Terminated Employee Entitled to Profit Sharing Bonus Declared After Termination but During Employment Standards Notice Period


[author: Adrian Miedema]

Employers often assert that a terminated employee is not entitled to a bonus for the termination year. A decision of an Ontario court may put a small qualification on that assertion. Employers should review their bonus policies in light of this decision.

The employer terminated the employee’s employment on May 25, 2010 on a without-cause basis. On June 18, 2010 – within the employee’s four-week Employment Standards Act notice period – the employer announced its profit sharing bonus for the recently-ended fiscal year and paid it out. The employer did not pay that bonus to the employee. The employee had been paid the bonus for her three previous years of employment. The bonus was a “very significant financial part of her overall compensation.”

Mr. Justice Ricchetti of the Ontario Superior Court of Justice held that section 61(1)(a) of the Employment Standards Act “permits the employer to terminate without notice but only if the employee receives what the employee would otherwise been entitled to receive from the employer under the terms and conditions of employment during the statutory notice.”

The judge held that under the employer’s bonus plan and practices, the decision as to whether to award profit sharing at all may have been discretionary, but once the bonus had been declared, the employer had no discretion to exclude a particular employee from entitlement. As such, all employees who were employed on June 18, 2010 were entitled to the profit sharing bonus. Because that date was within the employee’s four-week Employment Standards Act notice period, she was deemed to be “employed” at that time, and was thus entitled to the profit sharing bonus payment. An employer memo, issued a few months earlier, to the effect that only “active” employees were entitled to the bonus, did not override the statutory obligation to pay the bonus to the employee.

Sandhu v. Solutions 2 go Inc., 2012 ONSC 2073 (CanLII)


Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dentons | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.