Employers often assert that a terminated employee is not
entitled to a bonus for the termination year. A decision of an
Ontario court may put a small qualification on that assertion.
Employers should review their bonus policies in light of this
The employer terminated the employee's employment on May 25,
2010 on a without-cause basis. On June 18, 2010 – within the
employee's four-week Employment Standards Act notice period
– the employer announced its profit sharing bonus for the
recently-ended fiscal year and paid it out. The employer did not
pay that bonus to the employee. The employee had been paid the
bonus for her three previous years of employment. The bonus was a
"very significant financial part of her overall
Mr. Justice Ricchetti of the Ontario Superior Court of Justice
held that section 61(1)(a) of the Employment Standards Act
"permits the employer to terminate without notice but only if
the employee receives what the employee would otherwise been
entitled to receive from the employer under the terms and
conditions of employment during the statutory notice."
The judge held that under the employer's bonus plan and
practices, the decision as to whether to award profit sharing at
all may have been discretionary, but once the bonus had been
declared, the employer had no discretion to exclude a particular
employee from entitlement. As such, all employees who were employed
on June 18, 2010 were entitled to the profit sharing bonus. Because
that date was within the employee's four-week Employment
Standards Act notice period, she was deemed to be
"employed" at that time, and was thus entitled to the
profit sharing bonus payment. An employer memo, issued a few months
earlier, to the effect that only "active" employees were
entitled to the bonus, did not override the statutory obligation to
pay the bonus to the employee.
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