Court File and Parties
COURT FILE NO.: CV-13-488020 DATE: 20161104 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: David Bain Plaintiff – and – UBS Securities Canada Inc. and UBS Securities LLC Defendants
Counsel: Chris G. Paliare & Tina H. Lie, for the Plaintiff Daniel J. Shields & Hendrik Nieuwland, for the Defendants
HEARD: May 30, 31, June 1, 2 & 3, 2016
REASONS FOR JUDGMENT
Madam Justice D.A. Wilson
[1] In this action, the Plaintiff, David Bain [“Bain”], claims damages for breach of contract and wrongful dismissal arising from his employment with the Defendant UBS Securities Canada Inc. [“UBS”]. Bain was terminated on February 28, 2013, and the Defendant concedes the termination was without cause. In these reasons, I will refer to the Defendants as UBS, as it was clear that the Plaintiff’s employment was with UBS and not with UBS Securities LLC.
Background
[2] Counsel filed as exhibit 1 the Agreed Statement of Facts [“ASF”]. Bain has a Bachelor of Commerce (Honours) degree and is a Chartered Accountant and a Chartered Professional Accountant. After working at Ernst and Young from 1990 to 1994, Bain started working as an investment banker with Scotia Capital [“Scotia”] from 1994 to 1999. By the time he left Scotia, he was an Associate Director in Mergers & Acquisitions [“M&A”].
[3] UBS is a global company carrying on business in securities, investment banking and wealth management, with its head office in Switzerland. UBS carries on business in Canada in securities and investments.
[4] Bain commenced working for UBS in June 1999 as a Vice President. While at UBS, Bain received various promotions and at the time of his termination, he was Managing Director, Head of Canadian M & A. His base salary was $385,000 plus bonus and referral fees.
[5] In 2006, there was a “plan of arrangement” involving UBS Bunting Ltd., UBS Holding Canada Ltd. and UBS AG. Following this, the Canadian employees of these companies were advised that effective 2008, their salaries and bonuses would be paid in accordance with the practices of UBS. The Equity Ownership Plan [“EOP”] was put into place in Canada. This was a deferred compensation award plan under which employees were awarded notional shares in UBS that vested in tranches over a number of years. After this transaction, Bain’s salary increased, and part of his bonus was paid through EOP.
[6] In early 2013, a decision was made by UBS to cease the M&A arm of UBS in Canada. As a result, various employees were terminated, including Bain, whose position became redundant. Bain was told that he was being terminated in a meeting on February 28, 2013, and his final day of work at UBS was March 22, 2013. He was paid certain amounts by UBS, based on his entitlement under the Employment Standards Act, 2000, S.O. 2000, c. 41 [ESA], the particulars of which are set out in the ASF. He did not receive a bonus for 2012 or for the three months that he worked in 2013.
[7] During the trial, reference was made to the income earned by other directors at UBS, the “comparators,” and this information was filed as exhibit 5. This included both the salary and the bonus amounts paid to other Executive Directors and Managing Directors for 2012 and 2013.
[8] Since termination, Bain has actively looked for employment, but at the time of trial, he had not been successful in securing another job. He has earned no income from employment since leaving UBS, apart from the payments made by UBS. Bain lives in Toronto with his wife and three young sons.
[9] Subsequent to the hearing of the evidence in this trial, while the Judgment was under reserve, the Court of Appeal released two decisions in respect of trial judgments that were referred to by counsel during argument: Lin v. Ontario Teachers’ Pension Plan and Paquette v. Terago Networks Inc. Counsel forwarded brief written submissions on the application of these two cases. The submissions were considered; I marked Plaintiff and Defence counsel’s supplementary submissions as exhibits A and B respectively.
Positions of the Parties
Plaintiff
[10] Bain held the highest position in Canada in M&A at the time of his termination. He had been induced to leave his job at Scotia, which was secure, to join UBS. This is a relevant factor when considering the proper notice period, and, as I indicated, Bain has not found a new position. The Plaintiff submits that the reasonable notice period is 21 months.
