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Love is Dead (and employees are better for it)

By Jennifer Mathers McHenry

Is Love dead?  Well, yes, if you are talking about the Court of Appeal for Ontario’s (“ONCA”) decision on bonus entitlement in Love v. Acuity.  

If you’re not talking about it (and you are an employer with a bonus plan or an employee subject to one), you should be.  Here’s why:

Love v. Acuity is a 2011 decision of the Court of Appeal for Ontario that considered a profit sharing plan which provided that an employee terminated without cause “ceased to be an employee” on his termination date and – in what appeared to be a total departure from previous decisions of the ONCA in Schumacher v. TD  and Taggart v. Canada Life Assurance Co. (neither of which were cited by the ONCA in Love)  did not find either that the plan had to be interpreted to contemplate lawful termination and, therefore the “termination date” can only be the end of the reasonable notice period (as I would argue Schumacher requires) or that he was entitled to damages in lieu of plan participation in order to properly compensate him for his having been terminated without notice (as I suggest Taggart clearly requires).

The three decisions cannot be squared.  So, what does that mean for employees and employers?  The answer was utterly unclear until this year.  With two recent decisions, Lin v. Ontario Teacher’s Pension and Paquette v. TeraGo Networks, the ONCA has once again made clear that despite bonus plan provisions to the contrary employees are entitled to damages on account of earned and unpaid bonus compensation as well as and lost bonus compensation over the reasonable notice period.

The court leaned heavily on it’s own analysis in Taggart and reminded us all that the inquiry in the context of any wrongful dismissal begins with the employee’s common law right to reasonable notice and the right to be put in the position he or she would have been in had that reasonable notice been provided through an award of damages. The key question regarding any plan document, then, is not whether is clearly states that an entitlement ends on the “termination date” (like in Love) but rather whether it clearly and effectively ousts the employee’s common law rights.

Love is dead, and in my view, the law is better for it.

Read the decisions below, and if you need more information regarding the evolution or state of the law in Canada regarding executive compensation and bonus plan entitlement, our Executive Employment team is here to help:

http://www.canlii.org/en/on/onca/doc/2016/2016onca619/2016onca619.html

 http://www.canlii.org/en/on/onca/doc/2016/2016onca618/2016onca618.html


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