Failing To Communicate Bonus Policy – Employer Ordered To Pay Out Bonus

Case Brief: Thoma v. Schaefer Elevator Components Inc.

The recent BC Supreme Court decision, Thoma v. Schaefer Elevator Components Inc., 2019 BCSC 100 ("Schaefer"), dealt with an employee who was properly terminated with notice, but brought a claim against his previous employer alleging he did not receive the compensation to which he was contractually entitled. In a summary trial, Justice Riley addressed the issue of whether, in absence of a wrongful dismissal, the employer was liable for payment of discretionary bonuses to the employee for his final year of employment and his six month termination period. The Court found that the employee was entitled to a bonus for his final year of employment, but not for the portion of his termination period which fell in the following year.

The Schaefer decision is a timely reminder for employers of the best practices for drafting employment contracts and bonus provisions, as well as the importance of clearly communicating compensation policies to employees.

Facts

Schaefer involved an employee, Mr. Thoma, who worked for Schaefer Elevator Components Inc. from September 1, 2013 until October 31, 2017 - he was given notice of termination and provided with six months of his salary as severance per his employment contract.

Mr. Thoma's employment contract expressly set out the bonus component of his remuneration and the terms by which his bonus was determined. Specifically, the bonus provisions stated that Mr. Thoma would receive an annual bonus in addition to his annual salary as follows: in his first year of employment, his bonus was set at $12,000, and for subsequent years, he was to receive "an annual bonus of 'up to' $24,000 per year, based upon 'agreed upon targets' and Mr. Thoma's 'degree of achievement' of those targets". [Schaefer, para. 3]

Mr. Thoma received the maximum available bonus in the years 2013 through 2016, but did not receive a bonus for 2017. He argued he had a contractual right to a bonus for 2017 and a pro-rated bonus for the balance of the notice period which extended into the first four months of 2018. He claimed that the bonus was an integral part of his wage structure and that, based on past conduct, he had a reasonable expectation that the employer would not exercise its discretion against him by declining to pay the bonus. Mr. Thoma also claimed he was owed vehicle expenses, medical and dental expenses, and pay for accrued vacation leave.

Reasoning

In adjudicating the matter...