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Court ruling making it harder for employers to avoid paying bonuses to workers dismissed without cause

bonusEmployees often rely on bonuses as a big part of their income and work hard throughout the year with the understanding that the efforts will be rewarded with a well–earned bonus. Employers on the other hand often attempt to limit the employee’s entitlement to bonuses and other incentives after termination, by including special contractual limitations in the employment and benefit plan contracts of the employee. In two recent decisions by the Ontario Court of Appeal the court has made it significantly more difficult for employers to avoid paying bonuses to wrongfully dismissed workers. [1]

In both cases the employees were wrongfully terminated and the employer refused to pay bonuses to the employees, because the employment contracts provided that the employee must be actively employed at the date of the bonus payment in order to be eligible to receive it. The employees filed wrongful dismissal suits. The Ontario Court of Appeal held if the bonus is an integral part of the employee’s compensation, it would not be fair to allow the employee to be deprived of the bonus, only due to the fact that the employee was dismissed prior to the payment date. The court reasoned that the employees’ claims were not strictly for the bonus itself, but for the contract damages as compensation for the bonus, which the employee would receive but for the wrongful dismissal. This is because the bonuses would be earned during the reasonable notice periods.

While definitely a victory for employee rights, the Court refused to fully protect employee bonuses, as the Court acknowledged that the employment contract may provide for limitations of bonus and incentive plan payments after termination, and wrongful termination. In both cases the employees won because the language in the contract was not considered enough to take away employee’s rights, or there was no explicit consent to these provisions. Unfortunately the decisions do not provide guidance on what is the standard required for the waiver of the incentive right by the employee, but the Court did suggest that unambiguous and clear contractual language would likely be enough. These cases do however represent an important step for employee rights, and will make it more difficult for employers to deprive wrongfully dismissed workers of their entitlements.

[1] Paquette v. TeraGo Networks Inc., 2016 ONCA 618, Lin v. Ontario Teachers’ Pension Plan, 2016 ONCA 619

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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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