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Earned Bonuses Are Payable On Termination

In a recent case out of Ontario, Chambers v. Global Traffic Technologies Canada Inc., 2018 ONSC 2000, the court maintained that bonuses earned by an employee prior to termination or during the reasonable notice period are, in fact, payable to the employee despite their being terminated from his/her employment. Additionally, the court awarded nine months’ pay in lieu of notice for a relatively short-term employee of only 2 1/2 years.

The plaintiff, in this case, a 57-year-old General Manager of the defendant earned a base salary of $163,200.00 per year, a target bonus of $90,000.00, RRSP matching, a car allowance of $710.00 per month, four weeks’ vacation and extended health and dental coverage.  With respect to the bonus, the plaintiff claimed that it was an integral part of his remuneration, even though he had not attained the full amount of $90,000.00 at any time in the previous 2 1/2 years of his employment.  However, in 2017, the plaintiff was advised at a mid-year review that “indicated to me that all performance metrics were at the expected level for that point in the year, and I expected to reach 100% target achievement for the year” providing him with the expectation that his full $90,000.00 bonus would be received in 2017.

The defendant terminated the plaintiff’s employment in late 2017 on a without cause basis due to a restructuring of the business and provided a termination letter that provided, in exchange for a Full and Final Release, that the defendant would provide six weeks’ notice, reimbursement of the car allowance for the 6 week period, continuation of benefits for 2 weeks and continuation of extended health and dental benefits for the full six week period and continuation of the RRSP matching and outplacement services.  This termination package was declined by the plaintiff and he commenced an action for wrongful dismissal.

The Court’s Analysis

In its analysis, the Court held:

[59]  After a review of the Bardal factors and the cases relied upon by the parties, I consider all of the above evidence, including the following factors:

  1. Chambers is the most senior person for Global and has a senior managerial role with a significant remuneration;
  2. Chambers reports to VanDerBosch at Global LLC’s operations, not to anyone in Canada;
  3. Chambers is 57 years old; Chambers had a daily management of three dealer sales representatives and one technical support representative, maintaining relationships with contractors;
  4. Revenue at those regional offices (based on the information in the Incentive Plan) was not insignificant (targeted at approximately $6.3 million;
  5. Chambers only was employed for two years and six months, which is not a lengthy period (albeit in a senior position);
  6. There was the availability of similar employment, as demonstrated by Chambers seeking positions at approximately 280 jobs after his dismissal. There is no evidence that his work was “very specialized” or in a “narrow field of endeavour”; and
  7. Global did not provide Chambers with a reference letter.

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[61]           Based on my review of the Bardal factors, I fix the length of reasonable notice at nine months.

The court recognised two issues regarding bonus:

(1) Entitlement

With regard to entitlement to the bonus, the Court held that bonuses which were earned during the period prior to termination or would have been earned in the reasonable notice period are payable upon termination, even if payment of the bonus would have been outside the notice period.  Essentially, this means that non-discretionary bonuses earned in the period leading to the termination and during the reasonable notice period are part of the wages earned pursuant to the Ontario Employment Standards Act, 2000 and cannot be taken away even on termination of the employment.

(2) Quantum

The court addressed quantum of the bonus by looking at the prior bonuses awarded in the plaintiff’s previous work history and determined that a fair approach would be to average the bonuses received over the last 2 1/2 years or $45,000.00.

Important Reminder About Reasonable Notice

This case is a useful reminder to employers that even short-term, higher level employees will be entitled to a higher reasonable notice than would otherwise be provided to lower level employees or employees with a lower skill set.  Here, the court, relying on the Bardal Factors and held that, despite only having 2 1/2 years of service, the older, higher level employee was entitled to a significant reasonable notice of 9 months.  Additionally, the case serves as an example that non-discretionary bonuses earned in the period leading to the termination and during the reasonable notice period are payable to the terminated employee regardless of the termination.

 

Scott Chambers is an employment and human resources lawyer at Doak Shirreff Lawyers LLP.  Scott can be reached at 250-979-2527 or at [email protected] for any employment matters.  Additionally, you can follow Scott on Twitter at @DSEmploymentLaw or on LinkedIn at www.linkedin.com/in/scottdchambers

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