CHAUDHRI: When poaching goes wrong – the hidden costs of top talent

Recruiting top talent to join your company? Or, are you an employee feeling like you’ve been sold a pipe dream only to be terminated shortly after?

Inducement may be the most important employment law concept you have never heard of.

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If you follow the wearable tech space, you may have seen the recent news that Bryan Lynch, Apple’s head hardware engineer overseeing home devices, left the tech giant to join Oura. For those who have yet to give in to the wearable tech movement, Oura makes the Oura Ring, a sleek, sensor-laden ring that tracks personal health metrics, similar to the Apple Watch.

For tech enthusiasts, Lynch’s move from Apple to Oura sparked a number of theories about Oura’s suite of new tech and products.

For employment law, the move raises interesting (or not so interesting) contractual and legal issues.

Transitions like Lynch’s happen all the time in competitive industries. A rival company finds a key senior employee, makes an attractive offer, and the employee jumps ship.

What does not always get discussed, however, is the legal risk and exposure attached to the recruitment of top talent.

In Ontario, the concept of inducement arises when an employer actively recruits an employee away from secure, long-standing employment. The concept is straightforward: if you convince someone to leave a stable job with promises of a better opportunity and you later terminate that person without cause, the courts will attach liability to the inducing employer that may include recognition of years of service well before the date of employment started.

Inducement is a factor courts consider when calculating reasonable notice under the common-law analysis. A court may find that an employee who was lured away from secure employment deserves a longer notice period than they would have otherwise been awarded.

The rationale is that the employee took a real risk in leaving and the inducing employer should bear some responsibility for that.

Many employees who are terminated soon after an inducement claim they were happy and securely employed and were not looking for greener pastures. It was only because of the inducement – which can often take the form of a long courtship of coffees, dinners and interviews – that the employee was lured away.

The concept of inducement may cause some stress for those in the recruitment space. However, courts have identified what actions would be seen as inducement, rather than passive recruitment.

For example, a job posting that an employee responds to on their own carries far less legal weight than a targeted approach where the employer sought out a specific individual, made representations about the role, and wined and dined them away from secure employment and into a role that is seemingly more promising.

Put simply, the more aggressive and targeted the recruitment, the stronger the inducement argument becomes.

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For high-level executive hires like a senior hardware engineer from Apple, the stakes are especially significant. These individuals are often leaving behind generous compensation packages, equity and job security.

If Oura sold Lynch on his dream role, pulling him away from his cushy Apple position, only to let him go a year or two later, a court could increase the notice period by months above what would have ordinarily been awarded. This of course all depends on the nature of the contract Lynch signed and whether or not Oura recognized his previous years of service at Apple (a common request during an inducement) and whether or not he was offered a signing bonus to recognize equity he may have left on the table.

The good news for employers is that inducement is not an automatic finding. Courts weigh it against other factors, and there are practical steps that can reduce or eliminate the risk.

So, how can employers protect themselves from the inducement trap? A well-drafted employment agreement is the first line of defence. If the contract contains a clear and enforceable termination clause that limits notice or severance to the minimums under the Employment Standards Act, 2000, a court may be constrained to that amount regardless of inducement.

Probationary periods are another commonly discussed tool, but their effectiveness here is limited. A probationary period generally allows an employer to terminate for non-performance without providing common law notice during the probation window.

It does not, however, strip an employee of their statutory entitlements, and it does not automatically neutralize an inducement argument. If anything, terminating an induced employee during a probationary period may still attract scrutiny if the circumstances suggest the hire was made in bad faith or the termination was arbitrary.