You say goodbye, and I say hello

In Miller v. Alaya Care Inc., the Ontario Superior Court awarded an employee 14 months of reasonable notice on termination, even though they only worked for the company for 7 months. The court said this was appropriate because the employee was induced to leave their previous position after many years of service. This case serves as a reminder that short service employees can be awarded significant termination packages.

Background

The employee worked at her previous employer for 12 years in a senior executive position earning a significant compensation package. Alaya Care reached out to her on LinkedIn several times, and offered her a pay increase and other incentives to leave her previous position. During the discussions, the company said that her specific experience would help the company grow, and asked her detailed questions about her compensation and what it would take to get her to leave her current work. She also visited the business several times during the interview process. Since her former employer was a direct competitor, when she negotiated her contract, the company agreed to indemnify her against her former employer if she was sued.

On termination, the employee was a VP, Client Services, 62 years old, earning a base salary of $200,000 annually, with a potential annual bonus of $40,000 and RSU’s. She was provided 4 months of pay in lieu of notice when the company terminated her without cause. When the employee sued, she alleged she was induced from her former employment to join Alaya Care, and because of this she should be treated as a 12.5 year employee to determine her termination entitlements.

The court looked at both her offer letter and the employment contract she received, and found that the termination language in both conflicted so it was confusing. The contract was also unenforceable as it breached the Employment Standards Act, 2000 (ESA) minimum requirements in several ways. Interestingly, the offer letter said “in the unlikely event” she was terminated she would be awarded a certain package, which the court interpreted as the employer promising long term employment.

The legal test The court reviewed the factors that need to be taken into account to determine whether an employee’s notice period should be increased because they were induced to leave their previous employer. These include:

• the reasonable expectations of both parties;
• whether the employee sought out work with the prospective employer;
• whether there were assurances of long-term employment;
• whether the employee did due diligence before accepting the position by conducting their own inquiry into the company;
• whether the discussions between the employer and prospective employee amounted to more than the persuasion or the normal “courtship” that occurs between an employer and a prospective employee;
• the length of time the employee remained in the new position, the element of inducement tending to lessen with the longevity of the employment; and
• the age of the employee at termination and the length of employment with the previous employer.

The court determined that the employee was induced to join Alaya care because Alaya Care:

• reached out to the employee first
• mentioned that her skills would help grow the company
• asked about her previous compensation and offered her a greater package to lure her to the new position
• said that the company was participating in an aggressive growth strategy (suggesting a long-term opportunity), and
• agreed to indemnify her against her former employer

Damages awarded

The court determined that the employee was entitled to compensation for the lost opportunity to earn a bonus and RSUs, since these were integral parts of her compensation and the RSUs had gone up in value since she was hired. The judge considered that she had 12 years of service with the previous employer and had significant experience in a niche industry, and assessed the notice period at 14 months.

Since the employee partially mitigated her damages during the notice period, she was awarded $204,404.18, including for lost salary, benefits, bonus and RSUs.

Employer takeaways

Employers should take extra care to review their employment agreements and make sure they are enforceable and in line with the requirements of the ESA before providing them to candidates. This is even more important in cases where there is potential inducement. In this case, had the employment agreement and offer letter been enforceable, this employee would have been limited to 4 months of notice as required by her contract.