An employee in Ontario was awarded bonus payments for the
applicable reasonable notice period following a without cause
termination despite the bonus plan's express terms that
personal and company objectives must be met and the employee must
be actively employed.
Paquette was terminated without just cause from his employment
as Director, Billing and Operations Support Services for TeraGo
Networks Inc. He had been employed with TeraGo for approximately 14
years and he was 49 years old at the time of his dismissal. There
was no contract of employment governing his notice period so the
trial judge determined that 17 months would be the applicable
period pursuant to the common law. Paquette was awarded damages for
his salary and benefits for that time, but the trial judge
concluded that Paquette would not be entitled to bonus payments
that would become due during the notice period because he would not
be actively employed during that time. Paquette successfully
appealed this ruling.
TeraGo's bonus plan stated that bonuses were available
an employee is actively employed by
TeraGo on the date of a bonus payout;
the employee met his or her personal
objectives, determined by the manager and approved by a
TeraGo's performance met the
corporate objectives set by its Compensation Committee.
The Court of Appeal clarified that Paquette was not claiming the
bonuses, which were governed by the plan, but instead he was
claiming damages for the employer's failing to provide
reasonable notice. An employee has a right to work and in exchange
to be paid and provided with benefits in the usual course during
the reasonable notice period. If the employer does not provide such
an opportunity, the employee is entitled to the damages that would
put the employee in the same financial position he would have been
in had reasonable notice been given. Since the court found that
Paquette would have received the bonuses had his employment
continued during the reasonable notice period, he was entitled to
the equivalent to these sums.
Lesson for Employers
Where there is no employment contract, the employer-employee
relationship is governed by the common law and employees are
entitled to the common law reasonable notice period when terminated
without just cause. If the employer does not provide the employee
with this amount of working notice, employees are entitled to
damages equivalent to their salary and benefits for the outstanding
notice period. Where bonuses are an integral part of the
employee's compensation package, employees are also entitled to
the equivalent of the bonus payments they would have received if
they had continued in their employment during the notice period.
This can apply in some circumstances even where bonuses are
expressly stated to be discretionary. Employers should consider
providing working notice for the reasonable notice period.
Carefully crafted employment contracts can also clarify and
substantially reduce employers' liability in cases of without
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 Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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).