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Must you include bonuses when calculating lost wages?

bonusesAn employee who has been dismissed without cause is entitled to damages based on the income that individual would have earned during a period of reasonable notice. “Reasonable notice” will differ from case to case, but is determined by a variety of factors at the judge’s discretion. When calculating the income that the employee is entitled to, many factors must be assessed, such as bonuses.

In the case, Bain v. UBS, the Ontario Superior Court of Justice tackled this very issue – whether bonuses are too be included when calculating the income that an individual would have earned during a period of reasonable notice. This case dealt with an employee of UBS who was employed for 14 years and was then fired as Managing Director, Head of Canadian Mergers & Acquisitions, upon ceasing the M&A arm of UBS in Canada. The employee was given less than a month notice and no bonuses for the year prior to his termination or the portion of the year that he was terminated.

Ultimately, the Court held that bonuses were an “integral part” of the employee’s compensation, rendering it necessary to include them in their calculation for lost income. In calculating the employee’s lost income, the Court decided to include the averaged sum of the bonuses received by comparable employees as a means of ensuring that the wrongfully dismissed employee received the bonus that he was owed.

UBS argued that, pursuant to the terms of employment, the payment of bonus was solely determined at the employer’s discretion. In other words, UBS claimed that they had no obligation to award a bonus at all. The Court disagreed, stating that simply because the bonus is awarded in the sole discretion of the employer, it does not mean that it can be done in an arbitrary or unfair manner. The Court confirmed that employer’s must follow a fair, identifiable process, when exercising their discretion to award a bonus.

Here, the Court verified the factors that a judge is to consider when determining whether a bonus is an “integral part” of the employee’s compensation. These factors include: (1) whether the bonus is received each year, although in different amounts, (2) whether the bonuses are required to remain competitive with other employers, (3) whether the bonuses were historically awarded and the employer had never exercised its discretion against the employee, and (4) whether the bonus constituted a significant component of the employee’s overall compensation.

Additionally, the Court also verified the factors that a judge is to consider when determining the “reasonable notice” that the employee ought to have received. These factors include: (1) the character of the employment; (2) the length of service of the servant; and (3) the age of the servant and the availability of similar employment.

What does all this mean? It means that where an employee has been wrongfully dismissed and has failed to receive the bonus that they are regularly entitled to, that employee will need to prove that the bonus was an “integral part” of their compensation in order to have the Court include an amount that represents their bonus when calculating their lost wages.

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De Bousquet PC Barristers and Solicitors

Civil Litigation Lawyers at De Bousquet PC Barristers and Solicitors
De Bousquet law offers experienced counsel and representation in multiple aspects of employment law, labour relations, commercial law and civil litigation. Jean-Alexandre De Bousquet, founder of the firm, interned for the Canadian Centre for International Justice, worked for an Ottawa law firm and pursued a career with the Attorney General of Ontario. In 2014, Jean-Alexandre was named one of Ontario's "leading experts" in human rights law by Legal Action Magazine. Jean-Alexandre handles cases related to wrongful dismissal, workplace discrimination, breach of contract, fraud and commercial disputes. Jean-Alexandre is fully fluent in French and English and represents clients before courts and tribunals using both official languages.Before the practice of law, Jean-Alexandre was a journalist at the CBC for 3 years. Other notable achievements include employment with the Canada Research Chair on Native Peoples and Legal Diversity, the Canadian Research Chair on Metis Identity and the Urban League, a U.S. civil rights organization. Jean-Alexandre has also published articles in prominent academic journals and presented papers at international conferences in Canada and the U.S.Read more here
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