SCC Finds Worker Entitled To Damages For Bonus Triggered Throughout Discover Interval – Employment and HR – Canada

SCC Finds Employee Entitled To Damages For Bonus Triggered During Notice Period - Employment and HR - Canada

On October 9, 2020, the Supreme Court docket of Canada (SCC) launched
its choice in Matthews v. Ocean Vitamin Canada
, by which it awarded damages in respect of a bonus
cost which might have been earned had an worker labored to the
finish of his frequent regulation cheap discover interval.


Mr. Matthews was employed by Ocean Vitamin Canada Ltd. (Ocean
Vitamin) from January 1997, till his resignation in June 2011.
On the time of his resignation, Mr. Matthews held the function of Vice
President, New and Rising Applied sciences and reported on to
the Chief Working Officer (COO) of Ocean Vitamin. Mr. Matthews
participated in Ocean Vitamin’s long-term incentive plan
(LTIP), which supplied for money funds to contributors primarily based on
the worth of Ocean Vitamin within the occasion of a “Realization
Occasion,” outlined below the LTIP as a sale or public providing of
Ocean Vitamin.

Ocean Vitamin employed a brand new COO in 2007 who, the trial choose
discovered, started a “marketing campaign” to marginalize Mr. Matthews
inside Ocean Vitamin. However, Mr. Matthews remained with
Ocean Vitamin largely as a consequence of his perception that Ocean
Vitamin would quickly be offered, thereby triggering a bonus cost
below the LTIP.

Ultimately, nonetheless, Mr. Matthews accepted a place with a brand new
employer and resigned. Ocean Vitamin was offered roughly 13
months following Mr. Matthews’ resignation, which constituted a
Realization Occasion and triggered bonus funds to qualifying LTIP
contributors. Ocean Vitamin took the place that, below the
phrases of the LTIP, Mr. Matthews didn’t qualify for a cost. The
related LTIP provisions had been as follows:


[Ocean Nutrition] shall haven’t any obligation below this Settlement
to the Worker except on the date of a Realization Occasion the
Worker is a full-time worker of [Ocean Nutrition]. For better
certainty, this Settlement shall be of no pressure and impact if the
worker ceases to be an worker of [Ocean Nutrition], regardless
of whether or not the Worker resigns or is terminated, with or with out


The [LTIP] doesn’t have any present or future worth aside from
on the date of a Realization Occasion and shall not be calculated as
a part of the Worker’s compensation for any function, together with
in reference to the Worker’s resignation or in any
severance calculation.

The Nova Scotia Supreme Court docket (NSSC) discovered that Mr. Matthews had
been constructively dismissed and awarded him a 15-month discover
interval. In respect of the LTIP, the NSSC held that an award below
the LTIP would have crystallized had Mr. Matthews remained employed
all through the discover interval, and subsequently he was entitled to his
LTIP cost.

Ocean Vitamin appealed the choice to the Nova Scotia Court docket
of Enchantment (NSCA). The NSCA upheld the constructive dismissal
discovering and the 15-month discover interval; nonetheless, it disagreed with
the NSSC’s findings with respect to the LTIP. The NSCA held
that the language of the LTIP was “plain and unambiguous”
in precluding cost to workers who had resigned previous to a
Realization Occasion.


On attraction to the SCC, the one disagreement between the events
was whether or not Mr. Matthews was entitled to damages in respect of the
misplaced LTIP cost.

The SCC clarified that the problem was not whether or not Mr. Matthews
was entitled to the LTIP cost per se, however relatively
whether or not he was entitled to damages to compensate him for bonuses he
would have earned however for Ocean Vitamin’s failure to supply
cheap discover. As articulated by the SCC, “[t]he function
of damages in lieu of cheap discover is to place the worker in
the place they might have been in had they continued to work
by to the tip of the discover interval.”

In analyzing the problem, the SCC endorsed the method taken by
the Ontario Court docket of Enchantment in Paquette v. TeraGo Networks Inc., 2016 ONCA
. The SCC acknowledged:

Courts ought to accordingly ask two questions when figuring out
whether or not the suitable quantum of damages for breach of the
implied time period to supply cheap discover contains bonus funds
and sure different advantages. Would the worker have been entitled
to the bonus or profit as a part of their compensation throughout the
cheap discover interval? If that’s the case, do the phrases of the employment
contract or bonus plan unambiguously take away or restrict that frequent
regulation proper?

Making use of the above to the case at bar, the SCC answered the
first query within the affirmative: because the Realization Occasion was
triggered throughout the 15-month cheap discover interval, Mr.
Matthews would have been entitled to the bonus had he labored to the
finish of the discover interval.

As for the second query, the SCC concluded that clause 2.03
did not unambiguously restrict or take away Mr. Matthew’s frequent
regulation proper to damages:

[T]he provisions of the settlement should be completely clear and
unambiguous. So, language requiring an worker to be
‘full-time’ or ‘lively”, similar to clause 2.03, will
not suffice to take away an worker’s frequent regulation proper to
damages. In any case, had Mr. Matthews been given correct discover, he
would have been ‘full-time’ or ‘actively employed’
all through the cheap discover interval…

Equally, the place a clause purports to take away an worker’s
frequent regulation proper to damages upon termination ‘with or with out
trigger’, similar to clause 2.03, this language won’t suffice.
Right here, Mr. Matthews suffered an illegal termination since
he was constructively dismissed with out discover . . . exclusion
clauses ‘should clearly cowl the precise circumstances which have
arisen’. So, in Mr. Matthews’ case, the trial choose
correctly acknowledged that ‘[t]ermination with out trigger doesn’t
suggest termination with out discover’ . . . But, it bears repeating
that, for the aim of calculating wrongful dismissal damages,
the employment contract isn’t handled as ‘terminated’
till after the cheap discover interval expires. So, even when the
clause had expressly referred to an illegal termination, in my
view, this too wouldn’t unambiguously alter the worker’s
frequent regulation entitlement.

The SCC went on to conclude that clause 2.05 had no impact on
limiting or eradicating Mr. Matthew’s frequent regulation proper to damages,
since “severance and damages are distinct authorized
ideas,” and subsequently the clause’s reference to
severance doesn’t restrict Mr. Matthew’s capacity to say damages
in respect of his wrongful dismissal. The SCC went on to say that
the inclusion within the clause of the language stating that the LTIP
“doesn’t have any present or future worth aside from on the
date of a Realization Occasion” solely supported the conclusion
that, had Mr. Matthews been given correct discover of termination,
“he would have remained a full-time worker on the date of
the Realization Occasion, and thus would have obtained an LTIP
cost. His damages mirror that misplaced alternative.”

The SCC allowed the attraction, put aside the judgment of the NSCA
and restored the judgment of the NSSC, thereby awarding Mr.
Matthews damages in respect of his misplaced LTIP cost.


Employers should proceed to often evaluate their plans and
employment agreements. The Matthews
choice clarifies that clauses which try and restrict
legal responsibility in respect of misplaced quick and long-term incentives that
would have in any other case been awarded throughout an worker’s
cheap discover interval should be drafted clearly and unambiguously
to take away an worker’s proper to frequent regulation damages. Language
requiring an worker, for instance, to be “actively”
employed or employed “full-time” to be eligible for
cost won’t suffice.

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© 2020 Blake, Cassels & Graydon LLP.

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