Severance Pay and Inducement

When an employee is terminated from their employment, the severance pay calculation is based on a number of factors, including but not limited to age, years of service, job titles, availability of replacement employment, and inducement.

Inducement refers to a situation where an employee was recruited from a previously stable job posting in order to join a new company with the expectation of reasonably secure employment. A reasonable employee would not forgo years of service with a company, in order to join a new company for a short period of time, only to be terminated thereafter. Accordingly, be re-signing your rights from a previous employer, your severance entitlements will increase upon hiring at the new job.

One of the exceptions to a longer severance period resulting from inducement was argued in the case Nagribianko v. Select Wine Merchants (ONSC 2016 490), wherein an employee was recruited from a previous job posting but his new employment contract contained a probationary period, which expressly indicated that the “first three months of employment were probationary in nature, meaning that they would be a trial period to determine whether the employee was suitable for permanent employment thereafter.”

The Court found the wording in this probationary clause in the employment contract to be inconsistent with a finding of inducement. Where an employee reviews and employment contract and understands that they will not be hired on past the probationary period if they are not deemed suitable for the job, the argument will fail that they were induced to leave their previous job for long-term employment.  A probationary clause will not always negate an inducement argument, however, as it depends on the precise wording of the clause and other circumstances around the hiring decision.  Accordingly, it is imperative that an experienced employment lawyer is consulted if you have been recruited to sign a new employment contract or if you have been terminated from your new employment after being induced by to leave your previous employer.