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What Additional Payments Should Be Included in your Severance Package: Toronto Employment Lawyer
Compensation for bonus and car allowance during your notice period
Benefit Continuation
Section 60(1)(c) of the Employment Standards Act, 2000 (“ESA”) requires an employer to continue all benefits a terminated employee enjoyed as part of their regular employment for the entirety of their notice period.
The term ‘benefit’ not only applies to the usual health, dental, medical, and insurance coverage, but has also been found to include car allowances and bonuses.
Marques v. Delmar International, 2016 ONSC 3448
In Marques, The Defendant terminated the Plaintiff’s employment without cause and the Plaintiff sued for wrongful dismissal. At the motion for summary judgment, in addition to determining the amount of reasonable notice owed to the Plaintiff, the judge also needed to determine whether the Plaintiff’s car allowance formed part of his total remuneration, and whether the Plaintiff was entitled to compensation for his bonus during his notice period.
Car Allowance
On its face, the Employment Agreement between the parties listed the Plaintiff’s car allowance as part of his annual compensation. However, it was the Defendant’s position that the allowance was actually reimbursement for expenses incurred by the Plaintiff, and not a component of the Plaintiff’s income. The Defendant attempted to rely on a company policy in support of its argument, however this policy was neither attached to the Employment Agreement, nor was it provided to the Plaintiff for review at any time prior to him signing the Agreement. The Defendant also argued that the policy was incorporated into the Agreement by way of reference because it stated “as per Company policy”.
The motion judge disagreed with the Defendant’s position on this point. In accordance with the Ontario Court of Appeal decision of Poole v. Whirlpool Corporation, 2011 ONCA 808, an employer cannot rely upon external documents that are not explicitly incorporated into employment agreements, especially documents which were not otherwise drawn to an employee’s attention at any time, “whether orally, in writing or by means of internal internet communication system.”
The judge elaborated on this issue at paragraph 15, stating:
If the defendant wanted to treat the monthly car allowance as a reimbursement payment it could have easily done so by specifying such a term in the Agreement, or appending the car allowance policy to the Agreement. In my view, the words “as per Company policy” are insufficient to consider the monthly car allowance as anything other than what the Agreement provides on its face – a component of the plaintiff’s total remuneration.
Ultimately, due to the Defendant’s failure to explicitly contemplate the car allowance as reimbursement in the written Employment Agreement, the judge concluded that payment for same formed part of the Plaintiff’s total remuneration. Accordingly, the monthly allowance was to be included in the calculation of the Plaintiff’s reasonable notice.
A similar conclusion was also found in the case of Haff v. Valeant Pharmaceuticals International, Inc., 2013 BCSC 1720. In this case, the Judge confirmed that the Plaintiff’s employment related benefits, including a car allowance, were compensable during the notice period because she would have been entitled to them had she been given reasonable notice of her termination.
Bonus
In Marques, the Employment Agreement provided that the Defendant would “guarantee a minimum bonus of $25,000.00 after the plaintiff’s first year of employment.” The Plaintiff therefore argued that if he was to receive a proper notice period, which extended his employment until or after his 12-month anniversary, he would be entitled to receive the guaranteed bonus payment as set out in the Agreement.
The Defendant argued that the bonus was an incentive payment only, and because the Plaintiff was not “actively employed” at his one-year anniversary, he would not be entitled to the payment of the bonus. To award the Plaintiff his bonus after only 7.5 months of employment, and when he is not considered actively employed by the company, would be to re-write the terms of the Employment Agreement.
The judge again disagreed with the Defendant, finding it was the Defendant who was attempting to infer terms into the Agreement. Had the Defendant intended for the bonus payment to be applicable only if the employee was actively employed at the time it was paid, it ought to have included the explicit language specifying this term in the Agreement. A unilateral termination by an employer should not deprive an employee of a bonus entitlement, particularly when it is an integral part of the employee’s compensation structure. Therefore, the judge confirmed that if the Plaintiff’s reasonable notice period extended his employment to, or past his 12-month anniversary, in accordance with the Agreement, the Defendant would owe the total bonus payment to the Plaintiff.
The issue of ‘active employment’ at the time of bonus payouts was addressed in the case of Schumacher v. Toronto Dominion Bank, [1997] O.J. No. 2004. In Schumacher, the Court determined that the Plaintiff’s involuntariness to comply with the company’s requirement to be actively employed at the time the bonus was to be paid did not release the Bank from its obligation to pay the bonus. As such, the Plaintiff was awarded his bonus for the time he worked, as well as throughout his notice period.
The same principle was more recently upheld in the Ontario Court of Appeal decision of Paquette v. TeraGo Networks Inc. 2016 ONCA 618:
In the present case, as in Taggart, Schumacher and Bernier, the requirement for active employment does not prevent the appellant from receiving as part of his wrongful dismissal damages, compensation for the bonuses he would have received had his employment continued during the period of reasonable notice.
Take Away
We know that in accordance with the ESA, employees are entitled to the continuation of benefits for the entirety of their notice period. Marques highlights that benefits will also include other items regularly enjoyed as part of employment, such as car allowances and bonuses. Including these payments in a severance package can make a sizeable difference in compensation owed by an employer.
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