Court Of Appeal For Ontario Affirms Strong Limitation On Employee's Post-Termination Bonus Entitlement

The Court of Appeal for Ontario has affirmed an Ontario Superior Court trial decision which upheld an employee bonus limitation provision despite describing the limitation as "somewhat draconian." The decision in Kielb v. National Money Mart Company ("Kielb") (2017 ONCA 356) is helpful to employers in that it confirms that Ontario Employment Standards Act, 2000 ("ESA")-compliant limitations on an employee's termination entitlements are valid if unambiguous and freely negotiated by the parties to the employment agreement.

What Happened in Kielb?

In Kielb, a former in-house lawyer for the defendant company alleged that a non-discretionary bonus limitation clause was invalid. Kielb claimed the clause was ambiguous and thus unenforceable. He also challenged the wording on the grounds that it was unconscionable because of the severe limitation which it placed on his post-termination entitlement.

The clause in question provided that a participant's bonus did not accrue after the termination date and was only earned and payable on a set payout date. The clause stated:

"... For example, if your employment is terminated, with or without cause, on the day before the day on which a bonus would otherwise have been paid, you hereby waive any claim to that bonus or any portion thereof. In the event that your employment is terminated without cause, and a bonus would ordinarily be paid after the expiration of the statutory notice period, you hereby waive any claim to that bonus or any portion thereof." [emphasis added] Kielb was terminated without cause on April 21, 2010. However, the company's payout date for all bonuses was in September. The latest possible notice period date, in accordance with Kielb's employment contract, was in June 2010. Therefore, relying on the language of the limitation clause, the employer took the position that the termination package did not include any bonus entitlement.

The Court of Appeal agreed with the trial judge's interpretation of the limitation clause and found that Kielb was not entitled to bonus pay upon termination since the payout date fell after any contractual or statutory notice period. The Court...