How To Get Your Bonus After Termination
Termination is often a shock for an employee. The timing of a termination may add insult to injury if it immediately precedes a bonus payday. Employers often tell employees that they are not entitled to their bonuses if they are no longer employed by the company. However, that is not always the case.
Most of you know that when an employee is terminated without cause he or she should receive notice or pay in lieu of notice. See here for more information about notice. Confusion often arises as to what compensation is included in the employee’s pay for the notice period. Bonuses are especially complicated.
A recent Superior Court decision provides hope to employees that they will receive their bonus payment even if they are terminated before it is paid.
Mr. Lin was 41 years old and had worked for the Ontario Teachers’ Pension Plan Board (the “OTPPB”) for eight years. Mr. Lin had a bonus plan based on the calendar year and his bonus was typically paid out in April. His bonus made up more than 50% of his annual compensation. Mr. Lin was terminated in March 2011 before the 2010 bonus was paid to him. A judge found that he was entitled to a notice period of 15 months’.
The Bonus Calculation
There were three possible calculations for Mr. Lin’s bonus:
- What he already earned because he worked from January to December 2010;
- What he already earned (in part) because he worked from January to March 2011; and
- What he would have earned if he worked from April 2011 until June 2012 (the 15 months’ notice period).
The OTPPB had previously attempted to change Mr. Lin’s bonus plan to say that he had to be actively employed at the time the bonus is paid out to get any money (April 2011 for Mr. Lin). The judge found that Mr. Lin had not agreed to that change, so it was not enforceable.
Even if the contract did require the employee ‘to be actively employed’ to receive the bonus, the judge would not have enforced it because he concluded such language would have been unfair in the circumstances. This was because the bonus in this case made up such a significant portion of Mr. Lin’s annual compensation. It was also because the bonus was compensation for work completed by Mr. Lin and denying him that compensation would unjustly enrich the employer. The judge did not distinguish this idea for the periods of January 2010 to March 20011 when he did complete work versus April 2011 to June 2012 which was the notice period.
What does this mean?
If you are terminated, you may be entitled to your unpaid bonus even if the contract says you must be employed at the time of your termination to be eligible to receive it. This could include the bonus you have already earned, but have not received. It could also include the bonus that you would have earned if you were still working for your employer. Whether you are entitled to the bonus does depend on the language of your employment contract or bonus plan, so you should have an experienced employment lawyer review it.
If you have been terminated and have questions about the payment of your bonus, please contact us at [email protected] or 647-204-8107.
Are clauses that purport to waive an employee’s years of service for the purposes of severance/notice pay enforceable? It’s all important when your company is sold. Here is what to look for.read more
As we have written before, an employer may generally terminate an employee for any good business reason, as long as it provides the employee with adequate notice of termination (or pay in lieu of notice). Failure to provide adequate notice results in a wrongful...read more
If you have lost your job and need temporary income support, do you know what to do? In Canada, you can apply for Employment Insurance (“EI”) for partial income replacement from the Federal government. To learn about the different types of EI and whether you would be...read more