Canadian HR Reporter

N E W S 8 www.hrreporter.com Supreme Court tackles non-discretionary bonuses after wrongful dismissal A recent Supreme Court of Canada decision doesn't necessarily deliver good news for employers — or provide much guidance — when it comes to non-discretionary bonuses after a wrongful termination, finds Sarah Dobson DAVID Matthews was an experienced chemist who rose through the ranks to become a senior executive at Ocean Nutrition Canada. But, in 2011, after he had been marginalized by others for several years, he found new employ- ment. T hir teen months later, Ocean Nutrition was sold. Under the company's notice is an award of damages based on the period of notice which should have been given, with the damages representing 'what the employee would have earned in this period.'" But the decision is not necessarily good news for employers. "It puts a much greater onus on employers to ensure that their language in bonus plans and incentive plans is extremely clear," says Caroline Spindler, an associate at the Halifax office of Mathews Dinsdale. "[But] if we can't use this language, what language are we going to use? So, the other reason that this [decision] is significant is not only because of the higher onus, but it creates so much uncertainty as well because we don't know what language will be required now to limit that entitlement under common law." With some of the recent reasonable notice cases, it's becoming more difficult to guess how much damages are going to be owing, says Lucas Mapplebeck, an associate at Filion Wakely Thorup Angeletti in Hamilton, Ont. "You have to be really, really careful with the way you draft your contract. And you also have to understand that long-term incentive plan (LTIP), this was considered a "realization event," which triggered bonus payments to employees who qualified. But since Matthews was not working at the company on that date, it did not pay him the bonus. Matthews alleged that he had been constructively dismissed and, therefore, was a full-time employee when the company was sold, so he was entitled to the incentive payment. The trial judge agreed, saying Matthews was owed a reasonable notice period of 15 months and entitled to damages equivalent to what he would have received under the LTIP — for a bonus payment of $1.1 million. While the Court of Appeal agreed on the constructive dismissal, it didn't think Matthews was entitled to those damages. But, in October, the Supreme Court of Canada disagreed. "Insofar as Mr. Matthews was constructively dismissed without notice, he was entitled to damages representing the salary, including bonuses, he would have earned during the 15-month period," said Justice Nicholas Kasirer. "This is so because the remedy for a breach of the implied term to provide reasonable that might not even be enough." Essentially, it's about damages for the breach of contract, not for the loss of the bonus, he says. "That's the most important distinction that the Supreme Court basically confirms in Matthews," he says. "The employer actually dodged a bullet in some senses, because the Supreme Court had really dropped a hint that if they had properly sought punitive damages, they might have given them." LTIP terms In his decision, the judge referred to several cases, including the 2016 Ontario Court of Appeal decision Paquette v. TeraGo Networks Inc., which stipulates that employees must be "actively employed" on the date of a bonus payout. "Courts should accordingly ask two questions when determining whether the appropriate quantum of damages for breach of the implied term to provide reasonable notice includes bonus payments and certain other benefits: Would the employee have been entitled to the bonus or benefit as part of their compensation during the reasonable notice period? If so, do the terms of the employment contract or bonus plan unambiguously take away or limit that common law right?" said Kasirer. Ocean Nutrition's agreement stated that "full-time" employees would be eligible for the bonus, but not those who cease to be an employee, "regardless of whether the employee resigns or is terminated, with or without cause." In addition, it said the bonus plan "shall not be calculated as part of the employee's compensation for any purpose, including in connection with the employee's resignation or in any severance calculation." The Supreme Court is confirming a kind of national framework for when an LOST EARNINGS ADD UP TO MILLIONS Source: Matthews v. Ocean Nutrition Canada Ltd. 14 years The number of years David Matthews worked for Ocean Nutrition Canada 2012 The year Ocean Nutrition Canada was purchased by another company 15 months The reasonable notice period owed to David Matthews $1.1 million The amount of lost earnings for Matthews for the loss of the LTIP payment

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