Thoughts from a Management Lawyer

Be Careful When Drafting Termination Letters

That's the lesson from a recent Ontario Superior Court case. 

The plaintiff was hired by the defendant on November 28, 2005 for the position of full-time receptionist and was promoted to the position of Executive Assistant in 2008 at an annual salary of $36,000.  Her employment was terminated on November 28, 2008 at which time she was presented with a severance package that provided, in part as follows:

You will receive an additional five months pay in lieu of notice of termination as per our obligations under the Employment Standards Act of Ontario.

The Employment Standards Act would have provided the plaintiff with only 3 weeks pay, significantly less than 5 months pay.   The plaintiff signed and accepted the terms of the offer.  A few days later the plaintiff attended at the workplace to return some property of the employer at which time she was advised that there was a mistake in the offer. 

The plaintiff was told that she "... would only be receiving three weeks’ termination pay.  The plaintiff was asked to sign a release which she did not do."

The question was whether there was an enforceable agreement that the plaintiff could enforce?

The Court found that such a contract existed:

The letter represented the employer providing consideration it owed to the employee.  In the absence of any demonstrated intention of the employer to deal separately with its common law obligations, the submission that the letter was intended to deal only with the statutory obligations of the employer cannot stand.  The letter was to be the completion of the contract.  It represented not only the fulfillment of the employer's statutory obligations, but also its effort to conclude its common law responsibility to provide reasonable notice or pay in lieu of that notice.  The acceptance of the letter would represent the completion of all the employer's obligations. ....

So, the lesson is clear.  Take time to review the terms of any termination letter or, for that matter, any offer.  Any contract requires that three things be present (1) an offer, (2) acceptance and (3) consideration.  Someone mentioned to me yesterday the master carpenter's motto "measure twice, cut once".  That can be modified to fit the employment model as well.

Who's keeping Toronto going?

That's what the Globe and Mail asks as the City's municipal workers strike closes in on 2 weeks.  It's an interesting article focusing on the impact of the strike not on the public, the strikers or the city, but on the people and their families that are trying to maintain a level of service through the strike.

Speaking of the Globe, the company and their union have reached a tentative collective agreement that is expected to be put to a ratification vote next week.

"Never let a crisis go to waste."

What a wonderful quote that is.  I wish I could take credit for coming up with it but I can't.  In fact, I lifted  it from a Harvard Business School Working Knowledge article Building Businesses in Turbulent Times and specifically in answer to this question:

Q: Is a recession really the time for a company to make major changes?

A: Change is coming anyway, so leaders need to take control. At HBS, our motto is, "Never let a crisis go to waste." The major dislocations happening in industries around the world give companies a great opportunity to lay the foundation for the future. Because everyone acknowledges the current crisis, they often readily accept restructuring and changes that were not possible in the past—even if change has been needed for some time....

Companies are making changes.  Some drastic others more subtle, but all are trying to do things  that they believe, based on whatever analysis and thinking they've done, will allow them to survive the current crisis and come out the other end with a viable and profitable business.  Mindset is important as companies engage in change.  That mindset, and I will unrepentantly borrow again, is "I'm not just going to survive—I'm going to thrive."

Not a law post, but lots of good information in this article for anyone contemplating change in their business or interested in innovation in these times.

Labour News Dominating the Headlines (Again)

With a recession it's not surprising that labour issues are dominating the news.  As employers, largely in the public sector, try to negotiate away employee gains during collective bargaining many unionized employees are resisting and taking their fight to the picket line. 

Here are some of the stories:

Temperature rising in CUPE strike

Globe union members reject latest contract offer

Striking city workers a convenient target

Organized workers feeling the heat


 

Investigating Human Rights Complaints

The Ontario Human Rights Tribunal in a recent case adopted six factors for assessing the sufficiency of a respondent’s efforts to address allegations of discrimination and harassment:

(i)  the response must be prompt;

(ii)  there must be corporate awareness that the conduct complained of is prohibited;

(iii) the matter must be dealt with seriously;

(iv) there must be a complaint mechanism in place;

(v)  the respondent must act so as to provide a healthy environment; and

(vi) the respondent must communicate its actions to the complainant.

