By now we all know that Ontario employers are normally required
to provide employees with reasonable notice of termination or pay
in lieu thereof when terminating an employee without cause. What is
often disputed in the wrongful dismissal context is whether
employees have a right to bonus-related compensation upon
To minimize exposure, employers have often included language in
their bonus policies requiring employees to be "actively
employed" at the time the bonus is paid in order to be
eligible for the bonus.
Until recently, it was a commonly held belief among employers
that with the inclusion of this type of language, an employee's
right to compensation for bonuses that would have been paid during
the employee's reasonable notice period upon termination
without cause could be avoided.
However, the Ontario Court of Appeal in Paquette v. TeraGo Networks Inc. and
Lin v. Ontario Teachers' Pension Plan,
recently held that a term in a bonus policy requiring active
employment, without more, is not
sufficient to deprive an employee terminated without reasonable
notice of compensation for the bonus she or he would have received
during the notice period.
The Court in TeraGo set out the process for determining
whether an employee is entitled to bonus compensation upon
 The first step is to consider the
appellant's common law rights. In circumstances where, as here,
there was a finding that the bonus was an integral part of the
terminated employee's compensation, Paquette would have been
eligible to receive a bonus in February of 2015 and 2016, had he
continued to be employed during the 17 month notice
 The second step is to determine whether
there is something in the bonus plan that would specifically remove
the appellant's common law entitlement. The question is not
whether the contract or plan is ambiguous, but whether the wording
of the plan unambiguously alters or removes the appellant's
common law rights.
 In summary, the question in this case was not
whether the bonus plan was ambiguous, but whether the wording of
the plan (which in this case formed part of the appellant's
employment contract) was effective to limit his right to receive
compensation for lost salary and bonus during the period of
So what does this mean for Employers? The Court of Appeal's
decisions in TeraGo and Lin have left many bonus
policies in Ontario without protection for employers as it relates
to preventing dismissed employees who have been provided with pay
in lieu of notice from claiming the bonus they would have been paid
had working notice of dismissal been provided.
The lawyers at CCPartners are well versed in navigating employee
terminations as well as drafting and revising employment agreements
including bonus provisions and policies that will withstand
judicial scrutiny and reduce exposure for employers. For instance,
Susan Crawford, successfully litigated a case in 2015
on behalf of National Money Mart before the Superior Court of
Ontario where an employee was denied significant bonus compensation
on termination due to the clear language he agreed to in his
employment agreement that limited his rights to bonus upon
dismissal. You can read our blog about that decision
here. Click here for a list of experienced lawyers at
CCPartners who can help.
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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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.
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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.
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