“Amount Equal to 12 Months Salary” Includes Bonus Says ONCA:
In Nader v. University Health Network, 2022 ONCA 856, the Court of Appeal had a termination clause which entitled the employee to
an amount equal to 12 months salary in the event of termination by UHN without just cause.
The Plaintiff was terminated without just cause but the trial judge held that this did not include the bonus, even though historically the Plaintiff had received a bonus.
The Court of Appeal had this to say :
[4] However, we are satisfied that the motion judge erred in denying the appellant the performance-based bonus payable under the Employment Agreement. The Employment Agreement clearly provided for a discretionary annual performance-based bonus of up to 25% of the appellant’s annual base salary. The motion judge found that there was a dearth of evidence concerning the bonus – no evidence as to the appellant’s performance and whether he would have been eligible for 25% or some lesser amount. This finding overlooks evidence in the record establishing that the appellant was paid bonuses of approximately 25% for 2018 and 2019, and slightly less on a pro-rated basis for 2020, up to the termination of his employment. The Employment Agreement provided for payment “of an amount equal to 12 months salary” in the event of termination by UHN without just cause. “Salary” was undefined. The appellant’s uncontroverted evidence was that the bonus was a substantial and integral part of his overall compensation. The motion judge found that the appellant’s health care spending account, an amount required to be under the Employment Agreement in addition to “base salary”, was owing as part of the appellant’s compensation on termination. That finding was not appealed.
[5] Like the health care spending account, the bonus is properly
considered part of the compensation owed on termination. Termination deprived the appellant of the opportunity to earn the bonus for the year ahead and in our view it is reasonable to infer that he would have earned it. The respondent offered no basis for finding otherwise.
My Comments :
The term used in the agreement was ” salary”. If the agreement had said ” base salary only” the outcome may have been different. However one must be careful when using that language because under the ESA both termination and severance pay are based on regular wages which can include bonus payments. Therefore if you had a clause which provided the correct number of weeks pay to be in compliance with the ESA but limited it to base pay only then you could be in violation of the ESA as it did not include the bonus amount in the calculation.
an amount equal to 12 months salary in the event of termination by UHN without just cause.
The Plaintiff was terminated without just cause but the trial judge held that this did not include the bonus, even though historically the Plaintiff had received a bonus.
The Court of Appeal had this to say :
[4] However, we are satisfied that the motion judge erred in denying the appellant the performance-based bonus payable under the Employment Agreement. The Employment Agreement clearly provided for a discretionary annual performance-based bonus of up to 25% of the appellant’s annual base salary. The motion judge found that there was a dearth of evidence concerning the bonus – no evidence as to the appellant’s performance and whether he would have been eligible for 25% or some lesser amount. This finding overlooks evidence in the record establishing that the appellant was paid bonuses of approximately 25% for 2018 and 2019, and slightly less on a pro-rated basis for 2020, up to the termination of his employment. The Employment Agreement provided for payment “of an amount equal to 12 months salary” in the event of termination by UHN without just cause. “Salary” was undefined. The appellant’s uncontroverted evidence was that the bonus was a substantial and integral part of his overall compensation. The motion judge found that the appellant’s health care spending account, an amount required to be under the Employment Agreement in addition to “base salary”, was owing as part of the appellant’s compensation on termination. That finding was not appealed.
[5] Like the health care spending account, the bonus is properly
considered part of the compensation owed on termination. Termination deprived the appellant of the opportunity to earn the bonus for the year ahead and in our view it is reasonable to infer that he would have earned it. The respondent offered no basis for finding otherwise.
My Comments :
The term used in the agreement was ” salary”. If the agreement had said ” base salary only” the outcome may have been different. However one must be careful when using that language because under the ESA both termination and severance pay are based on regular wages which can include bonus payments. Therefore if you had a clause which provided the correct number of weeks pay to be in compliance with the ESA but limited it to base pay only then you could be in violation of the ESA as it did not include the bonus amount in the calculation.
Nobody said that employment law was easy.
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