Inducement is like 'a high school dance… who asked who to dance?' says lawyer offering tips for HR
A worker is entitled to wrongful dismissal damages equalling 14 months’ pay and benefits after only seven months of service because she was induced to leave long-term, secure employment, an Ontario court has ruled.
“Inducement doesn't mean it's an automatic add-on [of service at the previous employer],” says Barry Fisher of Barry Fisher Mediation and Arbitration in Toronto. “But this is an example of the type of evidence [of inducement] that can dramatically affect the notice period - inducement gets you more than your technical seniority, but not as if you were with the same company the entire time.”
The worker, 65, was employed with a technology company for nearly 12 years. She was the director of its Canadian subsidiary and represented the company at industry conferences.
In the fall of 2021, the worker was approached by her company’s biggest competitor, AlayaCare – a software company serving the homecare industry in Ontario. The worker wasn’t interested in leaving, but she agreed to meet with AlayaCare’s co-founder when he messaged her through LinkedIn to say he and others would “try and convince you to leave [the company] and join AlayaCare as an executive employee.”
The worker also spoke with the CEO and met with the co-founder in person, telling him about her salary, bonuses, and stock options. The worker said she was concerned that if she left her current employer to work for AlayaCare, it might sue her. The company assured her it would pay for a lawyer to defend any such action.
According to AlayaCare’s CEO, the worker told him she was unhappy at her current employer, but the worker disagreed, saying she didn’t intend to leave.
Offer of better compensation
AlayaCare invited the worker to visit its offices, which she accepted. The company followed up with an offer of a compensation package that included a better salary, bonuses, and equity in the company in the form of restricted share units (RSUs), which would vest in the future and which AlayaCare valued at $95.2375 per share, to make up for stock options and equity she would forfeit with her current employer. The bonuses were to be paid annually following an assessment of the worker’s performance.
On Nov. 27, AlayaCare made a formal offer of employment for the position of vice-president, client services. The offer letter included a termination clause stating that the company could terminate the worker’s employment “at its sole discretion for any reason or for no reason, without cause” by providing four months’ base salary and benefits continuation for four months. It also permitted Alayacare to terminate the worker’s employment “at any time for cause without payment or compensation” of any kind, stating that cause included “anything that constitutes ‘serious reason’ within the meaning of the laws of Ontario.”
The worker requested a few changes, including a clause that AlayaCare would indemnify her against any legal action from her current employer. The company agreed and the worker signed an employment agreement on Dec. 15, giving her notice of resignation to her existing employer on the same day. Her resignation was effective Jan. 7, 2022, and she started working for AlayaCare 10 days later.
Seven months into the worker’s employment, on Aug. 15, the company terminated her employment as part of “a reduction in its workforce,” according to the termination letter. AlayaCare also announced a restructuring of the company and later sent the worker information about a severance package of six months’ pay and continued vesting of RSUs until Feb. 13, 2020, if she signed a release.
The worker didn’t accept the severance package, so AlayaCare provided her with four months’ salary in lieu of notice, as outlined in her offer letter, plus 840 RSUs that were due to vest in January 2023, despite the fact she rejected the severance package.
The worker started looking for a new job in October and found a position on Feb. 28, 2023, for less pay.
Termination provision unenforceable
The worker sued AlayaCare for wrongful dismissal, arguing that the termination provisions in her contract violated the Ontario Employment Standards Act, 2000 (ESA) and she was entitled to reasonable notice under common law. She sought damages equivalent to a 22-month notice period, claiming she was induced to leave secure employment for the position at AlayaCare, so her service time at her previous employer should be added onto her total service.
The court found that the employment agreement’s provision allowing for termination “for cause” without notice didn’t comply with the ESA, which requires minimum notice or payment in lieu for any dismissal unless an employee engages in wilful misconduct. Since the agreement didn’t specify that only wilful misconduct would deny the worker notice or pay in lieu, it was unenforceable, said the court.
“Four months’ [severance pay] is a problem because you could easily exceed four months – which is 17 weeks in statutory entitlement - if you had more than 10 years of service, the statutory minimum would be 18 weeks,” says Fisher. “The jurisprudence talks about how you can look to the future - it has to be legal for all purposes from the very beginning, not just today.”
AlayaCare argued that, even if the employment agreement was void, the offer letter - which specified a “minimum” of four months’ severance for any termination - should still govern the worker’s entitlements. The court, however, determined that the offer letter didn’t clearly displace common law notice rights, as it only referred to a minimum obligation with no specified limit.
Noting that an ambiguity in a contract will be resolved in favour of the employee, the court found that the worker was entitled to common law reasonable notice.
For the appropriate notice period, the court considered multiple factors, including the worker’s length of service, her role as a senior executive, her age - 62 at the time of termination - and the availability of comparable employment. It also found that the worker had been induced to leave a stable, long-term position, which favoured a longer notice period.
Inducement
The court determined that a 14-month notice period was appropriate, noting that the worker wasn’t looking to leave her previous employment and Alayacare actively recruited her with promises of higher compensation and a key role – as well as assurances that it would help her if she faced litigation from her previous employer.
“I've always referred to [inducement] as like being at a high school dance, and the boys are on one side of the gym and the girls are on the other - who asked who to dance?” says Fisher. “Was the worker looking for a new job, or did she get a call out of the blue and was wined and dined?”
The court also found that the worker should receive compensation for the bonus she would have earned during the notice period, as it was “an integral part of the compensation package.” Although the employment agreement called the bonus a “discretionary annual cash bonus as outlined in the offer letter,” the offer letter itself stated she would receive the bonus by meeting her personal and corporate targets, the court said in calculating a pro-rated entitlement of 56.25 per cent.
As for RSUs, the court found that the worker would have had 840 vested in January 2023 during the notice period. AlayaCare argued that it was a privately-owned company, so RSUs had no value until the business was sold or went public, but the court disagreed. The company offered the worker 840 RSUs as part of a severance package if she signed a release, and it placed a vesting value on them in the offer letter, the court said. The court also found that the RSUs had increased slightly in value since the offer letter, to $107.33 each.
The court ordered AlayaCare to pay the worker $204,404.18 in damages - $79,166.70 from 14 months’ salary minus her earnings from her new job during the notice period; $1,330.28 in benefits, $33,750 pro-rated bonus, and $90,157.20 for the 840 RSUs.
Reasonable notice
Inducement is often pled by dismissed workers but rarely proven, but this case is a good example how long-term employment at the previous position from which an employee was recruited can significantly affect the notice entitlement, according to Fisher.
“Employers tend to exaggerate and say they didn't force someone to work for them, and that’s true,” he says. “And the element of inducement tends to lighten with the longevity of the new job - where someone was two years at one place and one year at another, that's not going to get much.”
“But here, [AlayaCare] made representations that the company would grow and it went a long way to give [the worker] all the money that it would take,” adds Fisher. “They were hiring other people and they went as far as indemnifying the worker from legal action from her previous employer – [the evidence of inducement] was set up very well.”
See Miller v. Alaya Care Inc., 2025 ONSC 1028.
