Recent BC Decision Reminds Employers They Can’t Behave Like Sports Teams

The summer is coming to an end and for many people, that means the excitement of their favourite sports returning to action. Fans of the NHL, NFL and NBA are eagerly anticipating seeing their beloved teams back out there with all the new additions they made during the offseason.

For the non-sports fans reading this (and I do indeed pity you), the summer for many sports franchises is like a shopping spree where the teams compete with each other to sign as much new talent as they can afford. If your team wants to sign a new defenceman or quarterback, they can promise them the world and then crow to the media about their championship expectations.

Unfortunately, however, most employers can’t act like the Toronto Maple Leafs or New York Knicks (and not just because they lack infinite resources and delusional fanbases). Most employers have to be mindful about recruiting new talent and the promises they make in so doing. A recent BC Supreme Court decision reminds employers that recruiting someone with promises of greener grass could be costly if things don’t go as planned.

The Facts

In Ferweda v Mercer Celgar Limited Partnership, 2024 BCSC 844 (“Ferweda”), the Court considered a situation involving an employee who was recruited from a competitor where he’d worked for 27 years as an operation specialist. After a period of back and forth discussion, the employer eventually convinced Mr. Ferweda to leave his long-term employment by offering a slight promotion and salary increase of $10,000.

Notably. the employer also sold Mr. Ferweda by stating that it offered superior benefits, greater access to overtime pay and that it “hired for the long term”. When asked about this last item, the manager of human resources asked how long Mr. Ferweda how was prepared to commit to the employer (to which he replied at least five (5) years). Mr. Ferweda was eventually convinced by the pitch and accepted the new job staring in April 2018.

After less than 2.5 years, however, Mr. Ferweda’s employment was terminated on a without cause basis. The employer cited downsizing and provided Mr. Ferweda five (5) months’ severance.

Ordinarily, this amount of severance would satisfy most or all common law severance entitlements for an employee in Mr. Ferweda’s position. In this case, Mr. Ferweda argued that he was entitled to heightened damages because he was induced to leave his prior employment. He brought a wrongful dismissal claim on this basis.

Inducement

In Canadian employment law, “inducement” means a situation where an employer encourages or entices an employee to quit their current job to come work for that employer, generally with promises of better conditions, future opportunities, and the like. Where an employee leaves stable employment (especially with long service) under such inducement and then is terminated in a relatively short period afterward, this can drastically increase the Court’s assessment of their severance entitlements.

In considering whether legal inducement applies, the Court will consider a number of factors such as:

• the reasonable expectations of the parties;
• whether the employee sought out work with the prospective employer or was recruited;
• whether assurances of long term employment were made by the employer;
• whether the employee did due diligence/conducted their own inquiry into the company before accepting the position;
• whether the discussions between the parties amounted to more than normal “courtship” that occurs between an employer and a prospective hiree; and
• the length of time the employee remained in the new position (greater inducement where new employment is shorter).

The Decision

In this case, the Court found that the employer had induced Mr. Ferweda and that Mr. Ferweda reasonably relied on this inducement and thereby left his prior secure employment.

In coming to this decision, the Court noted that:

• The employer actively recruited Mr. Ferweda who was not looking for a new job at that time;
• The employer made efforts to make the job attractive to Mr. Ferweda including making statements to him about superior benefits and conditions;
• The employer representative specifically told Mr. Ferweda he would be hired for the “long term” and asked Mr. Ferweda questions suggesting the employer wanted him to commit for the long term; and
• Ferweda did not accept the original offer and only agreed after a higher salary was offered.

The Court stated that the five (5) months severance provided by the employer would typically meet the reasonable notice owning to Mr. Ferweda. However, in light of the finding of inducement, the notice period should be increased to twelve (12) months. The Court further stated this was a “modest” increase to the notice period and that it would have awarded an amount of up to 18 months if the employee had been offered something more akin to a job promotion.

Notably, Mr. Ferweda did not have a termination provision in his employment agreement which would presumptively have limited his severance entitlements to less than common law amounts. It seems likely that such a clause would have saved the employer from the liability stemming from its inducement as BC courts will typically honour validly entered clauses of this nature.

Takeaways

Employers are often tempted to recruit top talent, especially from successful competitors and where the market for experienced employees is very tight. It may be tempting in these scenarios to over-promise these individuals and potentially over-hire as well.

While understandable, such decisions may put the employer in a difficult and risky position if its business fortunes turn and workforce reductions become necessary later – or if the new employee turns out not to be a good fit.

Every company wants to sell itself as a top-calibre organization when recruiting talent but it’s best to leave the championship promises to our favourite sports teams. Smart employers will be cautious and manage the expectations of potential hires while still highlighting their best sides. Guaranteeing the Stanley Cup might feel good but most employees just want to play for a solid team.

That being said – go Leafs go. It’s our year (or so the inducement has led me to believe).

For more information or advice about employment issues in BC or Ontario, please contact Matthew E. McCarthy of Boughton Law’s Employment Group.