Evidence Of Inducement Leads To Enhanced Notice Period
Sunday, June 12, 2016 - Filed in: Court Cases
In its recent decision of Rodgers v CEVA, 2014 ONSC 6583, the Ontario Superior Court considered both what it means to induce someone to leave their job and the implications of that inducement upon termination.
Rodgers had been employed by CEVA as its Canadian Country Manager, CEVA's most senior Canadian position, for just under 3 years when his employment was terminated with two weeks' pay in lieu of notice. Before joining CEVA, Rodgers had been the President of one of CEVA's competitors. An employee of CEVA approached Rodgers in 2009 and asked if he would be interested in the job. Rodgers interviewed with CEVA several times before being offered the job, which he refused. Within a week of his refusal, Rodgers was offered the job again with a substantially higher salary and a $40,000 signing bonus. Rodgers accepted the offer. Rodgers' hiring was conditional on his purchasing shares in the company worth over $100,000.
Rodgers employment was shortly thereafter terminated by CEVA without cause and upon provision of some notice. It was undisputed before the Court that the notice Rodgers had received was inadequate. The issue was simply how much notice was appropriate. Rodgers argued for a lengthy notice period because he was induced to leave his previous job, while CEVA argued that a short notice period was appropriate because of his relatively short service time and a clause in his employment contract that said he would receive notice upon termination based on his length of service and legal requirements.
Justice Taylor concluded that CEVA had induced Rodgers to leave his job, at least to some extent. He noted that CEVA approached Rodgers about the job and that they immediately improved their offer when he rejected the first one. While this level of inducement did not rise to the level of assuring Rodgers of long-term job security, it was found to be a factor that weighed in favour of a longer notice period.
Justice Taylor also concluded that the terms of Rodgers' employment contract did not operate to give service time more weight as a factor in calculating notice. He noted that in order for such a provision to have any meaning it must be made abundantly clear in the employment contract that service time is to carry more weight in determining notice than other factors, which was not the case. The most important factor to Justice Taylor indicating inducement was the requirement that Rodgers purchase shares in the company. Justice Taylor found that this constituted an implied representation on the part of CEVA that Rodgers' employment would be long-term. He concluded that the purpose of the investment was to create the impression that Rodgers would have an extended period of job security. For that reason, and despite Rodgers relatively short service-time, Justice Taylor awarded Rodgers 14 months' pay in lieu of notice.
As this decision illustrates, when employers look to headhunt new employees they must be aware of the potential consequences of inducement from secure employment. Employers who induce employees to leave their previous jobs only to find that the relationship doesn't work out could be on the hook for notice payments out of proportion with the employee's length of service. This decision serves as a strong reminder of this fact, and provides examples of some of the things employers can do that would constitute an inducement. This case may also give employers a possible escape route from this liability.
Employers may be able to avoid the risk of paying additional notice because of inducements by including clear language in employment contracts that termination pay will be based on length of service, so long as it is consistent with minimum statutory requirements. Such contractual termination provisions can oust common law presumptions and manage the risk of enhanced notice for unquantifiable factors such as inducement.
Note: This a reprint of an article by Michael Torrance of Rose Fulbright Canada LLP.