[11] His bonus fluctuated on an annual basis but was a substantial part of his compensation. In 2012, Bain’s evaluations were very strong, yet he did not receive a bonus for that year or for the three months of 2013 that he worked at UBS [“stub year”]. Counsel for the Plaintiff submits that Bain was entitled to a bonus for 2012 and the stub year of 2013, and by failing to award him a bonus, UBS breached an implied term of the employment contract: that the discretion concerning the granting and amount of the bonus would be exercised in a fair and reasonable manner. UBS decided not to award Bain the bonus for 2012 because he was being terminated, which the Plaintiff claims is unfair.
[12] The Plaintiff argues he is entitled to a bonus and to notice based on both salary and bonus: the total compensation approach.
[13] The Plaintiff submits that the fairest way of determining the quantum of bonus is to look at the amounts of bonus earned by the comparators, and average their compensation for 2012. Using this formula, the Plaintiff argues he is entitled to a bonus of $1,010,961 for 2012 and $242,380 for the stub year. Alternatively, the Plaintiff argues that his bonus ought to be determined based on the average bonus of the comparators, over several years, which would result in a bonus of $953,461 for 2012 and $242,380 for the stub year.
[14] Using the comparators, and a total compensation approach, the damages of the Plaintiff, for bonus for 2012 and 2013 and notice, total $2,143,294. Using the alternative approach, based on the bonuses earned by the comparators, the sum suggested is $3,455,895.
[15] In addition, the Plaintiff seeks his vacation pay, mitigation expenses, payment of referral fees and the amounts he expended that would have been covered during the notice period by the company benefit plan.
The Defendants
[16] UBS denies that Bain was induced from his job at Scotia to join UBS. He chose to join UBS and he was employed with the Defendant for 14 years. Given all of the factors, the appropriate notice period is 14 months.
[17] Furthermore, he is not entitled to payment of a bonus for 2012 or the stub year, 2013. The amount a terminated employee is entitled to receive under the ESA does not include sums for bonuses.
[18] The Defendant argues that the Plaintiff is not entitled to a bonus, either cash or EOP, for either year. Counsel for the Defendant submits that the law with respect to discretionary bonuses has evolved over the past decade and that it is no longer the law that in situations where a bonus is discretionary, employers have to exercise their discretion in a fair and reasonable fashion. Rather, he argues, the discretion must be exercised reasonably and fairly, absent an agreement to the contrary, and furthermore, a discretionary bonus is not a contractual entitlement.
[19] UBS submits that the Plaintiff accepted the terms of employment with UBS, which included payment of a bonus which was to be determined solely at the discretion of UBS. There was no obligation on the part of UBS to award a bonus or for it to be the same as the bonus awarded to others in similar positions at UBS. Bain’s position became redundant when UBS decided to cease the M&A business in Canada.
[20] The Defendant argues that the EOP was part of Bain’s compensation package with UBS. Through this, he was awarded notional shares which vested according to a schedule that was provided to the employees. This was part of the terms of Bain’s employment and he agreed to these terms; the original letter of employment no longer governs the relationship.
[21] UBS submits that Bain is not entitled to deferred compensation based on shares that would not vest within the notice period. Bain has no entitlement to damages for the failure of UBS to award him deferred compensation in the form of notional shares. The evidence was clear that the award of deferred compensation to Bain would not have vested until March 2015, which is outside any reasonable notice period, so he is not entitled to damages for this.
[22] The Defendant asserts that Bain has no right to payment of vacation pay based on his bonus because that is contrary to the provisions of the ESA. UBS does not dispute the loss of benefits, subject to the court’s determination of the proper notice period.
The Evidence
David Bain
[23] Bain received his Bachelor of Commerce degree in 1990 and subsequently, achieved the designations of Chartered Accountant and Chartered Public Accountant.
