In the context of employment, inducement occurs whenever a rival or its agent embarks on a campaign of luring the targeted employee away from his secure employment to join the competitor’s firm. A promise of long-term security, greater remuneration, more valued responsibilities, and career advancement opportunities are common examples of inducement. In its recent judgment in Fraser v. Canerector Inc., the Ontario Superior Court considered the workings of the inducement concept and expressed a novel qualifier that the “time of year” the employer terminates the employment should be a factor in the assessment of reasonable notice.
In Fraser, the plaintiff, Stuart Fraser, worked for his previous employer for seven years. By reasons of certain changes at his workplace, he developed a level of disenchantment with his future employment prospects but had yet to start actively looking for new pastures when his friend, identified only as Mr. Tuzi, approached him about an opening at his future employer, Canerector Inc. After two rounds of interviews, Canerector hired Fraser for its acquisitions group in June 2011. In 2013, the company changed his position to division liaison, something that was more of an evolutionary rather than a revolutionary change. Less than three years later, the company dismissed Fraser. As a consequence, he sued for wrongful dismissal.
Given the Supreme Court of Canada’s very strong clarion call in Hryniak v. Mauldin and in light of the Ontario Court of Appeal’s equally strong message in Arnone v. Best Theratronics, Fraser’s action proceeded by way of a motion for summary judgment.
In his lawsuit, Fraser took the position that the company had induced him to leave a secure, long-term position at another firm to accept employment with Canerector and, as such, the period of reasonable notice ought to have regard to that fact. He also claimed an entitlement to the prorated bonus accrued to the date of his dismissal as well any bonus amounts that might have accrued during a reasonable notice period since bonus entitlement was an integral part of his compensation package.
Canerector disputed the characterization of the hiring process as constituting inducement of any kind. Dealing with the issue of inducement, Justice Sean Dunphy concluded Canerector hadn’t selected Tuzi to either locate a candidate to fill the opening or lure Fraser away from his secure employment. He also found that on the evidence, the plaintiff hadn’t established inducement. In arriving at his conclusion, he considered the following factors: Canerector offered Fraser a “lower” base salary with the “potential” for higher remuneration in the future; it hired him as an entirely “new” employee by refusing to allow him to carry over his entitlements to vacation and severance pay from his previous employment; and, significantly, he was subject to an initial 90-day probationary period, a factor that’s inconsistent with any allegation that the company had induced him to leave his former secure employment.
Turning to the quantum of reasonable notice, Dunphy noted Fraser was fortunate to mitigate his loses by securing alternate employment within a 10-week period following his dismissal. He dismissed the two-week statutory notice as being too little and found the requested 12-month notice period to be excessive. Instead, he awarded Fraser a reasonable notice period of 4-1/2 months while factoring the “time of year” of his termination.
He explained that because the company had terminated Fraser in June, it was “quite foreseeable that hiring decisions at his level might have needed to be delayed somewhat due to the summer months in order to account for vacation schedules of key decision-makers.” But for the negative impact of the summer period, Dunphy would have awarded Fraser a shorter period of notice of three months.
This pronouncement is bittersweet. On one hand, Fraser sends a welcome message to employees that employers should account for the potential negative impact of summer vacations upon the dismissed employees’ job prospects when assessing their entitlements at dismissal. On the other, it sends a troubling message to employers that forces them to carefully choose the timing of dismissal.
In refusing to award bonuses, Dunphy explained that Fraser’s bonus plan implicitly required participants to be “active” employees at the time the company undertakes the assessment process after year end. He also found the plan itself was fundamentally discretionary and subjective and lacked any formula a court might objectively apply.
Fraser argued the bonus was an integral part of his remuneration and that absent a formula, there must be an objective assessment of it. Having distinguished a number of cases, Dunphy noted the parties hadn’t pointed him to any case law where the courts had found an entitlement to a bonus arising from a discretionary plan that involved no formula to turn to. But would the outcome have been different had Fraser advanced his claim for bonus entitlement on the basis of a loss of opportunity to earn it by reason of the employer’s unilateral action?
Fraser adds another layer of complexity when assessing a dismissed employee’s entitlements. It may mean some uncertainty for employers when calculating pay in lieu of notice, thereby necessitating legal advice before proceeding with a dismissal.
