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Headhunting risks: Inducements in recruitment can lead to increased liability in dismissals

When attempting to fill a position, especially a key role, employers will often look to recruit employees who are currently in that same (or a similar) role at a different organization and who show great experience or potential.

While “poaching” an individual who is already employed can be beneficial for gaining important experience and talent for the company, there is also some risk to this approach.

Inducement and reasonable notice

When it is the employer who pursues or approaches an individual who is already securely employed by another organization, there may be promises of things such as higher compensation, better career advancement, or greater job security to entice the individual to leave their current job.

However, this type of inducement may result in the employee being entitled to a longer reasonable notice period under the common law (i.e., greater wrongful dismissal damages). As stated by the Supreme Court of Canada in Wallace v United Grain Growers Ltd., [1997] 3 SCR 701, “where the employer had 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 period of reasonable notice will increase (para 83).

Factors in assessing inducement and its impact

Some factors that indicate whether an employee was induced, and the impact of any such inducement on the reasonable notice period are:

Who initiated contact, and the persistence of the contact. If it is the employee who initiated contact and the hiring process by submitting an application or reaching out to the company to see if they were hiring, that would strongly demonstrate there was no inducement. However, if it is the company who reached out first – particularly if they are persistent in pursing the employee – that is an indicator that there may have been inducement.

Whether the employee had been in a secure job. If the employee had been in a secure job (for example, they had been in their previous job for 20 years), that is another indicator of inducement. This factor may also influence the impact the inducement will have on the reasonable notice period. However, if the employee had been unemployed, had only worked for the previous company for a short period of time, or had otherwise been looking to leave their previous employment, those factors would suggest that there had been no inducement.

The promises made during the hiring process and whether they were kept. If a company promises the employee a secure job, long-term employment, or otherwise promises better things than their current job (e.g., higher compensation, seniority bumps, etc.) and then breaks those promises after hiring the employee, that is another indicator of inducement.

The length of the employee’s service at the new company before they were dismissed. An employee’s length of service after they were hired will greatly influence how much impact any potential inducement will have on the reasonable notice period. As an employee’s length of service increases, the impact of inducement decreases. An employee who was induced away from secure employment and then fired shortly after joining the new company may receive a fairly large boost to their reasonable notice entitlement whereas an employee who is dismissed 10 years later may receive no boost at all.

How to minimize the risk of a finding of inducement

Employers can safely avoid the risk of inducement by never being the one to initiate contact and never pursing a potential employee persistently. However, this is not necessarily practical advice for the realities of talent recruitment.

To minimize the risks associated with inducement, during the hiring process employers should avoid making blanket promises of job security or long-term employment and ensure that all promises made are true and can be kept.

An employer will also want to have an employment contract with enforceable probationary period and termination clauses.

An enforceable probationary period clause will demonstrate that there was no reasonable expectation that the new employment was promised to be secure or long-term.

An enforceable termination provision that clearly establishes what an employee is and is not entitled to upon termination (i.e., not entitled to common law reasonable notice), will also assist in preventing any inducement from “bumping up” an employee’s notice entitlement upon termination.

Overall, employers will want to be cautious of making certain promises when attempting to recruit an individual who is already securely employed by another company. However, a properly drafted employment contract can help minimize the risk of inducement when such poaching occurs.

John Hyde is the managing partner at Hyde HR Law in Toronto. He advises management on all aspects of employment and labour law, including representation before administrative tribunals, collective agreement negotiation, arbitrations, wrongful dismissal defence and human rights.