There are a number of earlier cases that also discuss these factors (See Wall v. University of Waterloo (1990), 27 C.H.R.R. D/44, Drummond v. Tempo Paint and Varnish Co. (No. 4) (1998), 33 C.H.R.R. D/175 (Ont. Bd.Inq.) and Abdallah v. Thames Valley District School Board, 2008 HRTO 230 (CanLII), 2008 HRTO 230 (CanLII).) 

Many employees believe that if they come to the employer and say "I'm telling you this in confidence and I don't want you to do anything with this information" that the employer is required to "do nothing".  In fact, the employer must do "something" with the information and that something will involve investigating and getting to the bottom of it. 

PR Battle in Recessionary Times

The National Post has an article What’s the deal with union benefits? that reviews some of the pressures facing unions to hang onto what they've achieved through years of collective bargaining.

In other news, The Windsor Star writes how OFL leader feels 'anger I have never seen' discussing a recent meeting in Amherstburg at which stories of dwindling pensions were discussed.  One employee with 47 years at the time of her retirement in 1998 was faced with the following:

She had what she thought was a good company pension – $2,448.90 a month. The first cut of $507 a month came two years ago. Just recently, she got a notice that her company pension could be cut to as little as $1,000 a month.

These are indeed interesting times for unions and unionized employees.  With unionization rates at around 30%, it remains to be seen how unions will respond to the economic pressures and member concerns. 

Summary Judgments in Employment Disputes

Summary judgment motions can be a highly expeditious and cost effective way of dealing with a variety of employment disputes.  I'd like to discuss this procedure here having regard to a couple of recent decisions.

The Alberta Court of Appeal in Poliquin v. Devon Canada Corporation recently discussed the availability of a summary judgment motion in a wrongful dismissal case. As will be discussed, this case involved the employer bringing the motion for summary judgment.

Summary judgment was discussed, and granted, in the Ontario case of Adjemian v. Brook Crompton North America. In this case, it was the employee who brought the motion for summary judgment. 

Summary judgment is available under the Ontario Rules of Civil Procedure.  There are really two summary judgment rules, one for "regular" lawsuits (Rule 20) and the other Simplified Rules (Rule 76) in respect of claims that are less than $50,000. 

Rule 20 provides as follows:

20.01  (1)  A plaintiff may, after the defendant has delivered a statement of defence or served a notice of motion, move with supporting affidavit material or other evidence for summary judgment on all or part of the claim in the statement of claim.

(2)  The plaintiff may move, without notice, for leave to serve a notice of motion for summary judgment together with the statement of claim, and leave may be given where special urgency is shown, subject to such directions as are just.

(3)  A defendant may, after delivering a statement of defence, move with supporting affidavit material or other evidence for summary judgment dismissing all or part of the claim in the statement of claim.

Rule 76 provides as follows:

76.07(9) The presiding judge shall grant judgment on the motion unless,

(a)  he or she is unable to decide the issues in the action without cross-examination; or

(b)  it would be otherwise unjust to decide the issues on the motion.

The test for a summary judgment is less stringent under rule 76.07 (9) than the test for a summary judgment for a normal action under Rule 20 (see Adjemian v. Brook Crompton North America). 

The Court in Adjemian held that the more stringent test under Rule 20 was met and, of course, the test under Rule 76 was met as well.  According to the Court:

It is my conclusion that: (a) there is no genuine issue for trial;  (b) I am able to decide the issues in the action without cross-examination; and (c) it would not be otherwise unjust to decide the issues on the motion.

The employer's argument that there were genuine issues for trial, specifically the plaintiff's mitigation efforts and the character of her employment, were rejected by the Court.  The Court accepted the employer's characterization of Ms. Adjemian's employment and moved on.  In terms of mitigation, the Court commented that:

There is overwhelming evidence that Ms. Adjemian had made and continues to make reasonable efforts to mitigate her loss. Brook Crompton wishes to cross-examine her to establish that she could have done more, but that is not a genuine issue for trial because mitigation need not be perfect, it need only be reasonable, and on this motion for summary judgment, Brook Crompton has not remotely shown that Ms. Adjemian’s efforts to mitigate her losses were not reasonable. 

