Unwritten Terms of Employment Contracts

| May 23rd, 2017 | No Comments »

Contracts- Implied Terms:

It is not uncommon for terms of employment between workers and employers to be unwritten. Disputes between an employee and employer may arise over past verbally-agreed-upon terms, established unwritten practices, and more. This can result in litigation and unseen costs resulting from workplace conflict. In general, the courts will attempt to determine what terms would have been agreed to between the parties if they were to produce a written contract. This is done by examining the common practices within the workplace, interactions between the employee and superiors, and so forth. Employees and employers also have duties that the courts established through common law, whether or not it is in writing.

Common Law Employer Duties:

Employers have a duty to pay their employees. There must be a regular pay period set by the employer, and this means that employees are not to be paid in arrears. The law recognizes the inherent power imbalance between employees and employers, and paying in arrears would subject employees to too much control. There are fines and penalties associated with failing to establish a regular method of pay – weekly or biweekly is most common.
Employers also have a duty to provide employees with a safe workplace and equipment. If an employee suspects they are being put in harm’s way, then they have the right to refuse any work they believe is unsafe. There are protocols for this under the Ontario Health and Safety Act. This includes the employee first notifying a supervisor, the supervisor then eliminating the hazard to the employee’s satisfaction, and, if no resolution is agreed upon, an inspection by the Ministry of Labour to determine if there is a hazard.

Employers are also obligated to provide notice or pay in lieu in the event an employer wishes to terminate an employee. This pay or notice is based upon an estimate of how long an employee would need to find comparable employment.

Common Law Employee Duties:

Employees have a duty to obey. This is fundamental to the employment relationship, as workers are providing their service in exchange for pay. Willful disobedience can lead to a summary dismissal, which means that the employer can terminated the employee without severance pay or a notice. The exception to the duty to obey is when an employee is asked to do something illegal or perform work that is unsafe. Employees also have a duty to exercise skill and care while doing their job. This includes using the skills required and also not being negligent while performing job duties.

Employers also cannot intentionally cause an employer harm, which falls under an employee’s duty of good faith and fidelity. This includes protecting trade secrets of the employer even after employment has ended, not pursuing or completing other work during hours of work, work for a competitor and so on.

Conclusion:

The above duties are a part of every employment relationship within Canada. For oral agreements that go beyond theses duties, drafting a carefully written agreement may avoid future disputes over misunderstandings within the workplace and also avoid costly litigation. For complex scenarios and terms of employment, it is best to seek an employment law professional. For any related issues, Whitten and Lublin Employment Lawyers have a team of professionals dedicated to providing great service.

Acceptable Scope of a Non-Solicitation Clause: A Real-Life Example

| April 17th, 2017 | No Comments »

For most employees, a non-solicitation clause should be all that is necessary if an employer is seeking to protect his/her business interests (clients) from employees who leave to a competitor. However, employers must be careful with the wording of such clauses because the clause must only go as far as necessary to protect the employer’s business interests. This is the ‘reasonableness’ standard with which the courts will review a non-solicitation clause. Any restrictions on the employee’s freedom to work must be necessary to protect the employer’s business or the clause will be unenforceable.

Non- Solicitation Clauses

There are a few things that a non-solicitation clause must contain to be enforceable. The clause must have a limited geographic scope and time in place that is reasonable. Further, a non-solicitation clause must be limited to the act of solicitation. If the wording of the solicitation clause goes beyond the solicitation of the employer’s client base, then it is likely to place unreasonable limits on the employee’s ability to freely compete and earn a living. Lastly, it is wise to limit the act of solicitation so that it is not too burdensome. This may entail only restricting the solicitation of the clients that the employee dealt with or the types of clients that the employee works with. To better understand the limits of a non-solicitation clause, the case of Donaldson Travel Inc. v. Murphy et al. 2016 is useful to review.