[24] After working briefly at Ernst & Young, Bain joined Scotia and he worked in M&A in 1999, when he was contacted by a former colleague who had joined UBS. Although he had not been considering leaving Scotia, Bain met with a number of people at UBS in April/May 1999, and they extended an offer of employment to him.
[25] He was told that his career prospects were bright, he had a good chance of promotions and that he would be an excellent fit with UBS. Bain knew some of the investment bankers at UBS and thought the job offered him the opportunity to work with talented people on interesting transactions.
[26] Bain had established good client contacts at Scotia. He was concerned about his future if he decided to move to UBS, so he negotiated a provision in his employment contract that he would receive a minimum notice period and a higher salary, as well as a guarantee of a minimum bonus. The letter extending Bain a job at UBS offered him a position with UBS as a Vice President with a salary of $85,000 and a minimum bonus of $270,000. The employment offer provided that if he was terminated, he would receive not less than six months’ notice or compensation in lieu. The letter provided, “For greater clarity, the amount of equivalent compensation will be determined by reference to salary and bonuses, but will exclude any earnings, distributions or dividends attributable to any shares”. Bain accepted the offer of employment on June 4, 1999.
[27] In cross-examination, Bain agreed that the amount of his bonus was in the discretion of management, in accordance with the bonus scheme of UBS. It was based, in part, on the performance of the company.
[28] Bain started to work at UBS in the position of Vice President on June 14, 1999. Over time, he was promoted and received commensurate salary increases. In 2001, he was given the title of Director, which was not necessarily a promotion. In 2004, he became the Executive Director, Head of Canadian M&A Execution, which bestowed on him an increased ability to take the lead on deals.
[29] By March 1, 2005, Bain was the Executive Director, Head of Canadian M&A. On March 1, 2010, he was promoted to Managing Director, Head of Canadian M&A: the position he held at the time of his termination. In this role, he reported to Alain Auclair and he assumed the overall responsibility for M&A in Canada. His salary was $385,000 plus bonus. The position of Managing Director was the highest Canadian position. In addition, Bain sat on a number of committees, including the Performance Measurement and Management Committee, which was responsible for the annual performance reviews of employees.
[30] Bain testified that from 1999 to 2008, the bonuses he received at UBS were paid in cash. After the arrangement under the OBCA took place, from 2008 onwards, his bonus was received 40 percent in cash and 60 percent in shares through the EOP. Generally, Bain met with Auclair in February, at which time his evaluation would be discussed as well as the calculation of his bonus for the previous year. The bonus was usually paid at the end of February.
[31] In 2011, his performance was rated as good, but it was a very difficult year for UBS. There was a trader in London, England, who had committed a $2.5 billion fraud, and the resulting judgment had to be paid by UBS. This had a huge impact on the amount of the bonus pool. Consequently, there was a huge decline in the bonuses paid to many employees of UBS, including Bain. He received a bonus of cash and deferred shares in the total sum of $78,800, which was the lowest amount he had ever received. In the 12 years he had worked for UBS, his bonus ranged from a low of $225,000 to a high of $1.6 million. Bain was very disappointed and he had a discussion with Auclair, in February 2012, concerning the bonus. Auclair acknowledged the amount of the bonus was really low and told Bain it was not indicative of his performance or what he deserved for his work for 2011. Bain was told 2011 had been a dreadful year for UBS, the numbers were down and the decisions on bonuses for the Canadian employees were made in New York.
[32] Bain remained unhappy and spoke to Auclair again concerning his bonus for 2011. Auclair acknowledged that Bain got “screwed”; he told Bain that he had advocated on his behalf for a larger bonus, noting his salary was less than some of the other Managing Directors. However, he was unable to persuade the decision-makers in New York that the bonus should be increased. Auclair told Bain that he would attempt to secure a raise for him in 2012, although he could make no promises.
[33] Auclair told Bain he was doing a fantastic job and his future looked great with some terrific career prospects and opportunities down the road. Auclair suggested that Bain put the 2011 year and bonus behind him and move forward, as things would improve. Auclair said that if he performed, he would be paid accordingly. Bain made notes of their conversation on the letter he received from Auclair on February 12, 2012.