The Court granted judgment in favour of Ms. Adjemian and determined that she was entitled to a reasonable notice period of 16 months less what had already been paid to her. 

The Court noted, though, that "her judgment has come so quickly that it comes during the period in which she continues to have an obligation to mitigate."  In these circumstances, the Court imposed a "trust requiring her to account for any mitigatory earnings."  This was similar in approach to Bullen v. Proctor & Redfern Ltd. (where the court reluctantly concluded that it did not have jurisdiction to "jurisdiction to impose periodic payments ... such an order would be logical and desirable in circumstances such as these" had the legislature conferred jurisdiction on the Court to do so.) and Correa v. Dow Jones Markets Canada Inc..  

Lest it be felt that summary judgment is available in every wrongful dismissal action, the following comments of Justice Malloy in Bullen v. Proctor & Redfern Ltd. are instructive:

Clearly, not every wrongful dismissal action is appropriately dealt under Rule 20. However, the summary judgment procedure will often be appropriate in wrongful dismissal actions particularly where there is no allegation of cause for dismissal and where the parties are in agreement on the underlying facts pertaining to the relevant factors to be taken into account in determining the appropriate notice period…

In Garden v. Apotex Inc. the Ontario Court of Appeal held that the case was not one where summary judgment was available because the case, at its core, would involve the assessment of conflicting evidence.  As relates to credibility, the Court of Appeal in Gutierrez v. Tropic International Ltd. commented:

The principles governing motions for summary judgment are well-established.  Summary judgment may only be granted where there is no genuine issue for trial, the proof of which lies upon the moving party. The role of a motions judge on such a motion is centred on the threshold question of whether a genuine issue exists requiring a trial. The determination of credibility issues, the weighing of conflicting evidence, the making of factual findings and the drawing of factual inferences, other than where only one inference is reasonably available, are matters reserved for the trier of fact.  .... In order for a motion for summary judgment to be defeated based on one or more credibility issues, the credibility issues must be genuine. Where the evidence demonstrates that there is no genuine issue of fact which requires a trial for its resolution, and that a trial is unnecessary, the foundation for summary judgment is established. [case references omitted]

In Poliquin v. Devon Canada Corporation it was the employer that brought a motion for summary judgment seeking to have the plaintiff's wrongful dismissal action dismissed.  The position of the employer on the metrits was that Poliquin had been dismissed for just cause and that the termination was not wrongful.  The chambers judge dismissed the motion for summary judgment.  In doing so, however, according to the Court of Appeal, the chambers judge found that:

The chambers judge found that Poliquin’s actions were “beyond inappropriate” and “deplorable”: Reasons, paras. 17 & 19. Nevertheless, he dismissed Devon’s summary judgment application, concluding that the proportionality of Devon’s disciplinary action in response to Poliquin’s misconduct was a matter which required a trial: Reasons, para. 20. Devon now appeals that decision.

The employer appealed the dismissal of its summary judgment motion.  It argued that the chambers judge’s had failed to conclude, based on the "undisputed evidence before him, that it was “plain and obvious” that Poliquin’s wrongful dismissal action has no prospect of success."  In other words, the chambers judge should have dismissed the action summarily. 

The Supreme Court of Canada recently commented on the important purpose behind summary judgment rules like Rule 159(2) in Canada (Attorney General) v. Lameman (discussed here and here) stated as follows:

The summary judgment rule serves an important purpose in the civil litigation system. It prevents claims or defences that have no chance of success from proceeding to trial.  Trying unmeritorious claims imposes a heavy price in terms of time and cost on the parties to the litigation and on the justice system. It is essential to the proper operation of the justice system and beneficial to the parties that claims that have no chance of success be weeded out at an early stage. Conversely, it is essential to justice that claims disclosing real issues that may be successful proceed to trial.

