December 17, 2020
Fa la la la la…’tis the season for joy and celebrations. Admittedly 2020 is unusual and this might not be the year for large end of year bonuses. But, maybe you are in the process of re-evaluating the compensation structure given fiscal constraint, you are hiring a new executive with future bonus earning possibility or you are concerned generally about limiting your company’s liability for large payouts upon termination of employment. The recent Supreme Court of Canada decision in Matthews v. Ocean Nutrition Canada Ltd. 2020 SCC 26 might leave you feeling a bit like a scrooge. The essential element of the case is that a former employee was found to be entitled to a bonus, long after he left the organization, because the triggering event occurred during what would have been his reasonable notice period under the common law (if you want to read the full facts, the case is available online http://canlii.ca/t/jb004).
If you intend to pay bonuses to employees after they have departed, then the results of this case are not of concern to you. If you intended eligibility for bonuses to end the minute an employee walks out the door then it should be of concern. If your bonus plan or employment agreement relies on restrictive language for eligibility, like an employee must be an “active employee” or eligibility ceases if the employee “ceases to be an employee,” it might be time to consider changes given the Supreme Court of Canada’s decision.
We can help you determine if, and what changes are needed to align your intentions with your documentation and the law. Our approach is to support you based on our experience providing legal services from within organizations. Practical solutions delivered efficiently to drive value: we are Inhaus Legal.