Donaldson v. Murphy, 2016 (Superior Court of Justice – Ontario)

In the case, Murphy was a former employee of Donaldson Travel that left to work for a competitor company named Goliger. One of Donaldson Travel’s claims was that Murphy solicited clients and therefore violated the non-solicitation clause that Murphy had signed. The clause reads:

Mary agrees that in the event of termination or resignation that she will not solicit or accept business from any corporate accounts or customers that are serviced by … Donaldson Travel, directly, or indirectly. (emphasis added)

The court deemed this clause unenforceable for several reasons. Firstly, there was no limit in time and geography. As it is worded, this clause would never expire and would apply anywhere in the country. This is unnecessary to protect Donaldson Travel’s business interests. Secondly, the phrase “or accept business from” goes beyond the act of solicitation. This places an unreasonable restriction on Murphy’s ability to earn a living because it is not necessary to protect Donaldson’s business interests. Lastly, the term “any corporate account” is also too broad. It would be reasonable to limit the solicitation of clients that Murphy dealt with; however, the wording here would prevent Murphy from conducting business with any clients of Donaldson, even the ones that Donaldson establishes after Murphy had left. This is not needed to protect Donaldson’s business interests by the departure of Murphy.

Closing Remarks

The burden is placed on the employer to carefully draft such clauses and to show that the clause is reasonable. The wording of the clause is important as the courts will not look beyond the wording of the clause, nor will they change the clause so that it is legally enforceable. For employees that are not in a managerial role, a non-solicitation will almost always suffice in protecting an employer’s business interests. It is important to seek the assistance of an employment lawyer when seeking to protect business interests through non-solicitation clauses.

A Case of Employee Dishonesty Resulting in Termination

| April 4th, 2017 | No Comments »

Where there is ‘just cause’ for termination an employer is not obligated provide an employee notice of termination or pay in lieu.  ‘Just cause’ means that the employee has done something wrong that deserves termination as a disciplinary measure. This can either be one act that strikes a fundamental aspect of the employment relation or a final step in the progressive disciplinary process. Overall, the punishment must be proportional to the misconduct of the employee. For a single act to trigger a just cause termination, it must be fundamentally incompatible with the duties of employment or significantly breach the employer’s trust of an employee. There are two aspects that must be considered when determining whether termination is warranted (i.e. proportionate to the employee’s misconduct). This includes the nature and extent of the misconduct, and the surrounding circumstances.

Fernandes v. Peel Educational and Tutorial Services Limited:

Fernandes v. Peel Educational and Tutorial Services Limited (Peel Educational Ltd.) is a case which deals with employee dishonesty and termination. Fernandes was a teacher of 10 years (1999 – 2009) with a good employment record. Fernandes was also involved with extracurricular activities, including coaching and after-school events. In the 2008 – 2009 school year, Mr. Fernandes was found to have falsified various grades for the students in his classes. This was an attempt to meet the deadline for report cards, for which he had been given 3 extensions. After an investigation and 3 meetings, the school terminated Mr. Fernandes’ employment without notice or severance, calling this a case of ‘academic fraud’. Upon analysis, the Ontario Court of Appeals ruled that there was just cause for termination. In reviewing Mr. Fernandes’ misconduct of dishonesty, the court considered the nature and extend of the misconduct, and the surrounding circumstances.

  1. The nature and extent of the misconduct:

The court considered the fact that Mr. Fernandes assigned inaccurate and false grades for his students’ assignments, both initially and upon resubmission, and that Mr. Fernandes released these grades for the students’ interim report-cards. Further, Mr. Fernandes lying to the employer in an attempt to cover-up his actions was also considered in assessing the seriousness of this misconduct. The key here is to understand the seriousness of this misconduct as it related to his employment relation. Teachers hold the trust of the school, the students and the students’ parents to fairly evaluate the students’ progress and development. The dishonesty of this misconduct, therefore, was fundamentally incompatible with the duties required by a teacher, causing irreparable harm to the trust placed in Mr. Fernandes by all parties.

