Inducement to Leave Long-Term Employment Can Increase Severance Owed

Update by Erin Brandt, Cofounder

It is long established law that inducing a potential employee to leave long-term employment can increase the amount of severance an employer owes should they dismiss the recently recruited employee.

But what exactly constitutes inducement? And how much more severance might be owed?

The recent case of Ferweda v Mercer Celgar Limited, 2024 BCSC 844 revisits these questions in finding that Mr. Ferweda was induced to leave his prior employment, justifying an increase from 5 months to 12 months of severance pay.

Background

Mr. Ferweda was employed by Catalyst Paper Corporation in Duncan, BC and its predecessors for 27 years. He started as a junior engineer and over time worked his way to the most senior, non-management position in the pulp mill, reporting directly to the mill manager.

In early 2018, Mr. Ferweda was 53 years old, with plans to work for Catalyst for another 8 years before retiring. He felt overworked, underpaid, and had concerns that the mill might shut down prior to his planned retirement date. However, he was not actively looking for alternative employment.

In January 2018, a Celgar recruiter reached out to Mr. Ferweda about a job at the Celgar mill in Castlegar. Mr. Ferweda was invited with his spouse to tour the Celgar mill – at Celgar’s expense.

In March 2018, Celgar offered Mr. Ferweda employment, which he rejected, as the offer was not sufficient to cause him to leave Catalyst. Celgar made Mr. Ferweda a second offer with a salary increase from the first offer. Mr. Ferweda accepted the second offer and resigned from Catalyst.

Mr. Ferweda worked for Catalyst for just under 2.5 years, when his employment was terminated without cause in September 2020 as a result of downsizing. Catalyst ultimately paid Mr. Ferweda 5 months severance, though by December 2023 Mr. Ferweda was still unemployed.

Decision

The issue of inducement was the most significant issue to be decided in this case. The Court cited Wallace v United Grain Growers Ltd., [1997] 3 SCR 701, 1997 CanLII 332 (SCC):

Many courts have sought to compensate the reliance and expectation interests of terminated employees by increasing the period of reasonable notice where the employer has induced the employee to “quit a secure, well-paying job … on the strength of promises of career advancement and greater responsibility, security and compensation with the new organization.”

…

Such inducements are properly included among the considerations which tend to lengthen the amount of notice required.

…

Not all inducements will carry equal weight when determining the appropriate period of notice. The significance of the inducement in question will vary with the circumstances of the particular case and its effect, if any, on the notice period is a matter best left to the discretion of the trial judge.

The Court commented how evaluating the impact of inducement is inherently a fact-specific legal exercise and must consider what was within the reasonable contemplation of the parties when the contract was formed. Specifically, there must be some evidence of a representation by the employer creating an expectation or reliance interest at the time the contract was made (see Sollows v Albion Fisheries Ltd., 2017 BCSC 376). But the amount of additional severance will vary on the exact nature of the evidence and the strength of the representation.

In Mr. Ferweda’s case, the Court found that the Celgar had made an inducement that Mr. Ferweda reasonably relied on. Specifically:

• Celgar recruited Mr. Ferweda. He had not been actively looking for a different job, nor did he respond to an ad. He was contacted directly by a recruiter hired by Celgar.

• Celgar attempted to make the job attractive by paying for Mr. Ferweda to visit their worksite. During this visit,

  • An employee of Celgar who had previously worked for Catalyst highlighted why working for Celgar was superior to working for Catalyst and expressly told Mr. Ferweda that Celgar hired for the “long-term”.

  • Another employee implied that the position was meant to be comparatively long-term.

• Mr. Ferweda only accepted Celgar’s offer after rejecting Celgar’s first offer, after which Celgar improved their offer.

Based on the totality of things said and done by Celgar at the time the contract was signed, the Court found that Mr. Ferweda reasonably believed that he was being offered an opportunity to potentially end his career with Celgar in a role which was comparable to Catalyst, but would offer greater job satisfaction and better remuneration and benefits.

Having found inducement, the Court assessed the impact of the inducement, along with the standard Bardal factors, namely the character of employment, the employee’s length of service, their age, and the availability of similar employment. The Court concluded that absent inducement, 5 months notice would have been appropriate. However, given Mr. Ferweda’s unique character of employment and his age, the Court increased the notice period to 12 months. The Court commented that because the inducement was not a promise of promotion, they applied a somewhat more modest increase.

Key Take Away for Employees

For an employee to prove they were induced away from secure employment, justifying an increase in notice or severance, it is not enough to be offered a better job. Rather, there must be something else the employer said or did to create an expectation upon which the employee relied.

But where a potential employer does say or do something to promise long-term employment to a prospective employee, and the individual resigns from their position to accept an offer of employment on that basis and is dismissed shortly thereafter, such inducement can materially increase the amount of notice or severance owed.

Key Take Away for Employers

This case highlights the importance of only making promises or assurances that can be kept, and having an enforceable contract which sets out clear expectations and entitlements for severance in the event of termination. With such clear language, an analysis of common law severance including an increase for inducing an employee away from secure employment could have been avoided.