, she is able to perform the requisite duties (which have been clearly specified) and is not subject to any restriction that may prevent her from performing these duties. An obvious example of a potential restriction is an ongoing contractual obligation to a former employer to avoid servicing a certain client.
Clauses of this nature are helpful as they provide new employers with additional protections (and a contractual basis to end the relationship in the event that a worker is found to have misrepresented her abilities in this regard).
Probation Clause: A probation clause provides for a specified period of time during which the employer may assess the suitability of an employee for ongoing employment.
The Ontario courts have made clear that the existence of a probationary clause in an employment agreement is inimical to an inducement of employment. Essentially, probation is a period of tentative employment (during which their tenure is expressly at risk) and is, as such, incompatible with any inducement or promise of long-term employment. See: Nagribianko v. Select Wine Merchants Ltd., 2017 ONCA 540.
Given this legal reality, the inclusion of a probation clause in an employment contract is significant. Employers, accordingly, should strongly consider their inclusion, while incoming employees may wish to either seek a waiver of the same or negotiate for a fair contractual severance entitlement in the event that the relationship is short-lived.
Severance Entitlements: One of the most frequent disputes we see is with respect to the amount of severance an employee should receive. As such (and especially when inducing an employee to leave stable employment and join your operations), it may be advisable to include in the employment agreement a termination provision that guarantees a fair contractual entitlement for the employee in the event that the relationship does not play out as hoped.
Takeaways for Ontario Employers and Employees
Active recruitment of good staff remains a challenge in many industries across Ontario. As such, whether you are an employee working in Ontario or an employer with operations in the province, it makes sense to approach such situations with caution. Employers should be mindful of the potential risks that can accrue when aggressively recruiting a worker from stable employment. Likewise, employees that accept such offers of employment ought to be aware that they are likely forfeiting accrued tenure and security (and as such seek additional assurances).
Both employees and employers should seek the assistance of an experienced employment lawyer in navigating this process and look to reduce to writing details of any agreement, paying careful attention to the obligations and entitlements which will subsequently accrue.
Vey Willetts LLP is an Ottawa-based employment and labour law boutique that provides timely and cost-effective legal advice to help employees and employers resolve workplace issues in the National Capital Region and across Ontario. To speak with an employment lawyer, contact us at: 613-238-4430 or info@vwlawyers.ca.
