Can a Bonus Requiring “Active Employment” be owed during the Reasonable Notice Period after a Wrongful Dismissal?
The appellant commenced an action against the respondent for wrongful dismissal after the parties failed to agree on a severance package. The parties agreed to have the matters of determining a reasonable notice period, damages and any issues related to compensation, lost bonuses and mitigation of damages be decided on summary judgement.
The motion judge found the reasonable notice period was seventeen (17) months and that the appellant was awarded damages based on his base salary and benefits that he would have received during that seventeen (17) month period. The motion judge denied the appellant’s claim for lost bonuses.
The Ontario Court of Appeal’s Decision
As such, and relying on “[t]he basic principle in awarding damages for wrongful dismissal is that the terminated employee is entitled to compensation for all losses arising from the employer’s breach of contract in failing to give proper notice” the Court noted that bonuses will typically be included in the compensation owed during the notice period. (para 16).
The Court found that the appellant’s participation in the bonus plan was an integral part of his compensation, and therefore had a common law right to have it included in his termination compensation.
Second, the Court assessed whether there was anything in the bonus plan which would limit the appellant’s common law right to have bonuses included in the compensation during the notice period. The Court found that the language used in the bonus plan was insufficient to disentitle the appellant’s common law entitlement. In consideration of the related jurisprudence and the parties’ positions the Court stated, “[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.” (para 47).
Therefore, the Court concluded that the appellant was entitled to damages which included compensation for loss of bonus in 2014 and the lost opportunity to earn a bonus in 2015.
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