The test for summary judgment was put as follows:

The defendant who seeks summary dismissal bears the evidentiary burden of showing that there is “no genuine issue of material fact requiring trial”...The defendant must prove this; it cannot rely on mere allegations or the pleadings...If the defendant does prove this, the plaintiff must either refute or counter the defendant’s evidence, or risk summary dismissal...

To resist a motion for summary judgment it must be shown that the claim has a real chance of success. 

The Court of Appeal in Poliguin commented:

What principles therefore guide the courts’ application of the summary judgment rules? First, the bar to summary judgment remains a high one: Lameman at para. 11. Second, if that bar is met, summary dismissal is not an extraordinary remedy nor an indulgence to the party moving for it. Third, if the evidence conflicts on a material point, or is hearsay, the party resisting summary judgment can demand a trial as of right. There is no discretion to refuse the trial.

The Court of Appeal considered what it called the undisputed key facts. 

The Court of Appeal found that the employer had a Code of Conduct and that the employee had acknowledged having read, understood and accepted its terms.  The Court found that the Code of Conduct formed part of the employment contract between the parties.  A number of policies in the Code of Conduct applied to the allegations of just cause being advanced by the employer. 

I won't review the cause allegations.  Suffice it to say that the employee acknowledged at least some of the facts upon which the employer relied in terminating his employment for just cause. 

The Court considered the use of the workplace computer for the exchange of inappropriate material.   The Court commented on the Code of Conduct:

"Employer's have the right to set the ethical, professional and operational standards for their workplaces.  Doing so not only falls within an employer's management rights, it also constitutes an integral component of corporate good governance.  The workplace is not the employee;s home; and employees have no reasonable expectation of privacy in their workplace computers.  It therefore follows that while employers may permit employees limited personal use of workplace computers, the employer is entitled to restrict the terms and conditions on which that use may be permitted....

Employers have good reason to be concerned about the misuse of their equipment and resources in order to access, receive and disseminate pornographic and racist material.  The potential for harm to an organization flowing from this kind of misconduct is great.  It can easily poison a work environment, thereby denying equal employment opportunities to others.  .... Since work is an essential aspect of an employee's personal life, an employer owes obligations to all employees in its organization.  It cannot turn a blind eye to discrimination and harassment in its workplace.....

If an employer fails to act it faces a significant risk of actions by employees who are subjected to discrimination and harassment - and properly so. ....  Therefore employers are fully justified in taking proactive steps, including the adoption of codes of conduct, to curtail and prevent improper conduct."

Now, I know this post is about the availability of summary judgment in employment disputes, but this quote is worth a short digression.  It is somewhat akin to the comments by Mr. Justice Bastarache in Keays v. Honda Canada Inc. where he said that:

“I accept that the need to monitor the absences of employees who are regularly absent from work is a bona fide work requirement in light of the very nature of the employment contract and responsibility of the employer for the management of its workforce.”

In any event, this expression of the rights of employers is very broad as is the comment that employees do not have a "reasonable expectation of privacy in their workplace computer"  This paragraph, from a judgment of a Court of Appeal, is significant and, we can expect, will be referenced in future cases. 

The Court concluded that:

"Employers are not required to tolerate the misuse of their computers and Internet access any more that they are required to put up with serious incidents of dishonesty by employees.  When an employee steals money from an employer, the theft and resulting damage is at least confined to that employee.  But where dissemination of pornographic or racist material using the employer's computer or Internet access is concerned and especially where the employee's e-mail address includes the employer's identity, this may not necessarily be so.  In the information technology world today, e-mail can be disseminated to many inside and outside an organization with the click of a mouse.  Accordingly the harm done may well be far more serious and pervasive. "

The Court of Appeal held that the chambers judge failed to give adequate weight to the fact that the plaintiff, in this case, was a senior supervisor who was a "role model for other employees".  According to the Court, the misconduct in question was "more serious given [the plaintiff's] responsibilities as a senior supervisor".  The Court also disagreed with the chamber judge's suggestion that no co-worker or supplier complained about the pornography.  According to the Court of Appeal, it was "entitled to presume from the polluting of [the employer's] workplace with pornography regardless of whether anyone complained.  So too is [the employer]."

