Canada: Employer Fails To Pay $328,000 Bonus, Employee Sues, Everyone Loses: A Review Of A Recent Constructive Dismissal Decision

Last Updated: January 25 2016
Article by Geoffrey Breen

What do you think one of your employees might say if you decided not to pay over $300,000 in owed compensation? Well, the Ontario Superior Court of Justice recently considered just that, and concluded that the employee did not reasonably respond in alleging constructive dismissal of employment. But, of course, it's not so simple.


Chapman v. GPM Investment Management and Integrated Asset Management Corporation1 involved a constructive dismissal claim brought by the former CEO of the defendant, GPM. In his position, Mr. Chapman enjoyed remuneration in excess of $1 million per year.

Despite his senior position and substantial remuneration, the terms of Mr. Chapman's employment were set out in a relatively informal memorandum of understanding (the MOU). The key term of the MOU to this case was the bonus clause, which provided for an annual bonus equal to 10% of pre-tax profits, subject to certain specified exemptions.

Mr. Chapman's claim arose from events in 2011, when GPM divested itself of a land interest that was considered a one-off investment such that the capital gains realized from the sale were considered to fall outside of the definition of "pre-tax" profits for the purposes of the MOU. In light of this, the capital gains were not included in Mr. Chapman's bonus calculation, a decision that meant that Mr. Chapman would miss out on payment of $328,862.

Mr. Chapman disagreed with GPM, taking the position that the failure to pay him the significant bonus was a fundamental breach of the terms of his employment, and therefore constituted constructive dismissal. As a result, Mr. Chapman brought his action seeking, among other things, wrongful dismissal damages in the amount of $3 million and payment of his $328,862 bonus.

In considering Mr. Chapman's claim, the Court applied the two branch test for constructive dismissal, as recently explained by the Supreme Court of Canada,2 which asks:

  1. Has the employer unilaterally breached a term of employment such that a reasonable person in the position of the employee would conclude that an essential term of employment is being substantially changed?

  2. Has the employer engaged in a course of conduct that, when viewed in light of all of the circumstances, would lead a reasonable person to conclude that the employer no longer intends to be bound by the terms of the employment contract?

On the facts of this case, the Court agreed that the profits earned ought to have been included in determining Mr. Chapman's bonus. Accordingly, the failure to pay Mr. Chapman a $328,862 bonus from the sale of the land was a breach of the terms of his employment.

However, the Court did not agree that this failure to pay amounted to constructive dismissal of Mr. Chapman's employment. While the bonus ought to have been paid, it was the result of a divergence in the interpretation of the MOU's bonus clause as it applied to a one-off transaction. There had been no actual alteration to the terms of employment that would reduce Mr. Chapman's compensation on a permanent basis and, in fact, the evidence established that all parties understood that Mr. Chapman's employment and compensation would otherwise continue unchanged. Further, there was no other conduct by the employer to support a conclusion that it no longer intended to be bound by the employment relationship.

The Court had little sympathy for Mr. Chapman's argument that it was untenable for him to sue his employer for the failure to pay his bonus and continue working, and thus constructive dismissal was the only reasonable position available to him. To this, the court noted that Mr. Chapman could have pursued further discussions with respect to the bonus or sought mediation and/or arbitration on this issue. While a Court may come to a different conclusion in this respect if considering a less sophisticated employee, it was also noted more generally that an employee can in fact sue for damages without alleging constructive dismissal.

While Mr. Chapman's constructive dismissal claim failed, it is important to note that GPM was still ordered to pay Mr. Chapman his $328,862 bonus. Further, GPM had counter-claimed against Mr. Chapman for over $1.6 million in relation to an alleged breach of his duties while employed. Not only did this claim against Mr. Chapman fail, the Court concluded that GPM's parent company, IAM, was obligated to indemnify him for his defence costs pursuant to a directors' and officers' indemnity it had provided to him during his employment.


  1. Constructive dismissal can arise both when an employer breaches a single substantial term of employment or engages in a course of conduct that, when added up, demonstrates an intention to no longer be bound by the employment contract.  
  2. The test for constructive dismissal is an objective one. Neither the employee's perceptions nor the employer's motives will be persuasive against objective evidence as to how a reasonable employee would have reacted in the circumstances.
  3. Absent other compounding conduct by the employer, a onetime non-payment of a bonus is unlikely to constitute constructive dismissal.
  4. Where an employer's breach of the terms of employment does not give rise to constructive dismissal, an employee may still have the right to sue for damages; an awkward proposition for an ongoing employment relationship. 

In the end, this decision demonstrates how a constructive dismissal claim can be a "lose-lose" situation for employer and employee. For this reason, alternative dispute resolution options are often worth exploring before engaging in full out litigation, particularly if the employment relationship is one you wish to maintain.


1. 2015 ONSC 6591

2. Potter v. New Brunswick (Legal Aid Services Commission), [2015] 1 S.C.R. 500

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Geoffrey Breen
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions