In Adelman v. IBM Canada Limited, 2026 ONSC 420 Justice Parghi awarded 24 months notice to a 59 year old Executive Director , Stategic Partnerships with 18.5 years service.
The Judge made some interesting ruling about how one calculates various compensation items:
- Valuation Date for RSU: At various times during the 24 month period certain RSU’s would have vested. That issue was not in dispute. IBM was arguing that the date upon which these RSU’s should be valued should be the date that they first became vested. The Plaintiff argued that because in the past he had not sold the shares upon vesting but instead waited an average of 402 days after vesting, that the valuation date should be 402 days after the vesting
The Judge agreed with the Plaintiff because there was evidence of this employee’s past practice. Absent such evidence the Judge would have found the IBM methodology ” a reasonable approach”.
2. Bonus in the Year Prior to Termination: The Plaintiff was terminated just before the payout of bonuses for the prior year. IBM determined that he was not entitled to a bonus for that year. The Judge determined that the process used by IBM to assess his entitlement to a bonus for the year that he worked was flawed. The was largely because of this statement :
[41] Notably, Mr. Adelman’s 2022 executive compensation statement, issued by IBM, states quite clearly that he was denied a bonus for 2022 because he had left the company by the time bonuses were paid out. The statement contains a note that states: “For 2022 he separated before AIP [annual incentive program] payment date (for 2023 cycle) so he is not eligible for AIP payment
He was then awarded a bonus based on the average over the last two years, which came to $24,227.
3. Bonus Over the Notice Period : The Judge ruled that the first issue to be determined was whether “ the bonus was an integral part of the employee’s compensation package, such that there is a common law entitlement to damages in lieu of bonus. “
The Judge then set a four part test to answer this question
[26] The test for determining whether a bonus is integral is well-established. I am to consider whether Mr. Adelman received a bonus each year, albeit in different amounts; whether the bonuses were required in order for IBM to remain competitive with other employers; whether bonuses were historically awarded and IBM never exercised its discretion against Mr. Adelman, and whether the bonuses constituted a significant component of Mr. Adelman’s overall compensation (Wolfman v. Rocktenn-Container Canada, L.P., 2015 ONSC 1432, [2015] O.J. No. 1118 (Q.L.); Bain v. UBS, 2016 ONSC 5326, 274 A.C.W.S. (3d) 331, at para. 83, aff’d 2018 ONCA 190, 289 A.C.W.S. (3d) 550).
Applying these criteria to the case in question the Judge ruled as follows:
A) The evidence disclosed that the Plaintiff did not receive a bonus every year.
B) There was no evidence that payment of bonuses was required for IBM to stay competitive, in fact an IBM witness testified that “IBM uses base salaries, and not bonuses, to maintain competitiveness within the market.”
C) The evidence showed that in any given year some eligible employees received zero bonus, including the Plaintiff’s supervisor.
D) The past bonuses were 16.6% and 3.6% of his base, which the Judge found was not a significant component of the Plaintiff’s compensation.
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