In the last few months, there has been an influx of commentary on the enforceability of contractual provisions purporting to limit an employee’s bonus entitlements upon termination. Following the Ontario Court of Appeal’s seminal decisions in Paquette v. TeraGo Networks Inc. and Lin v. Ontario Teachers’ Pension Plan, much of this commentary has focused on the language needed to oust an employee’s implied right to their complete compensation package during the reasonable notice period. This focus on semantics has overshadowed one other consideration that remains instrumental to the enforceability of bonus provisions—the need to sufficiently communicate to employees the preconditions of bonus eligibility.
Employees who are terminated without notice can sue employers for the total compensation, including bonus payments, which they would have otherwise received during the notice period if reasonable notice had been given.
As the managing editor of The Human Resources Advisor and Human Resources PolicyPro, I am often asked for clarification on bonuses and employment/labour standards entitlements. Essentially, should bonuses be included in the calculation of vacation pay and public holiday pay entitlements, and why?