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A judge in BC has ruled that a unilateral change to an
employee's bonus was constructive dismissal: Piron v. Dominion Masonry. That was
despite the employer's plea that the bonus was
discretionary, and despite the evidence that the bonus varied
widely from year to year and project to project.
The case highlights the need for employers to be careful about
how incentive compensation is determined, especially if they want
to be able to claim it is discretionary in any way.
James Piron was a 44 year old masonry foreman who had worked for
Dominion Masonry for 19 years. He started as a mason but became a
foreman within a few years. He began to earn significant bonuses
which were based on the size and complexity of the projects.
Trouble began after making some very sizeable bonuses on large
projects. The economic downturn started to bite and the following
projects were much smaller. The employer tried to establish smaller
bonuses but couldn't get Piron's agreement. They
then discussed, but failed to agree, on ideas of part ownership or
profit sharing through a new division. The employer was eventually
frustrated and angry, said it was "tired of all this bull
shit" and simply told Piron he could take his $38 per hour
without bonus or move on to something else.
The court decided that negotiating a bonus for individual
projects had become an accepted process and a significant feature
of Piron's employment. The economic circumstances and the
size and complexity of the projects were relevant to what was
negotiated, but that did not give the employer the right to
unilaterally change a significant feature of the employment
contract. The hostility in the relationship at its end meant that
it was not necessary for Piron to stay at work at his hourly wage
in order to mitigate his damages. He was awarded 15 months.
It is very hard for significant bonuses to be considered
discretionary and within the power of the employer. But if that is
the goal, it can be done. It requires clear contractual language
and a clear annual, or project by project, process by which the
incenctive compensation is set, calculated and paid. Anything less,
and it is likely to be considered an important feature of the
employment contract that is not subject to unilateral change.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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