  1. The surrounding circumstances:

The courts consider both the employer and employee’s surrounding circumstances when further evaluating whether just cause is warranted. In this case, it is important to understand the harm that Mr. Fernandes’ misconduct could have done to the school as a business. Being a private school, Peel Educational Ltd.’s authority to grant credits and Ontario Secondary School Diplomas is dependent upon meeting the standards in place by the Ministry of Education. The severity of harm which could have resulted by Mr. Fernandes’ misconduct placed the school’s business in jeopardy. Further, Mr. Fernandes’ actions also violated his employment contract to fairly evaluate his students and the school’s trust in his professionalism, making continued employment a significant issue.

The court also considered Mr. Fernandes’ past behaviour, as he was employed with the school for 10 years with no prior performance issues. However, Mr. Fernandes did not have any explanation for his misconduct. He did face a deadline to submit his grades which was extended 3 times. However, Mr. Fernandes stated to his superiors that there were no life troubles that were preventing or hindering his teaching duties.

Was dismissal warranted?

In consideration of the above, it was determined that the seriousness of Mr. Fernandes’ misconduct did warrant just cause for dismissal and thus no severance package or notice was required. Mr. Fernandes’ actions displayed a complete disregard for his professional duties as a teacher, which were incompatible with the essential nature of the job. Given the harm done to the employment relation, the court agreed with the disciplinary action of the school.

If you are an employer and are faced with serious misconduct by an employee, it is important to be mindful of how the misconduct affects the employment relationship when considering termination without notice or severance pay. It is always advisable to seek the opinion of an employment lawyer to avoid unnecessary and costly future litigation. Each case presents its own unique set of issues, so a thorough assessment of whether just cause is warranted should be conducted.

An Impassioned Employee Storms Out of the Office: Is This Resignation?

| March 28th, 2017 | No Comments »

When an employee resigns there is usually clear actions that support their decision. This may include a written letter, a verbal statement, a notice period, information that the employee has found another position or is moving away, or so forth. The idea is that there are clear indicators that leave no doubt about the intentions of the employee to resign. However, suppose that an employee is extremely upset from an event or changes made in the workplace, and storms off and leaves suggestions that may point to a resignation. The key is to be mindful of the surrounding circumstances and following up with the employee when coming to a reasonable conclusion regarding their true intentions. To get a better sense of what this entails, a recent case of Rajinder Joha (plaintiff) vs. Simmons da Silva LLP (defendant) by the Ontario Superior Court will be reviewed below.

Rajinder Joha was a senior law clerk for Simmons da Silva LLP (Simmons). Mrs. Joha was 62 years of age and was with Simmons for 27 years.

Mrs. Jona was informed by Mr. Clark (the lawyer she worked under) of structural changes, which included Mrs. Joha being under the direction of another employee that she did not get along with, on June 3rd, 2015. The next day, Mrs. Joha claimed to have heard Mr. Clark tell another law clerk that this person was to work with Mr. Clark, which further upset Mrs. Joha. After claiming to have overhear this, Mrs. Joha removed her personal belongings from her desk and handed in her security pass to Mr. Clark. Mrs. Joha did not return to work or contact any human resource personnel from June 4th – June 8th 2015. On Tuesday June 9th, Mrs. Joha attempted to return to work after having time to think things through and obtain advice from a lawyer. However, the employer refused to allow her back, claiming she had resigned. Mrs. Joha then sought damages for wrongful dismissal.

The judge ultimately decided that in consideration of the surrounding circumstances, Mrs. Joha did not resign from her position and was entitled to damages. The key takeaway from this case is that when an employee resigns or leaves during a time of heated emotions, the employer must consider the surrounding circumstances in determining if the employee did in fact resign. In this case, the judge considered Mrs. Joha’s tenure, senior position, her age, her lack of secured alternative employment, the fact that this was out of character for Mrs. Joha, and a lack of written notice by Mrs. Joha as circumstances that indicated Mrs. Johna did not resign. Further, the employer’s actions were also considered. There was no attempt by anyone at the firm to contact Mrs. Joha regarding her suspected resignation, no follow up meeting by her boss Mr. Clark, and no attempt to discuss the matter. The employer’s inaction was an important factor here in the judge’s decision. As a result, the employer was liable for damages of wrongful dismissal.

