I was terminated “without cause” - am I entitled to my bonus during the notice period?

Well, it depends.

The general rule is that bonuses earned during the notice period can be recovered if they are an integral part of the employee’s remuneration package. The Court looks at a variety of factors to determine if the employee had a contractual entitlement to the bonus, or if the bonus was merely an occasional payment made as a reward or incentive to improve future performance. Unless the employment contract contains a valid exclusion clause, the employee is entitled to a bonus for the period during the notice period.

In Brock v. Matthews Group Ltd., the Ontario Court of Appeal confirmed that the employee’s bonus had become an integral part of his remuneration because he had received a bonus every year except for one. However, while a portion of the bonus was a reward for past services, the rest was viewed as an incentive for future performance. Seeing as the employee was terminated, the Court found that the ‘future incentive’ portion of the bonus was not payable.

In Ruston v. Keddco MFG Ltd., the Ontario Court of Appeal rejected the employer's argument that the employee was not entitled to his bonus during the notice period since the company did not generate sufficient profits that year. The Court concluded that the employee was entitled to his bonus since he received a bonus in every year of his employment, which constituted a significant amount of his overall compensation.

Restrictions in an employment contract can limit an employee’s entitled to a bonus during the notice period. For example, in Loyst v. Chatten's Better Hearing Service, the Court found that an employee was not entitled to damages with respect to her yearly bonus and annual trips because they were not part of her employment contract or integral to her overall compensation.

How do I calculate the bonus amount if it isn’t always the same?

When the bonus amount is uncertain, the courts have used various approaches to calculate damages. Assessments by the Court often include damages from previous bonus results at the time of the breach. The court can also look at the employer's results after the termination of employment.

If there is not specific information available to calculate the bonus, it has been held that it is appropriate to average bonus paid in preceding years. When there is insufficient evidence showing the company's profits used in calculating an executive's bonus, the Court used the amount received in the year preceding employment termination.

It should be noted that the Court will not use the average of an employee’s preceding bonus’ if it would unfairly enrich the employee. For instance, in Hussain v. Suzuki Canada Ltd., the employee’s last year bonus was used to calculate his entitlement to a bonus during the notice period, since the bonus has been dropping over the last few years, and an averaging of bonuses would produce an artificially high amount.

The decision in Dimmer v. MMV Financial Inc. explores the problem of historical bonuses with an irregular and unpredictable pattern. In this case, the Court applied a historical bonus earnings approach, but modified it to include a “fairness factor” to account for the employee’s quarters that had zero bonus earnings. As such, the Court deducted certain zero earning quarters from the employee’s bonus calculation as they did not represent his “normal bonus earning experience”.

It is important to remember that even if the employee did not merit a bonus in the year of dismissal, the Court may look at previous years and award a bonus for the notice period based on a several-year average. It is not presumed that the employee would continue to perform poorly into the notice period based on last year's performance alone.