The Court also noted that the chamber's judge failed to evaluate the cumulative effect of the misconduct as was required under the contextual approach in McKinley. 

The Court concluded, in all of the circumstances, that the "was no genuine issue of material fact requiring trial" and, further that there was "uncontroverted evidence" that the action for wrongful dismissal could not succeed.  As such, it overturned the chamber judge's decision and summarily dismissed the action.

Many lessons can be gleaned from these cases. 

Summary judgment is available in employment disputes.  In Ontario the standard is more stringent in "regular" actions rather than in those under the simplified rules.  That being said, summary judgment cuts both ways as the Poliquin case shows.  The employer, too, can resort to summary judgment even in a just cause case.  It is critical that the evidentiary foundation for the motion be established in the pleadings, affidavits or cross-examination on the affidavits. 

While summary judgment is used in employment disputes, it has not been used with any degree of regularity as compared to the by-rote litigation procedures.  It can, however, be an exceedingly cost-effective way of dealing with appropriate employment disputes.   

Court Declines to Certify a Class Action in the CIBC Overtime Case

In a much anticipate decision, the Ontario Superior Court of Justice today declined to certify a class under the Class Proceedings Act, 1992 due to lack of commonality of an issue that would significantly advance the case.  A link to the case will follow shortly.

The primary claim advanced was to seek alleged unpaid overtime.  The claim was brought by Dana Fresco on her own behalf and on behalf of current and former front-line service workers in retain branches of the CIBC.  The claim alleged that the CIBC Overtime Policy was illegal in two respects:

1. Except for in extenuating circumstances, employees had to obtain pre-approval for overtime in order to be compensated.  This was alleged to have violated the Canada Labour Code; and
2. The Policy provided for the employee, at his or her option, to receive time off in lieu of overtime pay at a rate of 1.5 times.  This was also alleged to fall offside the CLC.

As Madam Justice Lax observed, this was not a "mis-classification" case where the employer excluded certain classes of employees from overtime.  In U.S. parlance, exempting an employee from overtime when, in fact and in law, the employee was non-exempt and, therefore, eligible.  Rather, this was a so-called "off-the-clock" case where the allegation was that the bank simply failed to pay otherwise eligible overtime in contravention of contract and the CLC. 

Lax, J. stated directly "it is my opinion that the Policy is not illegal and that, at any rate, the determination of its legality will not materially advance any class members claim for unpaid overtime wages.". 

Madam Justice Lax went on to re-frame the issue by noting that Ms. Fresco's "real complaint is not that the Policy is illegal, but that the Policy was applied in an illegal manner so as to require or permit class members to work unpaid overtime."

There was an assertion by Ms. Fresco of a "systemic policy, practice or experience" of unpaid overtime at the bank.  The Court did away with that by noting that "there is no evidentiary foundation for this but, even if there were, this is not a case where questions of systemic wrongdoing  can be resolved without examining the individual claims, thereby defeating the purpose of the class action."

There was a detailed discussion of the Policy and an excellent review of some of the overtime principles generally. 

Certification under the Class Proceedings Act requires that a number of requirements described at section 5(1) of the Act be present:

5(1) The court shall certify a class proceeding on a motion under section 2, 3 or 4 if,

(a)   the pleadings or the notice of application discloses a cause of action;

(b)   there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant;

(c)   the claims or defences of the class members raise common issues;

(d)   a class proceeding would be the preferable procedure for the resolution of the common issues; and

(e)   there is a representative plaintiff or defendant who,

(i)   would fairly and adequately represent the interests of the class,

(ii) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and

(iii) does not have, on the common issues for the class, an interest in conflict with the interests of other class members.

 In Sauer v. Canada (A.G.) leave to appeal denied those requirements were described as:

"There must be a cause of action, shared by an identifiable class, from which common issues arise that can be resolved in a fair, efficient and manageable way that will advance the proceeding and achieve access to justice, judical economy and the modification of behaviour of wrongdoers."