Employers that are faced with a similar situation should always make an attempt to follow up with the employee. This should include contacting the employee to discuss the matter, an attempt to make a follow-up meeting, or a written letter to confirm the employee’s intention to resign. Employers should be mindful that a cooling off period may be necessary so that emotions do not interfere with an employee’s judgement or decision. It is best to seek legal advice from an employment law expert when in doubt to avoid unnecessary litigation.

Some resignations are terminations in disguise

| March 22nd, 2017 | No Comments »
Daniel Lublin, Employment Lawyer

Daniel Lublin, Employment Lawyer

When is a resignation a termination in disguise?

Sometimes employers too easily confuse when an employee has voluntarily decided to leave. Whether through insincerity or neglect, this is one situation where employers may try to rid themselves of an undesirable employee, without paying any severance. But not so fast. Some resignations are actually terminations in disguise.

If an employee is faced with an ultimatum between resigning or dismissal, it will almost never be a valid resignation. Some employers feel that by offering the opportunity to resign instead of facing allegations of misconduct, they are doing their employee a favour. In some cases this may be true. But in many other there is an ulterior motive. Employers know that proving just cause for dismissal is a difficult task, so they will sometimes threaten misconduct as a means to provoke a resignation instead. However, courts often recognize that employees who submit hasty resignations when faced with unproven allegations of misconduct have not legally resigned. Rather these are resignations given under pressure or duress, which are almost never upheld. A true resignation is a voluntary act, not a camouflaged termination.

A resignation must also not be given on impulse. The law recognizes that spontaneously made statements or actions, such as walking off the job after an argument, usually do not constitute a valid resignation. Several court cases have held that employers must not seize upon an employee’s emotional outbursts. In one recent decision, the court even went as far as stating that employers have a duty to provide a cooling off period to an employee who proclaims “I quit” in the heat of the moment and then confirm whether this is truly his or her intention.

A resignation, to become effective, has less to do with an employee’s statements and much more to do with his or her actions. The real test is whether an employee’s actions are consistent with someone voluntarily wishing to leave and not return. I currently have such a case. In it, the employee emphatically denies that she told her employer that she was “done” although the employer certainly feels that she did. However, she still came to work the next day as if nothing unusual had happened. It was only then when her employer, not expecting her to show up, purported to accept her resignation allegedly given the night before. The problem with the employer’s case is that, if my client truly intended on leaving for good, she would not have come back to work the very next day. So when she was told to leave, it should be viewed as a termination, not the other way around.

Employees tendering their resignation are sometimes free to withdraw it and continue working as before, as long as the employer has not already accepted the resignation and taken steps to move on. For example, an employee who gives two weeks’ notice of his or her resignation is entitled to change his or her mind, but only if the employer has not already hired or promoted a replacement.

What about an employee who is asked to leave after giving advance notice of their future resignation? Unless that employee engaged in misconduct and resigned before it came to light, employees who are asked to leave during their resignation notice period are entitled to payment for the remainder of the time frame they were prepared to work.

Even an employee who just does not show up for several days may not have resigned either. Courts often caution employers against snapping up the opportunity to claim an employee has resigned or abandoned their job and a number of cases have found that, in this situation, an employer has to take steps to reach out to the employee and try to confirm whether he or she no longer wants their job, before concluding there is a resignation.

The lessons for both employees and employers is clear. If either side finds itself in the “twilight zone” somewhere between a resignation and a termination, there are several practical steps to consider:

  • From an employee’s perspective, immediately protest any assertion that you resigned, if that was not what you intended to do. Further, if unclear, request that your options be outlined in writing and seek advice before taking any action, especially before leaving the workplace, as difficult as that may be.
  • From an employer’s perspective, the courts are increasingly requiring evidence that they were looking out for an employee’s best interests before accepting what appears to be a resignation. Therefore, if an employee’s behaviour or statements towards resigning are out of character or appear given impulsively, it is a good idea to ask them to first take some time to consider their actions and confirm their intentions in writing.

Published in the Globe and Mail.

Dismissal for Poor Performance: Does an Employer Need to Provide Severance?

| March 21st, 2017 | No Comments »

Only if there is just cause for termination, the employer may terminate the employee without severance pay. As an employer, it is very difficult to establish just cause for employee incompetence or poor performance. To do so, the employer must prove that the employee fails to perform essential duties or meet the required working standard, and that this has been ongoing; an isolated incident of poor performance will likely not be sufficient. To establish just cause for termination, there must be an established objective standard of performance, and proof that the employee’s poor performance is their own fault. Any mitigating factors can be considered by the courts. Among other, mitigating factors may include volume of work, whether the employee was hired as an experienced hire, and the training provided.

If an employer claims that there are ongoing issues of unacceptable performance, then the employer must provide a warning to the employee. The warning must include the employer’s performance related concerns and the consequences that may result. It is advisable that the warning be in writing and is clearly presented so that there is no possibility of confusion. An effective warning will identify what the employee is doing wrong, along with the preferred standard by the employee. Further, support for improvement such as supplemental training should be provided and stated in the warning, with a time limit for improvement and potential consequences for failure to meet the stated objective standard.

There are rare instances that may grant an employee just cause to terminate without a severance for isolated incidences. These cases usually involve gross negligence or incompetence that cause an employer significant harm, or a lack of skills that the employee claimed to have during the hiring process.

Whenever faced with an issue of poor performance by an employee, it is always best to seek the advice of an employment law expert. It is difficult to establish just cause for performance related issues, so any decisions to terminate without severance pay should be reviewed by an employment lawyer.

Termination Clauses and Contracting Out: Clarity Given by Recent Ontario Appeals Court Ruling

| March 13th, 2017 | No Comments »

Employment Standards Act Review:

The Employment Standards Act (2000) grants employees minimal guarantees. In terms of termination, the Employment Standards Act (ESA) provides one week of notice or pay in lieu for every year of service, for a maximum of 8 weeks. Severance pay is a separate payment that employers must provide if their payroll exceeds 2.5 million or if the employee was one of 50 employees that has been terminated within a 6-month period. In addition, employers are to provide all benefits throughout the notice period or pay in lieu. Employers are legally prohibited from contracting out of the ESA, unless the clause offers a greater benefit to the employee. In the instance where an employment contract offers less than the minimum provided under the ESA, then the provision in the contract is void. In this instance, the courts will award the employee common law notice (damages), which are often considerably more than minimal standards. A recent case heard before the Court of Appeals for Ontario highlights the importance of unambiguous language in termination clauses, as any ambiguity will render the clause unenforceable.

Facts from Wood vs. Deeley (OCA 2017):

 In the case, Wood served 8 years as a Sales and Event Planner, earning about $100 000 annually including benefits. Wood’s termination clause provided 2 weeks of notice for each year served (or pay in lieu) and stated that Wood is only entitled to the terms set within the termination clause of the employment agreement. Deeley ended up paying Wood 21 weeks worth of salary, which was more than the minimum Wood would have received under the ESA. Deeley argued that the extra payment provided after termination covered Wood’s benefits. Wood argued that the termination clause was unenforceable, however, because it excluded benefit pay and severance pay as per the wording of the clause. The Appeals Court of Ontario agreed, ruling that the clause was void because it contracted out of the ESA. Only the cause itself was to be considered in terms of enforceability, which means remedies implemented afterwards are irrelevant. Wood was awarded 39 weeks of notice pay (9 months), Wood’s common law entitlement.

Main Issues in the Termination Clause:

All-inclusive clause:

The language used in the termination clause effectively limited Wood’s entitlements to those provided in the clause. This meant that anything not covered in the clause but guaranteed under the ESA to not apply. The ESA entitles employees to their benefits during the notice period. The clause did not mention anything about Wood’s benefits and therefore was found to contract out of the ESA.

