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Employment - Bonuses

. Celestini v. Shoplogix Inc.

In Celestini v. Shoplogix Inc. (Ont CA, 2023) the Court of Appeal considered the law of 'bonuses' in the employment termination context:
[51] The motion judge properly considered this issue by applying the decision of the Supreme Court in Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26, 449 D.L.R. (4th) 583. In Matthews, at paras. 52-55, the Supreme Court adopted this court’s approach to interpreting bonus entitlement as set out in Paquette v. TeraGo Networks Inc., 2016 ONCA 618, 34 C.C.E.L. (4th) 26, and Lin v. Ontario Teachers’ Pension Plan, 2016 ONCA 619, 402 D.L.R. (4th) 325. The analysis is two-part: (1) would the employee have been entitled to the bonus or benefit as part of their compensation during the reasonable notice period?; and (2) if so, do the terms of the employment contract or bonus plan unambiguously take away or limit that common law right?.

[52] In Paquette, van Rensburg J.A. concluded that a condition requiring an employee to be “actively employed” by the employer on the date of the bonus payout was insufficient to displace the employee’s common law entitlement to damages for a lost bonus: see para. 47. In Lin, she concluded that a clause stating that no bonus shall be earned or payable where an employee resigns or the employee’s employment is terminated prior to the payout of a bonus was also insufficient to displace the common law entitlement to a bonus payment because it is, in effect, the same as a requirement of “active employment” at the date of bonus payout: see paras. 86-89.

[53] In Matthews, the long-term incentive plan provided for a bonus payment if the employer was sold and the employee was still employed by the employer at time of sale. The particular provision at issue stated as follows:
2.03 CONDITIONS PRECEDENT: ONC shall have no obligation under this Agreement to the Employee unless on the date of a Realization Event the Employee is a full-time employee of ONC. For greater certainty, this Agreement shall be of no force and effect if the employee ceases to be an employee of ONC, regardless of whether the Employee resigns or is terminated, with or without cause. [Emphasis added.]
[54] Kasirer J., writing for a unanimous court, held, at para. 65, that language requiring an employee to be “full-time” or “active” is not sufficient to remove an employee’s common law right to damages. Similarly, at para. 66, he also concluded that a clause purporting to remove an entitlement to the bonus upon termination “with or without cause” did not remove the right to damages for loss of the entitlement to earn that bonus during the reasonable notice period. He reasoned that:
Here, Mr. Matthews suffered an unlawful termination since he was constructively dismissed without notice. As this Court held in Bauer v. Bank of Montreal, 1980 CanLII 12 (SCC), [1980] 2 S.C.R. 102, at p. 108, exclusion clauses “must clearly cover the exact circumstances which have arisen”. So, in Mr. Matthews’ case, the trial judge properly recognized that “[t]ermination without cause does not imply termination without notice” (para. 399; see also Veer v. Dover Corp. (Canada) Ltd. (1999), 1999 CanLII 3008 (ON CA), 120 O.A.C. 394, at para. 14; Lin, at para. 91). Yet, it bears repeating that, for the purpose of calculating wrongful dismissal damages, the employment contract is not treated as “terminated” until after the reasonable notice period expires. So, even if the clause had expressly referred to an unlawful termination, in my view, this too would not unambiguously alter the employee’s common law entitlement. [Emphasis in original.]
[55] The ICA provides that if Shoplogix terminated Mr. Celestini’s employment for a reason other than cause, then Shoplogix would pay the bonus earned up to the date of termination. Like the clauses considered in Matthews and Lin, s. 2 of the ICA does not unambiguously oust Mr. Celestini’s right to damages upon the circumstances that actually arose, that is, a without cause termination without reasonable notice − termination without cause must be taken to mean a lawful termination following the reasonable notice period. I agree with the motion judge that the ICA did not oust the right to common law damages representing the loss of bonus over the reasonable notice period.

[56] Shoplogix also argues that the motion judge erred in quantifying Mr. Celestini’s bonus entitlement.

[57] Shoplogix submits that there was no legal or factual basis for the motion judge to calculate what Mr. Celestini would have earned had he been given reasonable notice by averaging the annual bonuses that he earned in the last three calendar years immediately preceding his dismissal.

[58] In my view, there is no merit to this argument. Calculations of damages are entitled to considerable deference on appeal and will not be interfered with in the absence of an error of law or principle, a misapprehension of evidence, or if palpably incorrect: SFC Litigation Trust v. Chan, 2019 ONCA 525, 147 O.R. (3d) 145, at para. 112.

[59] There is no one particular way of calculating an employee’s damages related to the lost opportunity to earn a bonus. This court has affirmed trial judges’ calculations of the bonus based on a three-year average prior to dismissal especially where, as here, the bonus calculation could not have been performed in the usual manner because a portion of its components was based on work performance: see Bernier v. Nygard International Partnership, 2013 ONCA 780, 14 C.C.E.L. (4th) 155, at para. 5; Paquette, at para. 49.

[60] Like the court in Bernier, the motion judge in this case noted that a component of Mr. Celestini’s bonus was based on his performance. He further observed that the parties had not adduced any evidence of Shoplogix’s actual business performance in the 2017 and 2018 fiscal years: see para. 75. He rejected the calculation of Shoplogix’s expert because it was unclear how he came to his figure. It was for these reasons that the motion judge utilized an average based on what was paid in 2014, 2015 and 2016.

[61] In my view, the motion judge made no reversible error in adopting an averaging approach for the bonus entitlement that would have been earned in the notice period.




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Last modified: 01-03-23
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