There must be an element of commonality and "it is not enough for there to be a common defendant" nor is it enough to allege a "common harm".  According to Lax, J. "there must be commonality in the actual wrong that is alleged against the defendant and some evidence to support this."

In terms of the broad discussion of overtime, Justice Lax reviews the implications of allowing an employee to work overtime when discussing the "pre-approval" requirement of CIBC's policy.  The Court noted that overtime is payable where a manager required or permitted overtime to be worked, whether or not it was pre-approved.  This was not disputed by CIBC.  The Court also noted that:

"It is a fundamental right of the employer to control its business, including employees' schedules, hours of work and overtime hours.  The ability to authorize overtime is in fact one of the legal criteria used to assess whether or not an employee is considered managerial and exempt from the hours of work provisions of the CLC.  An employee cannot unilaterally and without agreement of the employer determine what is 'work'.... Put another way an employee cannot foist services on an employer and expect to be paid wages for them.  Where an employers overtime policy requires prior authorization, the employee is not entitled to work overtime hours at the employee's own initiative and then claim entitlement to overtime pay. .... Conversely, an employer cannot avoid its statutory obligations by knowingly permitting employees to work overtime and then later taking the position the overtime was not authorized."

What about time off in lieu of overtime?  The CLC, unlike some other provincial legislation, does not expressly permit time off in lieu of overtime pay.  The Court, in this case, found that time off in lieu as determined by the employee provided a "greater right or benefit" than did the CLC and would prevail over the strict requirements and application of the CLC.  Employees have the choice - they can receive time-off-in lieu of overtime pay or they can be paid for overtime.  This was persuasive to the Court of the fact that this was a more favourable benefit than provided under the CLC.

The Court then considered the requirements for certification under the Act and found that all were met except for the one dealing with "commonality".  The Court noted that the "central flaw in the plaintiff's case is that instances of unpaid overtime occur on an individual basis.  This lack of commonality cannot be overcome by certifying an issue that asks whether the defendant had a duty to prevent a series of individual wrongs, without any basis for the existence of a duty and where the duty does not relate to a pleaded cause of action." 

In other words, the claims and evidence filed showed

"a variety of individual circumstances that give rise to unrelated bases for unpaid overtime claims that can only be resolved individually by considering the evidence of the affiant advancing the claim, the evidence of various other current and former CIBC employees who managed and/or worked with the affiant, and various records maintained on a non-centralized basis by CIBC."

To state the obvious, this is an exceedingly important employment law class action case.  It remains to be seen whether Ms. Fresco will try to take the matter further, which may not be a complete surprise.  That being said, Madam Justice Lax has provided a thorough and detailed analysis of the developing body  of case law in support of her conclusion on commonality and otherwise.

Update: Jim Middlemiss at Legal Post has a post OT Class Action Dealt a Blow that discusses some of the implications of this case on other overtime class actions.

More Discussion of Dealing With the Layoff Survivors

The Lawyers Weekly has an article Employment and labour lawyers can help clients deal with ‘layoff survivors' where a subject that has been written about a number of times on this blog.  The article contains some good suggestions on managing the layoff to minimize the trauma on those left behind.

Inducement and its impact on Reasonable Notice - Part II

At Part I of this series I discussed, at a high level, some of the general damages principles associated with wrongful dismissal cases.  The period of reasonable notice sets the time frame within which damages are assessed. 

Today, I'd like to discuss some hiring issues and their effects on the period of reasonable notice and in establishing other claims.  Specifically, I want to discuss inducement or allurement.

Inducement/Allurement

Length of service is a factor considered when determining the period of reasonable notice of termination to which an employee is entitled. All things being equal, and as a broad generalization, the shorter the service, the shorter the notice period.  However, the reasonable notice period can be extended where it is shown that the employee was enticed away from previous secure employment by the new employer.  The usual test involves assessing whether the enticement goes beyond any ordinary degree of persuasion. 