Ambiguous use of ‘notice pay’:

The termination clause Wood was subject to provided more than the minimum required notice pay under the ESA. However, notice and severance pay are two separate entitlements under the ESA, and combining both under “pay” here created ambiguity. For example, the termination clause entitled Wood to 2 weeks notice for every year of employment, or pay in lieu. If 10 weeks were given as notice, then the remaining 6 weeks were not enough to cover the minimum amount of severance pay that Wood was entitled to under the ESA. Rather, the termination clause should have allotted the necessary amount to each, severance and notice, rather than combining both under “pay”.

 

This case shows that employers are held to a rigorous standard in terms of drafting employment contracts. This reflects the purpose and intentions of the ESA. The ESA aims to protect employees that are unaware of their employment rights and the court seeks to interpret these clauses in ways that encourage employers to draft clauses that comply with minimal standards. As such, when determining the legal compliance of a termination clause, only the clause itself is considered and any remedies the employer seeks to implement at the time of termination will be irrelevant to the enforceability of the clause. It is important to seek legal advice from an employment law expert to ensure termination clauses are properly drafted. Any ambiguity will either be interpreted by the courts in the most favourable way for the employee or be deemed unenforceable, which entitles the employee to common law notice (damages). Again, common law notice (damages) is usually far more than minimal standards.

Are your Employment Contracts Illegal?

| March 8th, 2017 | No Comments »

Employers often require their employees to sign employment contracts that limit the amount of notice of dismissal they are required to provide.  In most cases, the employer attempts to limit its obligation to the bare minimums under the Employment Standards Act, as opposed to the more onerous obligation of providing reasonable notice.

Many of these contracts, however, violate one or more minimum standards under the Act, which renders the entire termination provision illegal.  Many judges in the last several years have granted leniency to employers, rather than overrule the illegal clause.

Recently, Whitten & Lublin was successful in convincing Ontario’s highest court to put an end to this practice, in the case of Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158 The law on this point is now clear: a termination provision that can reasonably be interpreted as contravening the Act will fail, and the employer will be required to provide reasonable notice of dismissal.

Determining whether an employment contract violates the Act is a difficult task that requires a competent employment lawyer to assess.   Nonetheless, the following are a few guidelines for determining whether a contract is illegal:

  • Are benefits mentioned? The Act allows employers to provide payment instead of formal notice of dismissal, provided that the employee’s benefits are continued for the minimum notice period. Since benefits are not a form of “pay”, they must be separately referenced
  • Can severance be worked? Severance pay under the Act must be paid. If the contract permits an employer to satisfy all obligations with working notice, or a combination of pay in lieu of notice without separately referencing severance pay, then the contract is illegal
  • How is pay in lieu of notice calculated? Pay in lieu of notice must be calculated based on what the employee would have received, had they been given working notice of dismissal. Limiting pay in lieu of notice to just base salary may violate the Act
  • Does the contract exclude a minimum standard, or is it just silent? A contract that states that the employee will receive no further entitlement is more likely to be illegal than one that is silent on the point.

Illegal termination clauses come in all shapes and forms, and are used by large corporations, all the way down to small businesses.  Contact our lawyers to determine your rights on dismissal.

For further reading, the judgment in Wood v. Fred Deeley Imports Ltd. can be viewed here.

Are you entitled to bonus pay that would have been earned during your notice period in the case of wrongful dismissal?

| March 6th, 2017 | No Comments »

A notice period is required by an employer seeking to terminate an employee. Employers can either provide the employee with notice or pay that would have been earned had the employee worked throughout the notice period. When an employee is terminated without a notice or pay in lieu, this is a wrongful termination and a breach of the employment contract. The remedy is damages paid by the employer in the amount equal to the compensation that would have been earned by the employee during the reasonable notice period that is owed.

