Employees pushed out of their jobs have a right to bonuses they would have received if given proper advance warning they were being dismissed, the Supreme Court ruled on Friday.
The court said unanimously that a nutrition company executive driven from his job by a hostile boss was entitled to a $1,089,000 bonus payment when the company was sold – though the sale occurred more than a year after he left.
That victory for David Matthews, whom the court described as one of a handful of chemists in the world capable of running an omega-3 fish-oil plant, will affect a wide swath of Canadian employees, his lawyer Howard Levitt said.
“It’s an Everyperson story," he said in an interview. A woman who has been hit on frequently or an employee subject to constant toxic obscenities who then leaves the company in late fall, might otherwise be deprived of their Christmas bonus. "This case gets you your Christmas bonus back.”
Low-income workers pushed out of jobs have often missed out when employers claimed that they did not owe them non-salary forms of compensation, said Chris Rootham, a lawyer who represented Parkdale Community Legal Services, which intervened in the case.
The ruling “affects a huge number of lower-income workers because it protects or preserves their entitlement to payments for the small commission, tips and bonuses that would become payable to them during their notice period.”
A lawyer for an employers' group said he viewed the ruling as much narrower.
Tim Lawson, who represented the Canadian Association of Counsel to Employers, an intervenor, said the ruling supports the existing legal principle that if damages are to be restricted for denial of reasonable notice, the contract must be clear and unambiguous on the restrictions, especially when written by the employer and not negotiated with the employee. “In this case, the court said it was not,” he said.
Mr. Matthews joined Ocean Nutrition Canada Ltd. in 1997, but 10 years into his tenure a new chief operating officer marginalized him and began a four-year campaign of deceit against him, a lower court found. In 2011, he left and joined another company.
Thirteen months later, Ocean Nutrition was sold for $540-million. Mr. Matthews’s contract contained an incentive plan in which he was supposed to receive a share of the proceeds if the company were sold. But the contract contained clauses that said employees could receive the bonus only if they were still with the company, and the bonus could not be part of a severance payment. Mr. Matthews sued for damages, including the bonus payment, arguing he had been constructively dismissed – in effect, driven from the company.
The trial judge who heard his case, Justice Arthur LeBlanc of the Nova Scotia Supreme Court, ruled in 2017 that he was entitled to the bonus payment. But the province’s Court of Appeal, in a 2-1 ruling, said he wasn’t, because the company’s incentive program explicitly barred the payout to him.
The Supreme Court said the trial judge was right. Mr. Matthews had been constructively dismissed and was owed 15 months' notice (Ocean Nutrition agreed on both these points). Because the sale happened within the 15 months' notice period, he should have been treated as if he were still with the company, and entitled to the bonus, the court said.
“The purpose of damages in lieu of reasonable notice is to put the employee in the position they would have been in had they continued to work through to the end of the notice period,” Justice Nicholas Kasirer wrote for the court, explaining the 7-0 decision.
The contract language reserving the bonus to current employees was ambiguous, he said, and severance is not the same as damages in lieu of notice. To Mr. Levitt, however, the contract language that appeared to rule out the bonus payment was as strong as he’s seen in such employment contracts. That suggests, he said, that the courts will look askance at companies trying to take away from their employees what they’re entitled to.
Nancy Barteaux, a lawyer representing Ocean Nutrition, said in a statement the decision is a reminder to employers “to use clear language in every agreement with an employee.”
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