The theory being that, if the employee gave up secure employment because of statements made by the new employer (or its agent), and is terminated within a short time after commencing employment, the employee should be credited with some of the service with the former employer for purposes of determining the common law period of reasonable notice.

The Supreme Court of Canada has held that inducement has been held to be a proper consideration in deciding upon the notice period.  In Wallace v. United Grain Growers Mr. Justice Iacobucci  held that:

One such factor that has often been considered is whether the dismissed employee has been induced to leave previous secure employment: see E.G. Jackson v. Makeup Lab Inc. reflex, (1989) 27 C.C.E.L. 317 (Ontario H.C.J.); Murphy v. Roland Inc. reflex, (1991) 39 C.C.E.L. 86 (Ontario Court General Division); Craig v. Interland Window Mfg. Ltd. 1993 CanLII 1821 (BC S.C.), (1993) 47 C.C.E.L. 57 (B.C.S.C.). According to one authority, many courts have sought to compensate the reliance and expectation interests of terminated employees by increasing the period of reasonable notice where the employer has 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.” [I. Christie et al., Employment Law in Canada (2nd ed. 1993) at p. 623]

In saying that, Justice Iacobucci was quick to point out that:

I note, however, that not all inducements carry equal weight when determining the appropriate period of notice. The significance of the inducement in question will vary with the circumstances of the particular case and its effect, if any, on the notice period is a matter best left to the discretion of the trial judge. 

The question is “at what point does the conduct rise to the level of legal inducement rather than simply ‘sales puffery’?”

When is inducement a consideration?

The Ontario Court of Appeal discussed the issue of inducement in Alcatel Inc. v. Egan.  While upholding the trial judges finding of inducement on the facts of the case the Court noted that "caution must be exercised to avoid a conclusion of inducement in virtually any new hire". 

Similarly, Mr. Justice Echlin in McCullouch v. Iplatform Inc., a case that considered the circumstances under which "inducement" or "allurement" will apply, noted that every "new hire" situation could raise inducement issues:

Should every move from one employer to another represent potential exposure to the new employer for prior service?  The clear and unquestionable answer is “no”.

In this case, Paul McCulloch had been working for Shawk Herzig Somerville Limited for nearly a decade. He reported to Fred Nurnberger. As a result of the loss of a key customer, Nurnberger entered into discussions with Iplatform Inc. with a view to moving over to them. McCulloch also began talking with Iplatform who told both Nuremberger and McCulloch that "they were expanding and wanted to grow their business and develop a packaging division".

On October 26, 2001 McCullouch received a one page fax outlining the terms of Iplatform's offer of employment and, the following day, he received a 9 page Employment Agreement with a note saying that "we would like to wrap this up tomorrow". McCullouch signed the Agreement, resigned his employment with Shawk Herzig Somerville Limited and started working for Iplatform on December 3, 2001.

So far so good, except that Iplatform experienced financial difficulties and terminated McCullouch's employment on March 15, 2002 (105 days after his start date). Iplatform offered McCullouch salary and benefits continuation for one (1) month in return for a signed release. Iplatform did not allege (until its statement of defence) that it was terminating McCullouch's employment for just cause.

Following his dismissal, McCulloch sought medical attention for a stress-related illness. Although McCullouch's counsel asked for the disability claim forms, none were forthcoming. McCulloch did not secure another job until August 12, 2002 (about 5 months after the termination).

McCulloch sought a reasonable notice period of 18 months relying on what he claimed was the inducement/allurement by the defendants. The evidence on this point was mixed.

The Court commented that:

Clearly the defendants were interested in attracting the clientele that Mr. Nurnberger hoped to bring with him. In doing so, they would need to service it and felt they could use someone like Mr. McCulloch to do the pre-press work.

Interestingly, Mr. McCulloch was able to negotiate upwards a salary offer of $65,000 to $68,000 plus a maximum $30,000 bonus, plus car expenses, business expenses, and options to purchase 24,000 shares at the senior executive/directors' strike price. This undoubtedly looked very appealing to an individual who had previously been earning about $52,500 and was now being offered a raise of nearly $20,000, all in.

