ONCA Makes Rulings About Post Dismissal Bonus Entitlements :
In Celestini v. Shoplogix Inc., 2023 ONCA 131 Justice Zarnett made the following rulings about the Plaintiff’s entitlement to a bonus payment over the 18 month notice period :
1. The clauses in the bonus agreements repeatably used the words ” employment terminates ” and ” termination of employment ” . The Defendant said that means if we we terminate your employment on March 1st then that ends your bonus entitlement. However the Court of Appeal goes right back to their 1999 decision in Veer v Dover ( and quoted in the SCC in Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26) when it says :
” Yet, it bears repeating that, for the purpose of calculating wrongful dismissal damages, the employment contract is not treated as “terminated” until after the reasonable notice period expires. So, even if the clause had expressly referred to an unlawful termination, in my view, this too would not unambiguously alter the employee’s common law entitlement.”
In other words, when a bonus plan says termination it must mean a lawful termination and a lawful termination only takes place at the END, not the BEGINNING, of the reasonable notice period.
2) As there was no evidence as to what the bonus would have been had the Plaintiff been able to work out his notice period, the judges’ use of a three year average was a proper method of calculating the bonus over the notice period. Had there been actual evidence of what the bonus would have been, the result would likely be different.
3) The time period between the end of the last bonus period and the termination is what I call the ” stub bonus “. If the bonus year ended on December 31 2020 and the person is terminated on March 31, 2021 then he is entitled to a bonus both for the stub period and the reasonable notice period. Lawyers sometimes miss this issue as they tend to focus on notice period payment and forget about the stub period. In this case the Plaintiff was paid about $50,000 for the stub period which the trial judge deducted from the wrongful dismissal damages. The Court of Appeal corrected that mistake and said that the amount properly allocated to the stub period ( about $37,000 based on the three year average ) was not to be counted as a payment towards the damage award.
1. The clauses in the bonus agreements repeatably used the words ” employment terminates ” and ” termination of employment ” . The Defendant said that means if we we terminate your employment on March 1st then that ends your bonus entitlement. However the Court of Appeal goes right back to their 1999 decision in Veer v Dover ( and quoted in the SCC in Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26) when it says :
” Yet, it bears repeating that, for the purpose of calculating wrongful dismissal damages, the employment contract is not treated as “terminated” until after the reasonable notice period expires. So, even if the clause had expressly referred to an unlawful termination, in my view, this too would not unambiguously alter the employee’s common law entitlement.”
In other words, when a bonus plan says termination it must mean a lawful termination and a lawful termination only takes place at the END, not the BEGINNING, of the reasonable notice period.
2) As there was no evidence as to what the bonus would have been had the Plaintiff been able to work out his notice period, the judges’ use of a three year average was a proper method of calculating the bonus over the notice period. Had there been actual evidence of what the bonus would have been, the result would likely be different.
3) The time period between the end of the last bonus period and the termination is what I call the ” stub bonus “. If the bonus year ended on December 31 2020 and the person is terminated on March 31, 2021 then he is entitled to a bonus both for the stub period and the reasonable notice period. Lawyers sometimes miss this issue as they tend to focus on notice period payment and forget about the stub period. In this case the Plaintiff was paid about $50,000 for the stub period which the trial judge deducted from the wrongful dismissal damages. The Court of Appeal corrected that mistake and said that the amount properly allocated to the stub period ( about $37,000 based on the three year average ) was not to be counted as a payment towards the damage award.
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