How to avoid a claim of inducement
Ed Canning Jul 23, 2007
In this fairly healthy economy, employers are often offering positions to people who are already employed rather than the unemployed.
In order to entice what the employer believes is the right candidate, promises of job security and opportunity are often made. When the candidate doesn’t live up to their resume, however, employers may be surprised how much severance they have to pay for a short term employee. The promises made in the hiring process can come back to haunt them.
Paul wasn’t looking for work when a business associate mentioned that a recruiting agency was looking for a senior financial person for an undisclosed company. Paul was already securely employed but wondered whether he had any more room to grow where he was. He contacted the personnel agency who set him up with an interview but Paul decided that the position wasn’t secure enough and didn’t accept the offer. The next year, the personnel agency called him back since they now had his resume on file and arranged a meeting between Paul and a prospective employer. The job being considered was that of Senior Corporate Accountant, but Paul was not interested in an accounting position. Soon thereafter, the employer contacted him again and offered him the position of Vice President of Finance and Special Projects. Paul got a raise in income and what he thought was a secure job with new opportunities for growth.
Three months after Paul started the job, the employer decided that he was not a fit and terminated the relationship, giving Paul two weeks’ pay in lieu of notice.
Paul sued. He said he was induced to leave secure employment by the employer and that his years of service with his previous employer should be taken into account in determining how much pay in lieu of notice he should receive.
The employer argued that since Paul had been the one to take the step to contact the recruitment firm, he could not now take the position that he was induced to leave his old employment.
The arbitrator found, however, that by sending his resume to the recruitment firm, all Paul did was throw his hat in the ring. He was simply indicating that he was willing to talk with a potential employer.
The arbitrator noted that when Paul turned down the first offer of an accounting position with the employer, it then created a new position that satisfied Paul’s desire for growth opportunities. All this was done to entice him to leave his secure job.
The arbitrator found that if the employer had not created this new position expressly to lure Paul from his old job, he never would have accepted the offer.
As a result of the arbitrator’s finding that Paul had been induced to leave secure employment, instead of awarding Paul 5.5 and a half months pay in lieu of notice, he awarded him 8.5 months pay in lieu of notice.
At the end of the day, the mistake both Paul and the employer made was not agreeing in a hiring contract as to what Paul would be entitled to if and when the employment was terminated without just cause.
Securely employed people who are thinking of jumping ship to seek new opportunities should try to ensure that in the hiring letter or contract, there is a provision guaranteeing them a minimum payment if they are terminated at any time. For instance, if you have been in a management position for 3 years and get a job offer, try to persuade the employer to include a provision that indicates that if you are terminated at any time, you will receive a minimum 3 months pay in lieu of notice. You could and should go further to indicate that that amount increases by anywhere from 2 to 4 weeks for each completed year of service.
By having such a provision, even if you are terminated after 3 months, your family is still protected for some period of time. The bills can still be paid while you are finding new employment. The 3 months is roughly equivalent to the pay in lieu of notice you would have received if you were terminated from your previous job.
This kind of contractual provision is also in the employer’s interest. If it existed in Paul’s case, there would never have been a lawsuit about how much reasonable notice was owed and whether or not Paul had been induced from his old job. If there had, the arbitrator would have said that whether or not Paul was induced was irrelevant since he signed a contract setting out his entitlements before he quit the old job. He knew what risks he was taking.
Both employers and employees are often squeamish about bringing up termination provisions before the marriage has been blessed. To many, it is almost as distasteful as a pre-nuptial agreement. Eternal bliss is all they want to contemplate.
Although my advice is not always followed, to the squeamish employee I explain that if they approach the issue in a rational and friendly manner, no one need be offended. Explain to your potential employer that you have a family to feed and although you are extremely hopeful that everything will work out, if it doesn’t, you will have left secure employment. You will feel much better about making the move if some reasonable guaranteed severance can be counted on.
It is hard for me to imagine an employer who cannot empathize with such a sentiment. They have bills to pay too.
For employers who are squeamish about bringing up the subject, the above argument works both ways: “We understand that you are taking a risk by leaving a job you have held for a long time and jumping into the unknown. We want to make your family and you feel more secure about making this decision by setting out now what payments you would be entitled to if your employment is ever terminated without just cause.” Why should an employee by scared away by such an approach?
Fortunately or unfortunately, not everyone follows this advise. Of course, if they did, employment lawyers would have a lot less work. Actually, now that I think about that, ignore all of the above.
As published in The Hamilton Spectator, July 21, 2007.