Employment lawyer Andrew Schafer to provide tips at HRD's Employment Law Masterclass Vancouver
“In Canada, there's a presumption that unless you have specific language in your employment agreement that addresses bonus entitlements during the reasonable notice period, the reasonable notice payment will include any bonus amounts that become due or payable during that period,” says Andrew Schafer, partner at Norton Rose Fulbright Canada LLP.
Schafer will be speaking alongside other panellists, at the upcoming virtual event Employment Law Masterclass Vancouver, which will be held on Feb. 22, 2024. Schafer’s session is titled ‘Key employment contract considerations: Focus on terminations.’
At the event, Schafer will discuss the key considerations for employment contracts, as they relate specifically to terminations, specifically focusing on defining the amounts that are payable or not payable in relation to incentive compensation upon termination.
Specificity within employment agreements and bonus policies
When constructing employment agreements and bonus policies, employers must use language that is inherently clear and specific with regards to employee bonus entitlement upon termination, Schafer says.
Courts want to see clearly defined the conditions for when a bonus is payable. In a termination clause, they want clear language that outlines if an employer wants to exclude a bonus payment if employment has been terminated prior to the bonus becoming payable, he says.
Schafer advises that employers turn their mind to what amount of a bonus would be owing if someone someone's employment ends prior to the bonus being paid out, and potentially after if they worked the period for the bonus. If the intent is to not include that, it needs to be explicitly stated.
“Traditionally, employers have just included very broad language along the lines of: ‘in order to receive a bonus, you have to be actively employed at the time of payout,’” Schafer says.
“Recently, courts have been saying that it isn’t enough to preclude a bonus payment that would have been due during an employee’s notice period because technically speaking, the obligation is to give working notice, to the employee should have been actively working at the time the bonus became payable.”
Issues like these can arise when, for example, an employee is terminated during one fiscal quarter, but the bonus is not payable until the following quarter or if an employee works a portion of the year prior to termination.
“If someone works until September of the year before, so they've worked three quarters of the year, they'll likely take the position that they’re entitled to three quarters of a bonus, or a bonus based on their duration of employment. What they'll say is; ‘I'm entitled to 10 months of reasonable notice, and 10 months will be well past the Q1 calculation date, so therefore I should be entitled to a portion of my bonus,” Schafer says.
At the masterclass, Schafer will also be touching on recent case law examples where employers tried to rely on bonus language and we're not able to do so.
