OCA Again Upholds Bonus over Notice Period

In Lin v Ontario Teachers’ Pension Plan Board ( 2016 ONCA 619)  the Court was faced with the following language in two bonus plans :

87] Again, the relevant language in the 2009 AIP is as follows:

In the case where a Participant resigns or the Participant’s employment is terminated by [Teachers’] prior to the payout of a bonus (normally the first pay period in April), no bonus shall be earned or payable to the Participant.

[88] The language in the 2008 LTIP is similar. It provides that:

In the case the Participant resigns or the Participant’s employment is terminated by [Teachers’], the Participant’s Dollar Grants not yet vested at the time of termination shall be forfeited forthwith without any right to compensation.

The Court found that this language was not sufficient  to take away the Plaintiffs’ common law right to his full compensation over the notice period. The Court said it this way :

[89] I reject the appellant’s assertion that these terms restrict Lin’s entitlement to compensation for lost bonuses in the event of wrongful dismissal. The wording does not unambiguously alter or remove the respondent’s common law right to damages, which include compensation for the bonuses he would have received while employed and during the period of reasonable notice. A provision that no bonus is payable where employment is terminated by the employer prior to the payout of the bonus is, in effect, the same as a requirement of “active employment” at the date of bonus payout. Without more, such wording is insufficient to deprive a terminated employee of the bonus he or she would have earned during the period of reasonable notice, as a component of damages for wrongful dismissal: Bernier v. Nygard International Partnership, 2013 ONCA 780, 14 C.C.E.L. (4th) 155, affirming 2013 ONSC 4578, 9 C.C.E.L. (4th) 41; Paquette, at para. 31.

[90] And, as Goudge J.A. explained in Veer v. Dover Corporation (Canada) Limited (1999), 45 C.C.E.L. (2d) 183 (Ont. C.A.), at para. 14:

[T]he termination contemplated must, I think, mean termination according to law. Absent express language providing for it, I cannot conclude that the parties intended that an unlawful termination would trigger the end of the employee’s option rights. The agreement should not be presumed to have provided for unlawful triggering events. Rather, the parties must be taken to have intended that the triggering actions would comply with the law in the absence of clear language to the contrary.

Again what does an employer need to do so as to deprive a terminated employee of his bonus over the notice period ?

This is the language that the Teachers tried to rely upon but failed because having asked for the employees’ consent these changes they backed down when the senior managers refused to agree to these changes.

In the event that a Participant resigns his or her employment with [Teachers’] or the Participant’s employment with [Teachers’] is terminated for any reason (whether with or without Cause), the Participant shall on the Termination Date forfeit any and all rights to be paid a bonus under the Plan (or any amount in lieu thereof) or to accrue any further bonus under the Plan. For further certainty, in the event a Participant’s employment terminates after completion of a calendar year in respect of which a bonus had been earned by the Participant under the Plan but prior to payment of that bonus, no bonus (or any amount in lieu thereof) shall be paid to the Participant.

“Termination Date” was defined as:

The date on which a Participant ceases to be employed by or provide services to [Teachers’] and, for greater certainty, does not include any period following the date on which a Participant is notified that his or her employment or services are terminated (whether such termination is lawful or unlawful) during which the Participant is eligible to receive any statutory, contractual or common law notice or compensation in lieu thereof or severance payments unless the Participant is actually required by [Teachers’] to provide services during such notice period.

Would that clause have ben enforceable? Could the Plaintiff apply for relief from forfeiture ?

The real issue is why do employers work so hard at first devising bonus plans that inspire employees to succeed and then work even harder to deprive those same employees of bonuses which in many cases they have already earned?

I strongly suspect that if employers devised plans that were fairer to terminated employees ( for instance providing for pro rata bonuses) , the Courts would be much more willing to uphold the contractual provisions, even if they did not provide for the  full common law entitlements that the employee would normally be entitled to.

I understand why you would not want to pay a bonus to an employee who has quit or was fired for just cause, but why the same treatment for an employee that you decide no longer fits your plans? Why should that employee be deprived of the bonus that he would have earned if he had been terminated legally, i.e. by providing reasonable working notice.

I thought that there was a general legal principle that a person should not benefit from their own illegal or wrongful conduct.

Why not apply that overriding tenet of justice rather that adhering to the out dated concept that an employment contract is simply a commercial contract between sophisticated parties of equal bargaining strength?

 

309 thoughts on “OCA Again Upholds Bonus over Notice Period”

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