THE QUESTION
I have a long-term incentive bonus with my company. The amount is vested, becoming due on Dec. 31, 2025. According to the agreement, you must be employed by the company on the vesting date in order to receive the bonus. I was recently terminated without good and sufficient cause and offered a package. This bonus was not included or considered in the settlement. What rights do I have as an employee? What if the company terminated me one day before the vesting date?
THE FIRST ANSWER
Jonquille Pak, lawyer and founder, JPAK Employment Lawyers, Toronto
Given that the long-term incentive bonus is already vested, you earned it prior to termination. It is a crystallized entitlement. Therefore, your employer is required to pay it, even if the payment date is scheduled to occur into the future and after termination.
If, however, your employment ended prior to the vesting date, you may still have a right to receive the bonus or otherwise compensation for the lost bonus. This will generally depend on the timing of the vesting date, relative to your applicable notice entitlements upon termination.
Under employment standards legislation in Ontario, the employer is not to alter any term or condition of employment during the applicable statutory notice period, which ranges between zero and eight weeks following the termination notice, depending on your length of service. Therefore, if your employment was terminated just one day before the vesting date, but within the applicable statutory notice period, the employer is obligated by statute to still honour the bonus as though you were actively employed on the vesting date.
Should the vesting date occur after termination and beyond the applicable statutory notice period, you may have a claim for damages equivalent to the value of the lost bonus if the vesting date should occur during the relevant notice or severance period to which you may be entitled under the common law.
It is common for employers to treat unvested equity or incentive payments as forfeited upon termination. The proposed terms of the settlement should be reviewed by a lawyer before finalizing anything to verify any vested or unvested entitlements. You will want to ensure that you receive an adequate severance package that is in line with your legal entitlements, plus the employer’s written agreement that it will honour payment of the long-term bonus if already vested.
THE SECOND ANSWER
Amiri Dear, senior associate, Hummingbird Lawyers LLP, Toronto
When an employee is terminated without cause, they are entitled to notice of termination or pay in lieu of notice of termination. The minimum entitlements to notice are protected by the employment standard act or code in their province. These minimum standards for notice range from one week for employees employed for less than one year, to eight weeks for employees with a tenure of eight years or more. However, an employee may be entitled to common law notice of termination based on their terms of employment, which considers a range of factors including the employee’s length of service, character of the employment, the employee’s age and the availability of similar employment opportunities in the job market. Common law notice often equates to one month’s notice per year of service.
It is unclear how long the employee has worked in the present scenario. As a general rule, a terminated employee is entitled to receive the same measure of pay that they would typically be entitled to during their employment, in the notice period. That would mean that not only is the employee entitled to their regular pay, but they are also entitled to receive the benefit of all payments that form an integral part of their compensation during this period. This includes access to health/dental benefits if applicable, as well as their bonus entitlements. Therefore, if the employee’s notice period extends to Dec. 31, 2025, and the bonus in question makes up an integral part of their compensation, they will be entitled to receipt of same.
Have a question for our experts? Send an e-mail to NineToFive@globeandmail.com with ‘Nine to Five’ in the subject line. Emails without the correct subject line may not be answered.
Andrea Yu