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Employers still liable for bonuses during notice period

The recent decision of the British Columbia Supreme Court in Szczypiorkowski v. Coast Capital Savings Credit Union is not particularly groundbreaking, but it does affirm a number of important points for employers. They include:

  1. Failing to provide a dismissed employee with a letter of reference (and verbal references) “is not in and of itself enough reason to lengthen what is otherwise a reasonable notice period,” but does have “significance within the overall context of the Bardal factors” and is therefore a relevant consideration in determining the length of notice.
  2. Where an employee regularly received a bonus in the past, it is reasonable to assume that the employee would have continued to receive the bonus if she or he had continued to be employed, and is therefore entitled to receive such a bonus as part of the pay in lieu of notice of dismissal.
  3. Where judgement is obtained before the period of reasonable notice has ended, the court can “discount” the amount awarded, but may choose not to do so where it is unlikely that the individual will obtain new employment before the notice period expires.
  4. Alleging just cause for dismissal, but withdrawing that allegation prior to trial, will not result in an award of punitive or other damages where the court is satisfied that the defendant was acting reasonably and in good faith.

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In this case, the plaintiff was 62 years old and had been employed by the defendant for 18 and a half years. At the time of dismissal, his title was Senior Manager, Commercial Real Estate Lending.

One day in October 2010, the plaintiff, Szczypiorkowski, sent an email message to approximately nine other employees, including his immediate supervisor, which contained inappropriate jokes of a sexual nature. The email breached the employer’s “Code of Ethics and Business Conduct” and related policies. Within a short period of time, the company undertook an investigation. The plaintiff admitted sending the email and acknowledged that he “probably” should not have done so, although he maintained that he had no intention of offending anyone and simply wanted to “lighten their day.”

The company concluded that it had just cause to dismiss the plaintiff, and proceeded to do so. As a result, the plaintiff did not receive any notice or pay in lieu thereof and was ineligible for employment insurance benefits.

The plaintiff commenced an action for wrongful dismissal. In December 2010, the defendant employer withdrew its defence of just cause in the litigation, but continued to maintain that it acted reasonably in concluding that the plaintiff’s conduct was just cause for termination. The employer issued a revised Record of Employment at that time and also provided the statutory minimum pay in lieu of notice.

As the defendant had withdrawn its position that it had just cause for dismissal, the primary issue at trial was the amount of notice to which the plaintiff was entitled. Given all of the circumstances, the Court concluded that the reasonable period of notice was 18 months. As part of its assessment, the Court considered the fact that the defendant had not provided a letter of reference. While the Court found that there is no obligation upon an employer to do so, the Court did agree that the failure can be a factor in assessing the notice period.

One of the issues that arose was how to treat the annual bonus. The defendant referred to its bonus guidelines, which require that “the employee must be in the employ of the Credit Union … in order to be eligible to participate.” As a result, the defendant’s position was that the bonus should not be included in the calculation of pay in lieu of notice. However, the Court found as follows:

Based on Mr. Szczypiorkowski regularly receiving a bonus in the past, it is reasonable to assume that he would have continued to receive a bonus if he had continued his employment with the defendant.

The Court also considered the previous case of Ferguson v. Kodak Canada Inc., where the Court, in considering a similar bonus clause, held has follows:

In my view, the clause was not designed to meet the situation of a wrongfully dismissed employee who was deprived of the opportunity to work. He is entitled to be compensated by an award of damages that puts him in the position he would have been in had reasonable notice been provided.

Given the reasonable expectation that the plaintiff would have received a bonus, the Court ordered that it be included in the damages award.

This case does have some positive aspects for employers, including the fact that withdrawing allegations of just cause prior to trial will not necessarily result in an award of punitive damages. However, the case is a warning that employers should be cautious when they choose not to offer letters of reference. As I have said in the past, there is usually no good reason not to offer references to dismissed employees, particularly where allegations of just cause are not made or maintained. While employers should never be dishonest in their references, they can usually find positive things to say about almost any employee.

In addition, the case contains another comment on the often contentious issue of how to treat bonuses when it comes to pay in lieu of notice. Employers should not assume that their obligation ends on the date that the individual is dismissed. That said, well drafted policies and properly executed dismissals can prevent liability for future bonuses in appropriate circumstances.

Stuar Rudner
Miller Thomson LLP

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Stuart Rudner

Employment Lawyer at Rudner MacDonald LLP
Stuart Rudner is a leading HR Lawyer and a founding partner of Rudner MacDonald LLP, a firm specializing in Canadian Employment Law. He provides clients with strategic advice regarding all aspects of the employment relationship, and represents them before courts, mediators and tribunals. He is the author of You’re Fired! Just Cause for Dismissal in Canada, a textbook and database of summary dismissal cases published by Carswell. Read more
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2 thoughts on “Employers still liable for bonuses during notice period
  • Thanks Kellie. Hopefully you can convince your client of the benefits of providing a positive reference.
    Stuart

  • Kellie Auld says:

    Excellent timing on this post. I am just assisting a client with a dismissal and the topic of reference letters came up. I recommended, as you say, that one be given. In my case it was a termination without cause.