OCA Says Future Bonus Payments Are Not Wages:

In Bois v MD Services ( 2017 ONCA 857) the Ontario Court of Appeal reviewed the situation where an employee resigned after the end of the calendar year in which the bonus was based upon but before the payment date had occurred.

The relevant clause in the bonus plan reads as follows:

In any given year, you must be a permanent employee of the CMAH Group of Companies on December 31 of the year for which the incentive is paid and continue to be so employed on the payment date(s) to receive a payment. Any employee who is no longer employed with the organization or has given notice of termination prior to the payout date will not be eligible to receive a payment.

The Plaintiff’s argument was as follows:

The appellant submits the motion judge erred in her interpretation of ss. 11(5) and 13 of the ESA, which state:

11(5) If an employee’s employment ends, the employer shall pay any wages to which the employee is entitled to the employee not later than the later of,

(a) seven days after the employment ends; and

(b) the day that would have been the employee’s next pay day.

13(1) An employer shall not withhold wages payable to an employee, make a deduction from an employee’s wages or cause the employee to return his or her wages to the employer unless authorized to do so under this section.

[10]      The appellant contends that where a bonus has been awarded for a year, but at the time of the employee’s resignation future bonus installments remain to be paid-out, s. 11(5) of the ESA effectively operates to accelerate the employer’s obligation to pay-out future installments, notwithstanding language in an incentive plan requiring the employee to be actively employed at the date of any future pay-outs. To the extent that the terms of the VIPs sought to disentitle the appellant to the future installments, they were void as they contravened s. 13(1) of the ESA.

The Court however found under the language of the plan, the bonus payments were not ones that the Plaintiff was ” entitled to” as the Court held that:

It was open to the parties to agree how and when any bonus was declared, earned, accrued and would be payable: Kielb v. National Money Mart Company, 2017 ONCA 356 (CanLII), at para. 12.

By the terms of the VIPs, the appellant was not entitled to the three bonus installments whose pay-out dates fell well after the date of his resignation. While those three installments would constitute wages payable upon each of the future pay-out dates, they were not “wages to which the appellant [was] entitled” when he resigned and his employment ended. Accordingly, we see no basis to interfere with the motion judge’s conclusion that where, as in circumstances such as those of the present case, the entitlement to an incentive plan payment does not arise until after an employee’s resignation or the expiration of the reasonable period of notice of termination, a plan’s requirement that the employee be actively employed at the time of a future pay-out does not contravene s. 11(5)of the ESA.

[17]      Nor does such an active employment provision contravene s. 13(1) of the ESA, as the future pay-outs do not constitute “wages payable to an employee” at the time of his resignation.

I have trouble with this decision for a number of reasons:

The Court said that the parties can decide when a bonus would be earned. Since the definition of “wages” in section 1 of the ESA includes bonuses as wages, according to this decision, the parties can define for themselves when a wage is earned, even if their private definition differs from the common  use of the same word in a statute.

Imagine that the parties had an agreement which said as follows:

Your wage will be $5,000 per month, payable on the last day of each calendar month. However you are only entitled to that payment  if  you are actively employed on the last day of that month. Therefore if you die, resign, or are terminated for wilful misconduct before the last day of the month, you will not receive $5,000 for that month. If you are not employed as of the end of the month, instead of receiving $5,000 for the month, you will only receive the minimum wage as prescribed by the Employment Standards Act of Ontario, which is currently $14.00 per hour.

According to the OCA, this clause would  be enforceable as the parties get to decide under what conditions the employee is entitled to his or her wages.

I believe that the Court failed to appreciate that there  is a fundamental difference between when you earn an entitlement and when that entitlement is payable.

Having earned the entitlement by performing all that is required of you, you may agree to defer being able to demand that payment until a later date. For instance, many commission plans say that your commission is earned on orders shipped in one month and payable on the 25th of the month following. If you quit work on the 2nd day of the month, you would have earned the commission but you could not legally enforce that entitlement until the 25th of that month.

If  I bought a car from you today for $20,000 and agreed to make payment for it in 30 days, it would  be commonly understood that as of today I owe you $20,000 but that do not have to pay you until 30 days hence.

Why doesn’t the same logic apply to the wage /  bonus  issue?

 

 

 

 

Staying on LTD after Termination Can Be Evidence of Frustration :

In Roskaft v RONA ( 2018 ONSC 2934) Pollak J. had a situation where 10 year employee went on STD and then LTD in 2012. In 2014, the Insurer found that the employee was permanently disabled from performing both his own and any occupation.  One year later, the employer reviewed the file and concluded that the contract had become frustrated, terminated him and paid him his ESA minimums.

The plaintiff sued for wrongful dismissal but even at the time of the trial in 2018 he was still on LTD and had never taken the position that he was able to return to work. He had been disabled at that time for 6 years.

The Court decided that an employer could rely on post termination evidence of frustration not in their possession at the time of the termination as long as it related to the nature and extent of the employees’ condition  at the time of termination.

This evidence can support a finding that at the time of termination there was no reasonable likelihood that the employee could return to work within a reasonable time.

Driver Banished by Customer = Lack of Work under CLC :

In Merz v TST Trucking Ltd ( YM2707-10977) CLC Adjudicator Lederman had a situation where a driver was assigned a route serving Purolator, an important client of TST. As a result of an apparent incident between Mr. Mertz and some Purolator employees, Purolator told TST that would no longer let Mertz come on their property. TST then terminated Mertz.

The Adjudicator found that whether or not Purolator was right or wrong in their assessment of Mertz’s actions, the banishment effectively ” precluded him from continuing in his job function ” and that this constituted a lack of work, therefore the adjudicator had no jurisdiction under the Unjust Dismissal section of the Canada Labour Code. The Adjudicator noted that the employer had no other routes available.

It is unclear if the employer had no other vacant routes available or had no other routes at all. If for instance TST could have moved another of its drivers onto the Purolator route and had Mertz drive that other route, then there would have been no lack of work.

If Mertz could have simply switched routes, then this case stands for the troubling proposition that even an unreasonable action by the employers’ client can lead to the dismissal of the employee.