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The right to benefits following the termination of an employee’s employment can lead to many disputes between employers and former employees.  This can be a significant issue, particularly for employees who are entitled to a range of compensation items aside from base salary, such as health benefits or bonuses.

To avoid disputes, many employers attempt to include specific language within contracts and/or bonus and benefit plans intended to specify what if anything individuals are entitled to in the event of a termination of employment, whether following resignation or the termination of the employee’s employment.

Courts, when deciding disputes relating to these entitlements, have focused on the basic principle that any rights or restrictions to benefits following the termination of employment are to be based on the intention of the parties.

The Alberta Court of Appeal in Styles v Alberta Investment Management Corporation, 2017 ABCA 1 concerned a dispute over the right of an Investment Manager to entitlements under a bonus plan. The employee argued that the bonus plan documentation, which set out (through a formula) specifically what he would be entitled to in the event of the termination of his employment, was not enforceable.  The employee specifically argued that the component of the plan which stated that the period relevant to determining bonus entitlement did not include any post-termination period in which the employee was not working should not be enforceable.

The Alberta Court of Appeal decided that the employer was correct in this case on the basis that the conditions restricting entitlements about post-termination non-working periods was clear and not in violation of the relevant employment statutes, and accordingly enforceable.

The Ontario Court of Appeal in Paquette v TeraGo Networks Inc., 2016 ONCA 618, in finding against the employer, reminded the parties of the importance of clearly worded provisions for any restrictions to be enforceable.

In this case, the employer did not want to pay bonus entitlements to a former employee both because the employee’s employment had been terminated and that he was not working at the time that payment was due.  To support its argument, the employer pointed to the bonus plan which stated that an individual needed to be “actively” employed at the time of bonus payment to be entitled to the benefit.  The court did not agree however, stating that the agreement was not clear enough, specifically that plan was not in the court’s opinion sufficiently clear that not being actively employed included any post-employment notice period.

What is the takeaway from these cases?

The recent cases are a reminder that employees are entitled to post-termination rights in accordance with the common-law unless a court is convinced on a balance of probabilities that there is an enforceable contractual (written or otherwise) agreement clarifying the specific rights to benefits or bonuses following the termination of employment.

 

 


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