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Canada: Ontario Court of Appeal finds bonus is part of notice entitlement notwithstanding employee’s knowledge of employer policy to the contrary

André Singer was the President and General Manager of Nordstrong Equipment Limited’s East Division (“Nordstrong”). He had worked for Nordstrong for eleven years when, in December of 2016, the company terminated his employment without cause.

On a motion for summary judgment, the motions judge set the reasonable notice period at 17 months, spanning from December 2016 to April 2018. The motions judge found that Mr. Singer was entitled to a bonus for 2016, but not for 2017 or 2018. He reached this conclusion by relying on Nordstrong’s practice of awarding bonuses at the end of the fiscal/calendar year based on performance. As well, Mr. Singer was aware that Nordstrong did not include bonuses in determining notice entitlement. As a result, Mr. Singer would not have had a reasonable expectation of earning a bonus during the 2017 and 2018 fiscal years while he searched for alternative comparable employment. The motions judge also denied Mr. Singer’s claim for the loss of his benefit package since he had not proven that he had suffered an actual loss.

Justice Feldman, writing for the Court of Appeal, found Mr. Singer was entitled to receive his bonus during the entire 17-month notice period rather than merely the 2016 fiscal year.

First, Justice Feldman found the bonus was an integral part of Mr. Singer’s compensation package, which triggered the common law entitlement to compensation for a loss of bonus as part of his damages for wrongful dismissal.

Second, Justice Feldman determined that the parties did not contractually restrict Mr. Singer’s bonus entitlement on termination of employment. It was insufficient that Nordstrong had a policy not to pay any bonus after the termination of an employee’s employment (since the bonus was considered an incentive for employees to perform). It was also irrelevant that Mr. Singer knew of this policy.

No contracting out could occur without explicitly setting out the company policy in a document that governed the bonus payment scheme. Since this policy was not expressed in any enforceable document, Mr. Singer remained entitled to his bonus during the entire notice period.

The Court of Appeal also overturned the motions judge’s decision to deny Mr. Singer’s claim for loss of benefits. On a wrongful dismissal action, an employee may claim loss of benefits flowing from the dismissal even if the employee does not prove that he/she suffered a loss of the benefits. Therefore, it was sufficient that Mr. Singer demonstrated the replacement cost of his benefits; he was not required to provide evidence that he had actually incurred the cost of replacing those benefits.

Employers wishing to contract out of a bonus during a notice period are encouraged to consult your Canadian labour and employment counsel to ensure that bonus clauses are properly drafted.