THE EMPLOYERS' EDGE
Court of Appeal Upholds Bonus Limitation Language in Employment Agreement
In a previous CCP blog (click here) we reviewed a trial decision argued on behalf of National Money Mart by one of our partners, Susan Crawford, where a provision in an employment agreement that limited entitlement to a non-discretionary bonus upon termination was found to be enforceable by the trial justice. The plaintiff in that case, Mr. Jonathon Kielb, not satisfied with the decision, appealed to the Ontario Court of Appeal. The appellate court unanimously upheld Justice Akhtar’s decision in dismissing Mr. Kielb’s appeal and released its decision today. Click here for a copy of the Court of Appeal’s decision.
Mr. Kielb had argued at trial that the bonus limitation clause was unenforceable due to its ambiguous and contradictory nature and because it also contravened the Employment Standards Act, 2000. These arguments were rejected by Justice Akhtar who found the provision to be unambiguous in denying Mr. Kielb his fiscal 2009/2010 bonus payment of approximately $86,000.00. In upholding the trial judge’s decision, the Court of Appeal found that:
“The parties did not purport to contract out of or otherwise waive the appellant’s statutory entitlements, which would have been void pursuant to s. 5(1) of the ESA. Rather, in clear and unambiguous language, the parties agreed that the appellant would be paid his entitlements under the ESA. The contract was also clear and unambiguous that the appellant’s statutory entitlements included those bonus payment that would have been earned and paid out within the appellant’s statutory notice period under the ESA”.
The Court of Appeal also rejected Mr. Kielb’s attempt to claim six (6) months’ common law reasonable notice damages when this claim was raised for the first time on appeal and at trial he sought to enforce the termination provisions in his contract which limited his entitlement to eight (8) weeks base salary. The Court of Appeal found that Mr. Kielb, having refused to execute the release that was a condition under his contract to receiving any payments above his ESA entitlements, had forfeited his right to his contractual termination payments.
While employers can take comfort from the court’s endorsement of clearly worded bonus limitation and termination language, the case underscores the importance of properly worded employment agreements and bonus plans. The CCP team has extensive experience assisting employers in the drafting of employment agreement and bonus/incentive compensation plans. Click here for a list of team members who can provide legal support with the drafting and review of employment-related contracts.