Can You Get Your Bonus If You Are Wrongfully Terminated?
- November 4, 2020
- Khalid Mahdi
In its recent decision: Matthews v. Ocean Nutrition Canada Limited, 2020 SCC 26 [Matthews], the Supreme Court of Canada confirmed that employees can receive bonuses and other benefits after being dismissed if they are payable during the reasonable notice period and if the contract does not preclude such payments. The decision signals to employees that wrongdoing on the employer’s part could lead to a recovery of more than just lost wages.
The case pertained to the dismissal of David Matthews, a former management executive at Ocean Nutrition Canada Limited. Among other benefits, Mr. Matthews’ employment contract included an incentive plan which would entitle him to bonus payments in certain circumstances. One such circumstance was the sale of the company. After years of mistreatment by Ocean’s then Chief Operating Officer, Mr. Matthews resigned. 13 months following his resignation, the company was sold for $540 million.
In court, Mr. Matthews alleged that he was constructively dismissed and that he should have been entitled to the bonus payment. Had he still been working at the company, Mr. Matthews would have been entitled to a bonus payment arising from the sale. The employer, argued that since Mr. Matthews was not “actively employed” by the company when it was sold, he was no longer eligible for the bonus. In a 7-0 majority, the Supreme Court of Canada ruled that Mr. Matthews had been constructively dismissed and was owed 15 months’ reasonable notice. Had he not been constructively dismissed, Mr. Matthews would have been working at the company when it was sold and would therefore have been entitled to a bonus payment arising from the sale. His contract did not explicitly preclude him from being able to receive the bonus, so he was entitled to it.
The decision in Matthews is significant, as it clarifies the status of bonuses following an employee’s dismissal without reasonable notice. The decision signals that entitlement to bonus payments should be explicitly clear. Where an employment contract intends to restrict entitlement to such payments, it “must be absolutely clear and unambiguous” (Matthews at para 65). Mr. Matthews’ contract restricted these bonus payments to “full-time” or “active” employees. However, the language was not sufficiently clear to limit his rights to such payments following his constructive dismissal from the company (Matthews at para 65).
You can read the full decision here.
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– This post is current as of the time of writing. Readers should not rely on this post as legal advice. –