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No Bonus for You! Judge Enforces Clear Language Disentitling Terminated Employee from Bonus Payout

In a case argued by Susan Crawford of CCPartners, Judge S.A.Q. Akhtar upheld the contractual provisions of an employment agreement that prohibited an employee from being entitled to bonus if not employed on the date of bonus payout.  This decision provides an excellent example of why clear contractual language is integral to minimizing exposure for employers.

In Kielb v. National Money Mart Company, recently decided in the Superior Court of Justice, the plaintiff Mr. Kielb was hired by National Money Mart Company (“Money Mart”), in the position of Vice President and Division General Counsel.  When negotiating the terms of his employment, Mr. Kielb made several changes to the original offer, and had reservations about the level of remuneration.  However, included in the Agreement was the opportunity for him to earn significant bonuses in accordance with Money Mart’s bonus plan, and therefore offset the lower base salary.  Ultimately, Mr. Kielb and Money Mart came to an agreement and he signed a formal Employment Agreement.

That Employment Agreement set out specifically how Money Mart’s bonus plan worked, including identifying the circumstances under which Mr. Kielb would become disentitled from receiving the bonus: only if he was employed at the time of the bonus being paid would he be eligible to receive bonus.  Notably, the Employment Agreement also provided examples of how this would work in an attempt to clarify the bonus plan.

Money Mart terminated Mr. Kielb’s employment without cause in April, 2010 and paid him in accordance with his contractual entitlements; as this was well in advance of the September, 2010 bonus payout date, and Mr. Kielb’s notice period did not extend through to the bonus payout date, Money Mart took the position that, according to the terms of the bonus plan set out in the Employment Agreement, Mr. Kielb was not entitled to any bonus payment.

In suing for wrongful dismissal Mr. Kielb included a claim for his expected bonus entitlements, arguing that the Limitation Clause (the clause prohibiting him from receiving a bonus payment if he was not an employee at the time of payout) of the Employment Agreement was not enforceable on one or all of several different grounds.

In upholding Money Mart’s contractual language, Justice Akhtar reasoned that the explicit language in the Limitation Clause, including the use of examples, made very clear the way the bonus plan worked, and that there was no ambiguity with respect to the fact that Mr. Kielb would not be entitled to any bonus payments if he was not employed at the time of Money Mart’s bonus payout.  Further, Justice Aktar held that, although some of the terms of the Employment Agreement, and their application, may be considered harsh or even “draconian”, that did not negate the fact that the language was clear, and that the Employment Agreement was entered into by Mr. Kielb with full knowledge.  Justice Akhtar dismissed Mr. Kielb’s claim in its entirety.

This decision restores some faith in the applicability of basic contract-law principles.  While the sophistication of the plaintiff cannot be ignored in this case – he was a lawyer, after all – this case clearly stands for the proposition that employers can still limit liability on termination by using clear, explicit language in the drafting of employment agreements.

The lawyers at CCPartners have experience with all aspects of contract drafting and enforceability.  Click here for a list of lawyers from the CCPartners team that can assist you with all of your employment agreement needs.