You may think your Ontario business is protected by air-tight termination documentation and procedures, but even the most iron-clad contracts can be vulnerable under some recent rulings by the court. If you haven’t been keeping an eye on employment law news, here’s what you need to know.
Paquette v. TeraGo Networks Inc.
In this case, an employee with 14 years of service was terminated without cause. The employee, Paquette, sued for wrongful dismissal and was initially awarded 17 months of pay in lieu of notice, calculated as his base salary and benefits. He had sought payment for his lost bonus, but the court ruled he was not entitled to that bonus based on the language in the contract requiring employees to be active to receive their money.
On appeal, however, Paquette emerged victorious. The court ruled that if a bonus is an integral part of an employee’s total compensation, the employee cannot be denied that bonus by reason of the unilateral action of the employer.
Lin v. Ontario Teachers’ Pension Plan
In a second case, Lin’s employer attempted to enforce amendments to the company’s annual bonus plan (AIP) and long-term incentive plan (LTIP). When the new language was introduced, impacted employees were asked to agree to the changes by signing off. Employees balked, and the employer backed off the request, but stated that the new language would still be applicable moving forward.
Lin was an employee for eight years, terminated for cause. When he sued, the court ruled there was no cause to terminate, and he was awarded a 15-month notice period. His payout included amounts under the AIP and LTIP. The employer appealed, citing the new language and making the case that even though Lin did not sign off, he acquiesced to the changes and thus, was bound by them. The court disagreed, dismissing the appeal stating that an employee’s refusal to sign off was a clear rejection of the changes.
Takeaways for Ontario Employers
Ontario businesses should learn some important lessons from these cases when drafting language that relates to entitlements upon termination:
- Determining whether an employee is entitled to a bonus during their notice period, it is essential for Ontario employers to draft language that is specific and clear.
- Based on Paquette, language that simply says bonuses require “active employment” or that “no bonus is payable if termination occurs prior to bonus payout,” will not hold up in court. Statements must clearly and unambiguously limit entitlements.
- Language that limits employees’ entitlements should be discussed as early as possible, preferably during the job offer and negotiation phase.
- When amending any bonus language, seek legal advice to make sure the language is enforceable based on current standards.
- Work with a staffing partner that is well-versed in Ontario termination law to ensure your contracts are in order and new employees read, understand and accept clauses that relate to entitlements.
Protect Yourself With Ontario’s Staffing Leader
If you are looking to improve your hiring process, access talent quickly, manage costs and protect yourself against ambiguous contract language, partner with the staffing experts at Employment Professionals Canada. The staffing specialists at EPC are more than just recruiters, they are true HR experts, and can help you navigate current legislation and employer requirements. Reach out to the Ontario employment specialists at Employment Professionals today to learn more.