In 2015, the Ontario Superior Court considered whether an
employee who was awarded a 17-month notice period was eligible for
a bonus payment under the employer's bonus policy, which
required "active employment" at the time of
payout. In Paquette v. TeraGo Networks Inc., 2015
ONSC 4189 ("Paquette"), the Superior Court
decided that, even though the plaintiff's bonus was an integral
part of his compensation package, he was not considered an
"active employee" during the notice period, and as such,
he was not eligible for a bonus payment under the policy during the
Many employers have been relying on Paquette since its
release to argue that employees are not entitled to bonuses during
the applicable notice period where their policies require an
employee to be "actively employed" at the time of bonus
Mr. Paquette recently appealed the Superior Court's
decision, arguing that the judge erred in finding he was not
entitled to bonus payments under TeraGo Networks Inc.'s
policy. The Court of Appeal released its decision on August 9,
2016, reversing the Superior Court's judgment, finding that Mr.
Paquette was entitled to bonus payments during the 17-month notice
period under the employer's policy.
As the first step in its analysis the Court of Appeal considered
Mr. Paquette's right under the common law to be kept whole
through the notice period, including his entitlements to bonuses
that he would have otherwise received had his employment not been
wrongfully terminated. The Court commented that the bonus was
integral to his compensation, and that, had he remained employed
during the 17-month notice period, he would have been eligible to
receive bonus payments under TeraGo's policy.
As a second step in its analysis, the Court of Appeal considered
whether there was "something in the bonus plan that would
specifically remove the appellant's common law
entitlement". In other words, is policy language
sufficiently clear to displace an employee's entitlement to
bonus payments during the notice period, and if it is not
sufficiently clear, the employee is entitled to bonus payments that
would have otherwise been received during the applicable notice
The Court decided that, in the case of TeraGo's bonus
policy, the language was insufficient and did not prevent Mr.
Paquette from receiving compensation for bonuses he would have
otherwise received during the notice period, had his employment not
been wrongfully terminated. The Court further stated, "A
term that requires active employment when the bonus is paid,
without more, is not sufficient to deprive an employee terminated
without reasonable notice of a claim for compensation for the bonus
he or she would have received during the notice period, as part of
his or her wrongful dismissal damages."
For all of these reasons, the Court of Appeal awarded Mr.
Paquette a bonus payment for 2014 and compensation for the lost
opportunity to earn a bonus in 2015.
It is clear from the Court of Appeal's decision that simply
indicating an employee must be actively employed at the time of
bonus payout in order to be eligible for a bonus is not sufficient
to displace an employee's right to be kept whole during the
applicable notice period.
In light of the Court of Appeal's decision, employers will
want to review their bonus policies to ensure the language goes
beyond merely stating that active employment is required to be
eligible for bonus payments. Specifically, employers will want
to ensure their policy language sufficiently removes or limits an
employee's common law right to bonus compensation during any
notice period, particularly where the employer's bonus program
makes up an integral part of its employees' compensation
Labour and employment law had some interesting developments in 2016. What follows are a few highlights from the last year and an introduction to an issue that may attract significant attention in 2017.
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