Alberta’s highest court recently considered, in Styles v Alberta Investment Management Corporation, 2017 ABCA 1 (CanLII), whether being “actively employed” ousts an employee’s eligibility to receive bonuses under a Long Term Incentive Plan.
As readers of our blog will know, Monkhouse Law successfully argued to Ontario’s Court of Appeal that the “active employment” eligibility requirement did not disentitle an employee from receiving bonuses as part of his wrongful dismissal damages in Paquette v TeraGo, 2016 ONCA 618 (CanLII).
In Styles, the Court refused to award the bonus payments to the employee, as the employee was not actively employed after his termination date. The employee also failed to make arguments that the contract was unconscionable and carried out in bad faith.
How is it that these two provinces Appeals Courts came to two, seemingly conflicting decisions?
At the onset, it is important to note that there are very important differences in Styles that were not present in Paquette:
- The Long Term Incentive plan explicity contemplated that bonuses “may be forfeited” during an employee’s pay in lieu of notice
- The Long Term Incentive plan expressly stipulated when someone would cease being “actively employed”, i.e. the termination date
- The Long Term Incentive plan expressly waives right to damages for benefits under it
- The decision was based in Alberta, not Ontario
In our view, the Court was more reasonably able to come to the conclusion that “active employment” disentitled a terminated employee to bonus payments during a notice period, because the wording of the eligibility requirements were more comprehensive. The wording is more clear such that both parties could conclude that the employee was not entitled to these payment starting the date in which he was terminated by defining when an employee stopped being “actively employed”, confirming that meant the bonuses would no longer be paid, and including another clause waiving an employee’s right to damages.
In addition, a major distinction is that this decision occurred in Alberta. In Ontario, when an employee sues, and is successful, at receiving payment in lieu of notice under the common law, that termination is deemed to be a breach of contract. As a result, the employee is entitled to damages representing all compensation he/she would have earned if they had been given the proper notice of termination.
In Alberta, terminations are not a breach of contract. If an employer fails to pay enough notice to an employee upon termination, it is the failure to pay that is the breach, but not the termination itself. The Court in Styles, expressed this opinion, and distinguishes it from Paquette at paragraph 34 and in the footnote.
Therefore, while these decisions appear competing on their face, upon digging deeper they seem compatible. To date, Paquette remains the law in Ontario, and Styles remains the law in Alberta.
While Styles is not the law in Ontario, it would be interesting to see if an Ontario Court’s decision would differ if an employer included the wording in Styles to an Ontario based Long Term Incentive Plan. We endeavor to continue to update our readers on any developments.
About the Author: Samantha Lucifora is an associate lawyer at Monkhouse Law where she practises Employment, Human Rights and Disability Insurance Law. Samantha was also co-counsel on the Paquette decision discussed above.
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