Canada: "Without Cause Terminations" And A Possible "Duty Of Reasonable Exercise Of Discretionary Powers"

In the fall of 2015, Madam Justice Yungwirth of the Alberta Court of Queen's Bench penned a decision that caused employers to take notice. In Styles v Alberta Investment Management Corporation, Justice Yungwirth built upon the Supreme Court of Canada's decision in Bhasin v Hrynew to introduce what the court referred to as a "common law duty of reasonable exercise of discretionary contractual power". In doing so, the court cast doubt on the enforceability of clauses in employment documents which purport to restrict the payment of bonuses to "active" employees only. The decision also raised a host of questions regarding deferred compensation plans, as well as "without cause" terminations more generally.

In the instant case, Mr. Styles was an investment manager with Alberta Investment Management Corporation ("AIMCo") from 2010 until his employment was terminated without cause three years later. His employment was governed by a written employment contract which provided that his employment could be terminated without cause, and set out a clear formula to use to determine the severance to be paid to him in that event. Mr. Styles' compensation was composed of not only base salary, but also Annual and Long-Term Incentives that were each governed by written plan documents and that had the potential to pay out substantial bonuses. With respect to the Long-Term Incentive Plan ("LTIP"), the documents contained wording in more than one place that required Mr. Styles to be actively employed at the time of payment in order to be eligible for the LTIP payment. Mr. Styles' employment was terminated without cause prior to the date that the first LTIP payments were to be paid. He was provided with severance in accordance with the written employment agreement, and did not receive any amounts on account of LTIP payments.

At trial, Justice Yungwirth reviewed the Supreme Court's decision in Bhasin and found there to be a basis for recognizing a common law duty of "reasonable exercise of discretionary contractual powers". She held that this duty required employers to exercise contractual discretion fairly and reasonably. Justice Yungwirth went on to examine two exercises of contractual discretion by AIMCo: first, the alleged discretion involved in denying Mr. Styles his bonus under the LTIP and second, the alleged discretion to terminate Mr. Styles' employment without cause. Justice Yungwirth found that because no reason was given for the termination, the employer acted unreasonably in exercising its discretion and should therefore be liable to pay Mr. Styles his bonus under the LTIP.

The Alberta Court of Appeal1 came to a different conclusion. In concurring reasons, the majority of the panel flatly rejected the concept of a duty of reasonable exercise of discretionary contractual powers. In any event, the Court of Appeal also found that AIMCo did not exercise any discretion. The Court of Appeal held that the language of the employment documents, properly interpreted, gave no right to the employee to receive a bonus unless the employee was actively employed on the vesting date. The awarding of an LTIP bonus did not involve any discretion on the part of the employer; either the condition for eligibility was met or it was not.

Going further, the Court of Appeal disagreed with the lower court's examination of the discretion involved in the decision to terminate Mr. Styles' employment. At trial, Mr. Styles argued that the reasonableness of the decision to terminate his employment depended on the employer showing some justification or reason for termination. The Court of Appeal clearly rejected this argument, along with any implication that reasons must be given to justify a without cause termination of employment in Alberta:

An employer can terminate the contract of employment on reasonable notice – no explanation need be given. The employee is entitled to notice or pay in lieu of notice and any other compensation provided for in the written employment contract.

Reconciling With Other Decisions

On first reading, the decision in Styles may seem to be at odds with other recent decisions from other jurisdictions2, particularly Paquette v TeraGo Networks Inc. In Paquette, the employee sued for wrongful dismissal and sought payment under a bonus plan that included an active employment condition similar to the provision in Styles. The Ontario Court of Appeal held that:

[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.

How then can one reconcile the very different results in these two cases? Paquette involved an employment contract lacking an express, written provision setting out the employee's entitlements in the event of a "without cause" termination. The employee brought a wrongful dismissal claim. The court awarded the plaintiff 17 months' notice, and was then required to quantify that award. Specifically, the court was called upon to decide whether the quantum should include an amount for loss of the bonus that the plaintiff would have been paid had he still been working during the entire notice period.

The Ontario Court of Appeal held that the wording in the plan documents did not clearly and unambiguously alter the employee's usual common law right to have his wrongful dismissal damages include all of the usual and integral aspects of the employee's compensation, including his bonus (which he would clearly have received had he been given working notice of 17 months).

In Styles, the employee had a written contract that expressly stated what the employee was entitled to in the event that he was terminated without cause. The employer paid this amount. Further, even had the employee in Styles been provided with full working notice (in distinction to pay in lieu thereof), he still would not have been employed at the date the deferred compensation was set to become payable. In this sense, Mr. Styles was not suing for wrongful dismissal. He was suing only for a failure to pay him amounts he claimed should be forthcoming to him under the LTIP policy.

What Does This Mean For Employers?

Employment lawyers ceaselessly lecture on the importance of having in place written employment agreements with clear provisions that precisely set out an employee's entitlements upon termination "without cause". Styles is an example of an employer who followed that advice and did everything right – it had a clear employment contract that said exactly what the employee should be paid if terminated without cause, and an LTIP policy document requiring that the employee be "actively employed" in order to get the LTIP. It then terminated an employee, and paid him out exactly as the employment contract and LTIP documents prescribed. Styles highlights, once again, the value of clear and reasonable written termination provisions. Not only do they provide clarity to both parties but, moreover, where the employer's deferred compensation plan contains careful language requiring "active employment", such termination provisions can also serve to insulate an employer from claims relating to loss of deferred compensation.


1 A Memorandum of Judgment concurring in the result was also penned by Justice Berger

2 For a review, see our earlier Communique on this topic titled " Avoiding Bonus Payments to Terminated Employees Just Got Tougher"

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.

Stephen Torscher
In association with
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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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