Mr. Justice Echlin analogizes "recruitment" to a "dating game" where "employers and employees both preen themselves, put on their best faces, sometimes overstate themselves, and try to look attractive to the other. "

But it is not every move from one employer to another that will attract a longer notice period by reason of the doctrine of inducement. When will the principle apply? The Court stated as follows:

What determines when allurement/enticement should apply? In Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701, Mr. Justice Iacobucci pointed to the reliance and expectation interests involved where the new employer makes strong promises of security in the new employment relationship. He adopted the comments of Goldie, J.A. in Robertson v. Weavexx Corp., (1997), 25 C.C.E.L. (2d) 264 B.C.C.A.) at p.271-272:

Also part of the inducement to the respondent in making the move he did was, no doubt the discussions as to long term employment. As I have concluded, those discussions lacked contractual force in terms of the respondent's assertion of a fixed term contract but nevertheless, they were and are, in my opinion, significant on the issue of reasonable notice.

In my opinion, such incidents are properly included among the considerations which tend to lengthen the amount of notice required (Wallace, supra at para. 85)

In the McCulloch case, no evidence was led to indicate that assurances of long tenure were given. In fact, the evidence was such that McCulloch was able to negotiate himself a lucrative increase in remuneration and confirmed that "it was a good offer". Justice Echlin found that:

In this case, Paul McCulloch changed employers to obtain a higher current pay package and to continue to work with his friend, Fred Nurnberger. At the age of 54, his focus was not on job security. Accordingly, I find little or no reliance or expectation interest relating to promises of longevity.

In reading the decision, it seems that there was some "uncertainty" at the previous employment by reason of the loss of a customer, and that both Nurnberger and McCullouch were looking at their options, including a move to Iplatform. McCulloch was able to negotiate favourable compensation for himself, and he moved. There was no inducement present here.

The Egan case is also instructive.  There the employee left 20 years of employment with Bell to accept employment with Alcatel.  Representations were made to Egan by two of her friends who, unbeknown to Egan, would receive a substantial bonus if she joined Alcatel.   

What is the impact of inducement when found?

Where inducement is found to exist, it will offset "short" service when determining the employees’ entitlement on termination.  In other words, the significance of  inducement as a factor in the notice assessment should diminish with time.  

As an example, Smith v. Centra Windows Ltd. where the plaintiff's inducement argument was rejected in circumstances where he had been employed for almost 14 years before being terminated.

However, Courts have not been uniform on this approach.  In Gillies v. Goldman Sachs Canada Inc. the BC Court of Appeal upheld a trial judgment that the defendant had induced the plaintiff, an institutional bond investor, to leave his secure employment by actively recruiting him and advising him that he would have secure employment.  The court concluded that this inducement was valid notwithstanding that he had been employed for almost five years. 

The approach in Gillies appears to be supported by the Supreme Court of Canada’s decision in Wallace v. United Grain Growers, where an inducement was found to be relevant notwithstanding that the employee had been employed for 14 years.

It's therefore an open question as to precisely "when" inducement as a factor wanes.

The effect of inducement can be significant.  In Egan, for example, a short service employee (less than 21 months) was awarded damages in respect of a period of reasonable notice of 9 month.

Summary

Not every comment made in the hiring process will trigger inducement.  The test is a stringent one.  That being said, where inducement is found, it can significantly increase the period of notice and will offset "short service".

This emphasizes the need to be vigilant during the hiring process, to carefully consider what is being said and by who to an applicant.  It also highlights the need to take detailed interview notes and to "paper" the hiring.  Employment agreements can be an effective way of minimizing the risks of an inducement argument if they are properly drafted and entered into.  The Court will, for example, consider the circumstances surrounding the employee’s departure from the former employer and the terms of any contract of employment that might undermine a “security of employment” argument such as, for example, a probationary period or termination clause limiting the employees’ recovery on termination. 

Further, finders fee type arrangements where current employees receive a bonus for recruiting friends is somewhat of a dangerous practice.  It may encourage people to say things that they otherwise might not in an effort to obtain the bonus.