Further to our discussion yesterday, in Matthews v. Ocean Nutrition, the Supreme Court adopted a two part test for deciding how to determine damages for breach of the implied contractual term to provide reasonable notice. Thankfully for employees, the court provided a path for dismissed employees to obtain bonuses.
The court said at 55:
Courts should accordingly ask two questions when determining whether the appropriate quantum of damages for breach of the implied term to provide reasonable notice includes bonus payments and certain other benefits. Would the employee have been entitled to the bonus or benefit as part of their compensation during the reasonable notice period? If so, do the terms of the employment contract or bonus plan unambiguously take away or limit that common law right?
The first part of the test is fairly straightforward. If a bonus, pension or other benefit would vest during the period of reasonable notice, then the employee would theoretically be entitled to it, subject to the second answer.
The second part of the test is more difficult. The question is whether it unambiguously limits or removes the common law right. In Matthews, language including the concept that an employee must be a full time employee or active was not valid. Wording designed to remove employee's rights on with or without cause termination was not acceptable. The court even found that a clause referring to an unlawful termination would not be enough. There is a real question of how a clause could be drafted to remove common law rights and not fall afoul of this decision. The court also indicated that an issue may arise as to whether those clauses, if drafted, have been properly brought to the employee's attention.
The upshot of this case is employees will have more rights to obtain bonuses, vested pensions, vested shares and other similar compensation upon termination.
If you have been terminated and believe you should be entitled to bonuses, pensions or other compensation, please feel free to contact us.
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