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What Happens To The Employee’s Bonus(es) Where The Plan Requires The Employee To Be “Actively Employed” At Time Of Pay-Out?

What Happens to the Employee’s Bonus(es) where the Plan requires the Employee to be “Actively Employed” at Time of Pay-Out?

The bonus is often an integral part of an employee’s remuneration package. The bonus plan and/or the employment agreement may also stipulate that to be eligible for the bonus,  the  employee must be “actively employed” at the time the bonus is paid out.

If the employee is terminated in November 2016, does this mean the employee does not receive anything for his/her  bonus for the 2016 year because he/she is not “actively employed” when it is paid out in February 2017?  Secondly, does this mean the employee is not entitled to compensation for the loss of the bonuses that he/she would have earned and received payment for during the  reasonable notice period?

In Paquette v. TeraGo Networks Inc. , (Ontario Court of Appeal, August 9, 2016), the employee was terminated in November 2014 and the bonus payout was in February of the following year.  The motions judge found that the reasonable notice period was 17 months but he concluded that the employee was not entitled to compensation for the loss of the bonus(es) because he would not be “actively employed” when the bonuses would be paid out.

The Ontario Court of Appeal allowed the employee’s appeal and concluded that those words alone (“actively employed”) are not sufficient to oust the employee’s entitlement to compensation for the loss of his bonus(es) as part of his  damages for wrongful dismissal.  The Ontario Court of Appeal concluded that the employee was entitled to be fully compensated for his 2014 bonus and his 2015 bonus  because these bonuses would have been paid out during the reasonable notice period.

This is for informational purposes only and does not constitute legal advice. Readers are cautioned against making any decisions based on this material. Rather specific legal advice should be obtained.

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