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Inducement can be a Factor in Determining Severance Pay

By Matt Lalande in Wrongful Dismissal on March 05, 2020

Inducement can be a Factor in Determining Severance Pay

Can inducement considered as a factor in severance pay?

Yes, in fact, our Supreme Court of Canada has expressly recognized that inducement is a factor to be considered in the reasonable notice analysis. (Wallace v. United Grain Growers Ltd.) The inducement factor comes into play when an employee has left a relatively long term, secure job and is terminated from new employment a short time after being hired.
Inducement may increase the reasonable notice period, but not every inducement will carry the same weight. The effect of inducement:

  • Varies depending upon the circumstances. Each particular case is assessed individually. The significance applied to this factor is not the same from case to case.
  • Is left up to the discretion of the trial judge. There is no definitive guideline as to how much inducement will affect the reasonable notice period. A court could attribute the years of service with the previous employer to the length of notice factor in the subsequent employment.
  • Decreases over time. Inducement may be considered as a factor when the termination of employment occurs very shortly after the employee is hired (within the first two years); however, the significance of this factor diminishes over time.

It’s important to understnd that the inducement factor does not arise every time an employer dismisses a short-term employee who had long, secure service with a prior employer. An employee who willingly leaves his prior employment will not necessarily be induced. To constitute inducement, the new employer’s conduct must go beyond the ordinary degree of persuasion. For example, inducement may be a factor where:

  • The new employer provides a promise of career advancement, greater responsibility, job security and compensation. (Wallace v. United Grain Growers Ltd.)
  • The new employer makes promises of long term job security. (Wallace v. United Grain Growers Ltd  and Robertson v. Weavexx Corp)
  • The employer lures the employee away from his previous employment through the use of a head hunter or executive search organization. (Jackson v. Makeup Lab Inc.)

When is inducement less likely to be found?

Inducement is less likely to be found where:

  • The employee was not employed at the time of hiring.
  • The employee’s prior employment was not secure.
  • The employee’s prior employment was short term.
  • The employee’s prior employment was part time but the new employment was full time.
  • The employee earned substantially less in his prior employment. (Mitchell v. Paxton Forest Products Inc)
  • The employee has been working for the new employer for a significant period of time.
  • The employee was already looking for employment when discussions with his new employer began.
  • The employee applied to the new position through an advertisement.

How can an employer guard against allegations of inducement?

An employer may be able to guard against an allegation of inducement by including a probation clause in the written employment contract. Probationary employment is understood by the parties to be unstable and tentative, and is inconsistent with the promise of long term job security required to prove inducement.

Do you have a question about inducement and wrongful dismissal?

Our employment law firm is based in Hamilton and we serve both employer and employee clients all over Ontario. If you have a question about inducement and wrongful dismissal, call us at 905-333-8888 and we would be happy to schedule a telephone of in-person consultation to discuss your issue.

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