By Rhea Kamin
Garner v Banks of Nova Scotia, 2015 NSSC 122
This case is an example of a court ignoring internal bonus policies of a Bank in favour of the employee.
Mr. Garner worked for the Bank of Nova Scotia for approximately 35 years and was a Branch Manager at the time of termination. He was a good performer and received bonuses under the Bank’s Annual Incentive Plan, (“AIP”).
Following his termination, Mr. Garner claimed damages for the bonus he would have earned over the notice period, among other things. The Bank argued that he was not entitled to a bonus. It relied on an internal document which stated that an employee is ineligible to participate in the AIP if the employee is in receipt of severance payments or payments in lieu of reasonable notice of termination (meaning terminated without cause). The Bank argued that because Mr. Garner was terminated without cause, the policy applies and he does not get his bonus.
Associate Chief Justice Smith disagreed with the Bank and awarded Mr. Garner damages for the loss of his bonus over the notice period. Where a bonus is an integral part of an employee’s compensation, and the employee can establish that he or she would have received the bonus during the notice period, the bonus will form part of his or her damages. An internal document which tries to limit payment of the bonus if an employee has been terminated without cause cannot oust the court’s ability to award damages for the loss.
In my view, this case means that bonus plans which try to limit an employee’s entitlement to a bonus following a termination without cause do not necessarily preclude the employee’s entitlement to damages for the loss of his or her bonus over the notice period. In a case like this, the employee isn’t claiming the bonuses themselves, but damages as compensation for the bonus income he or she would have received had the employer not breached the contract and given the employee reasonable notice of termination. It appears that the policy in this case did not limit Mr. Garner’s entitlement to damages for the loss of his bonus. This case jives with two recent decisions of the Court of Appeal for Ontario which we have written about here: "Love is Dead (and employees are better for it)"
WHAT THIS CASE MEANS FOR EMPLOYEES
ad been involuntarily terminated yet however, given that the Bank testified that where an employee retires or is off work due to illness for any part of a year that employee’s bonus is pro-rated and paid for that part of the year worked, he saw no reason why this practice should not apply to Mr. Garner notwithstanding the fact that he had been terminated and/or receiving payments in lieu of notice.