In 2001, the Ontario Court of Appeal
issued two decisions, Sills v. Children’s
Aid Society and McNamara v. Alexander
Centre, which both dealt with the “private
insurance” exception. Under this
exception, the court found that disability
benefits would not be deducted from
wrongful dismissal damages if an employee
had contributed to the benefits
plan.
WHAT’S CHANGED?
In 2013, the Supreme Court of
Canada’s decision in IBM v. Waterman
(“Waterman”) introduced change in the
law. The majority in Waterman found
that disability benefits, unlike pension
benefits, were intended to indemnify
for lost wages. There is no question
that receiving both disability benefits
and wrongful dismissal damages lead to
“double recovery,” however the majority
in Waterman specifically questioned the
logic of using employee contribution to
the benefits as a justification for receiving
both forms of compensation.
This critique from Waterman has given
employer’s counsel the opportunity
to “right the ship.” A number of recent
decisions, including Mazzuco v. Herer,
Morris v. ACL Services Ltd. and Schulz v.
Lethbridge, have all followed the majority
critique in Waterman and deducted disability
benefits from wrongful dismissal
damages.
TAKEAWAY FOR EMPLOYERS:
It is important to recognize the shift
that has taken place from Sylvester to
Waterman and appreciate that the presence
of “employee contributions” to a
disability benefits plan does not automatically
justify “double recovery.”
Employers can now reasonably claim
that wrongful dismissal damages should
be reduced if an employee also receives
disability benefits.
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HR Professional Ontario_4.75x4.75.indd 1 11/23/2016 10:06:16 AM
3. BONUS ENTITLEMENTS
OVER THE NOTICE PERIOD
WHAT THE LAW WAS:
For a number of years, employers relied
on bonus forfeiture provisions in
their bonus plans in order to limit bonus
entitlements to periods of “active
employment.” As such, a terminated
employee would not be entitled to bonus
payments during the notice period
because they were no longer “actively employed”
with the employer. However, two
recent Court of Appeal decisions have
effectively nullified these kinds of forfeiture
provisions.
WHAT’S CHANGED?
In Paquette v. TeraGo Networks Inc., an
employer relied on a bonus forfeiture
provision, which required participants to
be “actively employed on the date of the
bonus payout,” in order to avoid a bonus
payout during the reasonable notice
period. The Court of Appeal concluded
that a bonus forfeiture provision which
purported to limit bonus entitlement to
periods of “active employment” was not
sufficient on its own to deprive an employee
of their bonus entitlement during
the period of reasonable notice.
Similarly, in Lin v. Ontario Teachers’
Pension Plan Board, an employer relied
on a bonus forfeiture provision that stipulated
that any bonus entitlement not
yet vested at the time of termination
would be forfeited by the employee upon
termination or resignation. The Court of
Appeal concluded that the wording of
this forfeiture clause did not alter or remove
the employee’s common law right
to damages, which included compensation
for the portion of the bonus earned
during the reasonable notice period.
TAKEAWAY FOR EMPLOYERS:
As a result of these decisions, the enforceability
of bonus forfeiture provisions in
Ontario has become more complicated.
An employer that attempts to rely on a
bonus forfeiture provision to restrict a
terminated employee’s bonus entitlement
needs to ensure that there is no
ambiguity or uncertainty in the wording
of the provision, such as a requirement
legal words
Continued on page 16
14 ❚ SPECIAL CONFERENCE EDITION 2017 ❚ HR PROFESSIONAL