Court Weighs In On Whether Bonuses Should Be Paid During Notice Period Following Termination feature image

Court Weighs In On Whether Bonuses Should Be Paid During Notice Period Following Termination

When people are terminated from their jobs, they’re often entitled to reasonable notice if they weren’t fired for cause (such as for stealing from the employer). It may be easy for some people to calculate what their reasonable notice should be since it’s usually a number of weeks’ worth of salary (both common law and statutes apply). However, some people work with more complicated or unconventional forms of payment, including those who receive substantial bonuses. How are those calculated in terms of reasonable notice? This was a question recently addressed by the Court of Appeal for Ontario.

The employment history

The employee started working for the employer in 1978 when he was 25 years old. Following an acquisition in 1995, he continued to work there, making his way to the level of Senior Vice President. After 37 years of employment, he was terminated, without cause, following a dispute about the purchase and use or promotional sporting event tickets.

Following his termination, the employee sued the employer over two issues. The first was the amount of reasonable notice he was provided. The second was for his entitlement to bonuses during this period.

Lower court decisions

Before the case made its way to the Court of Appeal, the employee was successful in obtaining a summary judgment granting him 30 months reasonable notice as well as bonus pay during this period. The employer appealed both of these rulings.

Reasonable notice

The employer was successful in their appeal of the length of reasonable notice. The court reduced the notice period to 24 months. The court noted that if there are no exceptional circumstances at play, 24 months is the high end of the reasonable notice period. Even including the employee’s age, length of time with the employer, and senior position, the facts did not warrant a break from the traditional ceiling of 24 months. The court was critical of the motion judge’s remarks about seeing the employee through to the once-mandatory retirement age of 65, a factor the court noted was no longer relevant.

Bonus pay during the notice period

While the employee lost 6 months of reasonable notice at the appeal level, the court did not overturn the motion judge’s decision surrounding paying him a bonus during the period of notice. While there was contract language stating that bonuses were only payable during periods of “active employment,” the court found that since that language was not brought to the employee’s attention it could not be enforceable. This reinforces the rule at common law that employers must bring such contract language to the attention of employees if they wish to rely on that language to the employee’s detriment in the future.

When it comes to employment contracts and workplace policies, the employment team at HMC Lawyers is an invaluable resource for employers and employees. We offer exceptional and responsive service to help our clients avoid exposure to unnecessary legal risk and potential disputes.

For advice regarding employment contracts and workplace policies, call 1-800-480-3534 or contact us online to make an appointment.



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