Nikolay Chsherbinin is an employment lawyer at Chsherbinin Litigation and author of The Law of Inducement in Canadian Employment Law, published by Carswell. He’s available at 416-907-2587, [email protected] or nclaw.ca.
In Fraser, the plaintiff, Stuart Fraser, worked for his previous employer for seven years. By reasons of certain changes at his workplace, he developed a level of disenchantment with his future employment prospects but had yet to start actively looking for new pastures when his friend, identified only as Mr. Tuzi, approached him about an opening at his future employer, Canerector Inc. After two rounds of interviews, Canerector hired Fraser for its acquisitions group in June 2011. In 2013, the company changed his position to division liaison, something that was more of an evolutionary rather than a revolutionary change. Less than three years later, the company dismissed Fraser. As a consequence, he sued for wrongful dismissal.Given the Supreme Court of Canada’s very strong clarion call in Hryniak v. Mauldin and in light of the Ontario Court of Appeal’s equally strong message in Arnone v. Best Theratronics, Fraser’s action proceeded by way of a motion for summary judgment.
In his lawsuit, Fraser took the position that the company had induced him to leave a secure, long-term position at another firm to accept employment with Canerector and, as such, the period of reasonable notice ought to have regard to that fact. He also claimed an entitlement to the prorated bonus accrued to the date of his dismissal as well any bonus amounts that might have accrued during a reasonable notice period since bonus entitlement was an integral part of his compensation package.
Canerector disputed the characterization of the hiring process as constituting inducement of any kind. Dealing with the issue of inducement, Justice Sean Dunphy concluded Canerector hadn’t selected Tuzi to either locate a candidate to fill the opening or lure Fraser away from his secure employment. He also found that on the evidence, the plaintiff hadn’t established inducement. In arriving at his conclusion, he considered the following factors: Canerector offered Fraser a “lower” base salary with the “potential” for higher remuneration in the future; it hired him as an entirely “new” employee by refusing to allow him to carry over his entitlements to vacation and severance pay from his previous employment; and, significantly, he was subject to an initial 90-day probationary period, a factor that’s inconsistent with any allegation that the company had induced him to leave his former secure employment.
Turning to the quantum of reasonable notice, Dunphy noted Fraser was fortunate to mitigate his loses by securing alternate employment within a 10-week period following his dismissal. He dismissed the two-week statutory notice as being too little and found the requested 12-month notice period to be excessive. Instead, he awarded Fraser a reasonable notice period of 4-1/2 months while factoring the “time of year” of his termination.
He explained that because the company had terminated Fraser in June, it was “quite foreseeable that hiring decisions at his level might have needed to be delayed somewhat due to the summer months in order to account for vacation schedules of key decision-makers.” But for the negative impact of the summer period, Dunphy would have awarded Fraser a shorter period of notice of three months.
This pronouncement is bittersweet. On one hand, Fraser sends a welcome message to employees that employers should account for the potential negative impact of summer vacations upon the dismissed employees’ job prospects when assessing their entitlements at dismissal. On the other, it sends a troubling message to employers that forces them to carefully choose the timing of dismissal.
In refusing to award bonuses, Dunphy explained that Fraser’s bonus plan implicitly required participants to be “active” employees at the time the company undertakes the assessment process after year end. He also found the plan itself was fundamentally discretionary and subjective and lacked any formula a court might objectively apply.
Fraser argued the bonus was an integral part of his remuneration and that absent a formula, there must be an objective assessment of it. Having distinguished a number of cases, Dunphy noted the parties hadn’t pointed him to any case law where the courts had found an entitlement to a bonus arising from a discretionary plan that involved no formula to turn to. But would the outcome have been different had Fraser advanced his claim for bonus entitlement on the basis of a loss of opportunity to earn it by reason of the employer’s unilateral action?
Fraser adds another layer of complexity when assessing a dismissed employee’s entitlements. It may mean some uncertainty for employers when calculating pay in lieu of notice, thereby necessitating legal advice before proceeding with a dismissal.
Nikolay Chsherbinin is an employment lawyer at Chsherbinin Litigation and author of The Law of Inducement in Canadian Employment Law, published by Carswell. He’s available at 416-907-2587, [email protected] or nclaw.ca.