A recent British Columbia Court of Appeal decision underscores a reality in the work of talent acquisition: the way you attract employees can significantly impact your severance obligations if the relationship ends prematurely.
The decision in Mercer Celgar Limited Partnership v. Ferweda underscores that even relatively standard recruitment practices can constitute “inducement” that may double or triple an employer’s notice period obligations.
The case that raised the stakes
The facts of the Celgar case are straightforward. An experienced chemical engineer with 27 years of stable employment was contacted by a recruiter about an opportunity at a different pulp mill. Following a site visit and discussions with management, he initially declined the first offer. The company then increased its salary offer, and he accepted the position, leaving his long-term employment.
Two years later, when the company terminated his employment without cause during a downsizing, the dispute centered on the appropriate notice period. The company had paid five months’ salary in lieu of notice, which they argued was sufficient. The employee sought 12-18 months.
The court ultimately awarded 12 months’ pay in lieu of notice, explicitly citing inducement as a key factor. What’s notable for employers is how the court defined inducement in this context.
What constituted inducement?
The court found inducement based on several factors that many would consider routine recruitment practices:
- The company initiated contact with the employee rather than responding to his application
- They paid for a site visit to their facility
- Management highlighted advantages over his current employer
- They mentioned they “hired for the long term”
- When he declined their initial offer, they increased the salary
Nothing in this list involves extraordinary promises or aggressive tactics. Yet collectively, these actions created what the court described as “an expectation on the part of [the employee] that the opportunity at Celgar was such that it would be advantageous to him to leave his secure long-standing employment and take a job which was expected to be long-term.”
The legal principle at work
The court’s decision reinforces a principle established in the Supreme Court of Canada’s 1997 Wallace decision: when employers induce employees to leave secure positions, courts will protect the employee’s “reliance and expectation interests” if that employment ends prematurely.
As the BC Court of Appeal noted, inducement exists on a spectrum. It doesn’t require “aggressive ‘luring’” but can include “tacit persuasion and implicit assurances of job security and increased compensation.”
Most significantly, the court rejected the argument that inducement can’t exist when there’s mutual interest in forming the employment relationship. The court stated: “It is certainly conceivable that there may be circumstances in which there is equal interest on the part of the employee and employer, yet resistance on the part of the employee to give up their existing secure employment.”
The financial implications
For employers, the financial consequences of inducement findings can be substantial. In the Celgar case, the difference between the company’s position (five months’ severance) and the court’s award (12 months) likely represented tens of thousands of dollars in additional liability.
This potential exposure increases with the seniority of the position and the length of time the employee held their previous job. When recruiting experienced mid-career or senior professionals from stable employment, the contingent liability can be significant.
Practical considerations for employers
The Celgar decision doesn’t mean employers should avoid recruiting employed candidates, but it does highlight the need for careful practices:
Assess total potential exposure: When budgeting for a new hire being recruited from secure employment, consider potential severance costs if the relationship doesn’t work out. The more secure the position the candidate is leaving, the higher this contingent liability becomes.
Address severance expectations contractually: Consider explicitly addressing severance terms in employment contracts, particularly when recruiting from stable positions. While this requires discussing potential termination during the hiring process, it creates certainty for both parties.
Document recruitment interactions: Maintain clear records about who initiated discussions and what representations were made regarding job security. These details may prove crucial if inducement claims arise later.
Be mindful of representations: While highlighting your company’s benefits is appropriate during recruitment, be cautious about language suggesting extraordinary job security or making claims about long-term employment that may later be construed as promises.
Consider employment structure: Properly designed probationary periods and clear performance expectations may provide some protection during the initial assessment phase, though they won’t eliminate severance obligations altogether.
Finding the right balance
The legal principle underlying inducement claims isn’t designed to punish recruitment but to recognize the career risks employees take when changing employers mid-career. Courts acknowledge that leaving secure employment represents a significant decision that may warrant additional protection if the new position ends prematurely.
For HR professionals and employers, the challenge lies in balancing effective recruitment with awareness of potential long-term obligations. The Celgar decision reminds us that these obligations begin not when an employee starts work, but from the first recruitment conversation.
By understanding the legal framework and taking appropriate precautions, employers can continue to build their teams while managing their legal and financial exposure. In today’s competitive talent landscape, such balanced approaches represent not just legal prudence but good business practice.
And for more on this topic, check out the conversation I had with Stuart Rudner of Rudner Law. You can find that here: https://hrlawcanada.com/2025/01/lured-away-why-inducement-can-haunt-employers-for-years-to-come-says-rudner/
