Tricky Bonus Issues

Written on behalf of Peter McSherry

Requirement for Active Employment on Payment Date

A recent decision of the Ontario court dealt with a situation in which the employee had resigned his employment after December 31 of the relevant year. The company maintained a bonus plan which would normally have paid him a bonus sum for this time period, absent the facts which follow.

The company had a contract which required the employee to be in active employment on the date on which the payment was to be made. This payment date fell after the employee’s date of resignation and for this reason, the employer denied the payment.

It seems odd that a contract of this nature can be used to avoid payment of a sum which was clearly earned during the active period of employment.

This argument was, however, successful for the company. The Ontario Court of Appeal[1] basically said that the parties could define the terms by which the payment was to be “earned” as they pleased and denied the claim.

Bonus in Notice Period

On a related topic, the same court allowed a claim for a bonus not only for the time period up to the date of termination[2] but also for the post-termination notice period. The court stated that there must be in place a contract which denies the bonus claim for the severance period for the employer’s argument to succeed, where the bonus sum is an integral part of the compensation plan.

This is an important decision as the court overturned the first judge’s decision on this issue, which had denied this claim. Some earlier cases had ruled that the notice period must run to the end of the bonus cycle. For example, if the termination date was January 1 and the bonus period was the calendar year, then the argument had been that the notice period must run to the 12 month term to allow for the bonus claim. This theory was not used by the Court of Appeal as the bonus component was simply averaged into the notice period claim.

Confused?

These issues are far from straightforward. They can even more complicated when the employer denies the bonus claim on the notice period based on a contract. This argument then raised a multitude of employee rebuttals to the validity of the employment contract.

Get Advice, then Act

The issue of the resignation first raised above is a very simple one to correct, given proper advice.

The termination claim is more complicated, as the employee has no options, apart from suing. The bonus claim can be important and complicated,  If you are facing a question of such bonus issues, it is wise to take legal advice as soon as possible.

Situations of this nature shout out for competent legal advice. Get advice before you act. Contact the offices of Guelph employment lawyer Peter McSherry. We can help you determine whether you may have a claim due to a poisoned work environment or a constructive dismissal claim. Contact us online or by phone at 519-821-5465 to schedule a consultation.

[1] Bois v MD Physician Services

[2] This was the motion judge’s award at first instance