What about bonuses that would have been owed to the employee, but require the employee to be “actively employed” at the time the bonus is to be paid? A clause that requires ‘active employment’ during the time of payment does not apply in the case of wrongful dismissal. This was affirmed in the case of Paquette vs. TeraGo Networks Inc. (2016). Employees are generally entitled to bonuses that would have been paid during the notice period, regardless of whether or not the employee was actively working during the time. This is especially the case when bonus pay is essential to overall compensation (i.e. a significant proportion).

To gain a better understanding, it helps to review the Paquette (employee) vs. TeraGo Inc. case. Paquette was under an employment contract that required him to be “actively employed” at the time the bonus was to be paid. The bonus here was set to be paid every February for the previous year’s work. The judgement by the Superior Court of Justice awarded Paquette 17 months of damages for only base-salary and benefits. Paquette appealed this decision, arguing that he is also entitled to bonuses that would have been received had he actually worked for the duration of the notice time (17 months). The Court of Appeals (Ontario) awarded Paquette the bonus pay as well. Simply put, the notice pay is meant to place an employee in a similar position had there been no breach in the employment contract. Here, if Paquette was not wrongful dismissed, he would have collected his bonus at each payment date (February 2015 and 2016). In other words, Paquette had the right to work but was prevented from doing so as a result of the employer’s breach. For the year that Paquette did not work (2016), the bonus was calculated by taking the average of the previous years’ bonus payment.

If you are an employee that receives bonuses as an essential part of compensations (ie. a significant portion), then a clause requiring you to be employed at the time of bonus pay may leave you vulnerable if wrongfully dismissed. Employees in this situation are encouraged to seek legal advice to ensure you are fairly compensated for damages and are fully aware of your workplace rights.

Can a Non-Payment of a Bonus Trigger Constructive Dismissal?

| February 24th, 2017 | No Comments »

In the case of bonus pay, would a disagreement over the entitlement, and subsequently a non-payment, be enough for an employee to claim constructive dismissal? When an employer changes an essential term of an employment contract without the consent of the employee, this is a unilateral change and would warrant a constructive dismissal claim. This means that the employee had no reasonable alternative but to walk away from the job. This requires a fundamental change to the terms of employment such as pay and responsibilities. The remedy sought would be damages in the form of ‘notice pay’.

This, of course, is circumstantial. Important factors include the amount of the bonus in question. If the bonus makes up a large proportion of the employee’s pay and is guaranteed, then a failure of payment would more likely result in a successful constructive dismissal claim. Alternatively, if the bonus was a small amount with no other alteration to the employment contract, a constructive dismissal claim will unlikely be successful. A 2016 Ontario Superior Court case of Chapman vs GPM Investment Management (the company) deals with exactly this.

In this case, Chapman was the CEO and President of GPM. Chapman felt he was entitled to a bonus of 10% of profits made off the sale of an asset (property) for which GMP was involved. GPM disagreed over this 10% bonus because they claimed the gains made did not fall under the definition of ‘profit’ as defined in the employment contract. Chapman quit and claimed constructive dismissal in addition to payment for the 10% bonus he felt was owed. The Ontario Superior Court found that Chapman was entitled to this bonus, however, the failure to make this payment was not enough to trigger constructive dismissal.

The reasons the court did not find this to be constructive dismissal was due to a few reasons: the bonus was not much compared to Chapman’s overall compensation, the terms of the employment contract (the bonus structure) were not altered, and the employer intended to continue  honouring the employment contract in the future. The disagreement was also over a particular type of asset that the employer was never going to deal with again, thus making this a one-time isolated event. Overall, the circumstances here did not fundamentally change the conditions of employment, and therefore did not amount to a constructive dismissal. In addition, the employer here gave Chapman options to peacefully resolve the issue.

If there is a concern over an issue regarding the payment of a bonus, it is important to attain legal advice. The issue may involve a disagreement over the interpretation of an employment clause, which requires a wholesome approach – it is often not enough to only consider the clause in question. For both employers and employees, it is advisable to seek legal assistance in determining the appropriate remedies.