The entitlements of a terminated employee can differ significantly depending on the length of their employment prior to termination. A long-term employee may have accrued benefits, such as stocks, bigger bonus awards and other financial entitlements that a short-term employee may not yet have become entitled to. This is what was at issue in a recent decision after the employer dismissed a long-term employee without cause. The employee brought an action seeking a longer notice period, as well as certain other benefits during the notice period.
Long-Term Employee Earned Multiple Bonus and Benefits
The employee worked for the employer, a multinational technology company, for almost 23 years. The employee had joined the employer in the mid-1990’s in the role of senior consultant. The employer promoted him to managing consultant in 2001. Senior, associate, and principal consultants were reporting to him. The employer eventually promoted the employee again to premier field engineering manager. Eventually, the employee undertook a lateral move into the position of operations manager, consulting, and support.
The employee’s previous managers viewed him as a good performer. However, his last manager did not find the same. The last manager found that the impact delivered by employee in the fiscal year had been “in summary below expectations”. The employer dismissed the employee shortly thereafter.
In his various roles with the employer, the employee had received several benefits. Those benefits included merit increases, cash bonuses and stock options. His bonus payments constituted about 30 per cent of the employee’s total annual compensation. The company terminated the employee shortly after their 2018 fiscal year. The employer informed him that he would receive no merit increase and no cash bonus for the 2018 fiscal year. The company also took the position that the employee was no longer entitled to the vesting of any granted, but unvested, stock awards.
The employee brought an action for wrongful dismissal.
Court Considers Whether Non-Salary Entitlements Were an Integral Part of Compensation
1. Reasonable Notice
The Ontario Superior Court of Justice rejected the company’s claim that the employee was more readily employable. The court found this claim was undermined by the fact that he did not receive one interview request, despite applying for 70 positions since being terminated. Then, according to the Bardal factors, the court considered the character of employment, the employee’s age, his length of service, the availability of similar employment. The court also considered the case law provided by the parties. The court concluded that the reasonable notice here should be 24 months.
2. Bonus Award During Notice Period
There was a lost opportunity to earn a merit increase during the notice period. Accordingly, the employer owed damages to the employee. The court also found that he was entitled to a merit cash bonus during the notice period.
The court examined whether the employee was entitled to a bonus award during the notice period. The court found that the bonus was an integral part of the employee’s compensation package.
However, the court did temper the awards in this category. It was found that the proper measure of these damages was based on the average of the amounts that were awarded for such bonuses in the two-year period preceding his termination. For the employee that would work out to a 0.7% annual merit increase during the notice period and an annual cash bonus of $12,100 during the notice period.
3. Bonus for 2018 Fiscal Year
The court rejected the employee’s claim for the 2018 bonus. The employee’s last manager had not found the employee’s 2018 performance worthy of a bonus. That was not unreasonable, the court found. There was sufficient evidence to have made the zero-bonus recommendation. Given these findings, the employee was not entitled to a bonus for that fiscal year.
4. Unvested Stock Awards
The court concluded that there was little dispute that the stock awards were an integral part of the employee’s compensation package. This triggered a common law entitlement to damages in lieu of a bonus. However, in this case, it was quite clear that the stock award agreement provided that an employee’s right to vest stock awards terminated when the employee was terminated for any reason.
The termination agreement also contained broad language. Therefore, there was a rebuttal of the presumption that the termination had to be according to law in order to end an employee’s right to vest stock options. The court then concluded that the stock award agreement unambiguously excluded the employee’s right to vest his stock awards after he was terminated without cause.
Takeaways for Long-Term Employees Facing Termination
Long-term employees may have the right to many benefits beyond their annual salary after termination. This right depends on the terms in their employment contract, applicable legislation, and common law. It is best to consult with a lawyer regarding entitlements to benefits post-dismissal.
For advice on entitlement to benefits and other employment or labour law matters, contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins LLP. We regularly advise workplace parties on a wide range of legal workplace issues. Contact us online or by phone at 416-364-9599 to schedule a consultation.
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