[34] In 2012, Bain worked diligently. A “Banker’s Statement” was a document that was compiled at UBS to track the revenue generated by a transaction and the employees who were involved in it; it was one of the measures used in the evaluation of an employee. In 2012, Bain was involved in deals with a total value of $35,807,178.
[35] On January 24, 2013, Bain met with Auclair to discuss his evaluation and bonus for 2012. He made notes of their conversation, marked as exhibit 9 at the trial. During the meeting, Auclair told the Plaintiff that all Managing Directors in Canada received a good performance rating, including Bain. He was ranked by managers as good and by other employees as excellent. His Feedback Report noted on many points that he exceeded objectives.
[36] Auclair stated that Bain performed well in difficult circumstances because a number of members of his team were let go during that year and Bain was able to complete the deals notwithstanding this fact. UBS had a strong year, according to Auclair, with lots of transactions being closed with fewer resources. There were no concerns expressed about his performance during his meeting with Auclair; it was a very positive meeting. Indeed, Auclair told Bain that others ranked him as excellent; he was perceived as a great partner to work with who was very knowledgeable. He indicated that at the meeting in New York, he had ranked Bain on the high end of the good performance scale, but he did not know what his final ranking was. There was no further discussion with Auclair about his bonus during this meeting.
[37] On February 28, 2013, Bain was escorted into a meeting with Auclair and Katie Thickett, the Human Resources Director at UBS. Auclair told him he was being terminated because a decision had been made globally to cease the M&A work in Canada. He was told there would be a three week transition period, with his last day being March 22, 2013. Bain asked about other members of his team and was told they were all being terminated. There was a discussion about how the message would be delivered concerning the termination, and it was agreed that Bain would take the lead on this point, so he would not be affected in his search for another job. It was a short meeting, and there was no discussion about his bonus. Later that afternoon, he received the letter of termination.
[38] On that same day, Bain learned that one of his colleagues, Banker 2, who was an Executive Director, was also terminated. He was told that Banker 2 was not going to get his bonus for 2012, and as a result, he sought out Auclair and inquired whether he was going to receive a bonus for 2012. Auclair confirmed that he was not going to get a bonus. Bain asked if this decision was performance related, and Auclair said it was not; rather, it was due to the fact that UBS was downsizing.
[39] After reviewing the termination letter, Bain noted that UBS offered him a payment in lieu of notice to May 21, 2014, in the sum of $495,133, which was the equivalent of 14 months’ notice. On March 1, he spoke to Ms. Thickett and asked how she arrived at that figure for his severance. She replied that she had taken the average of his total compensation for the prior two years, salary and bonus for 2011 and 2012, and had done the calculations based on 14 months’ notice.
[40] On March 1, 2013, a representative of UBS issued a statement to the press about the closure of the Canadian arm of M&A. There was also an article in the Toronto Star. The press release suggested that the Canadian M&A department had not been successful and that accounted for its closure; the intimation was that Bain had not performed well in his role, since he was in charge of the division. Bain was angry because this was contrary to what had been decided in the termination meeting. He spoke to Auclair about it, and Auclair agreed it was “really bad” and not what they had discussed. The Plaintiff had an email exchange with Auclair in which Bain indicated he had to deal with calls and emails as a result of the press release.
[41] Bain worked conscientiously during the following three weeks. Auclair told him that he was impressed with how he was handling himself: generating new business and transitioning files. The Banker’s Statement for the three months of 2013 shows actual revenue generated of just over $2 million and projected revenue of $15,732,306.
[42] On March 6, 2013, the employees of UBS were advised of the amount of their bonus for 2012. Two Executive Directors, which was a lower position at UBS than Bain held, earned bonuses in excess of $400,000. Managing Directors generally earned larger bonuses than Executive Directors, at UBS. The other Managing Directors, Banker 4 and Banker 5, earned bonuses of $2,212,244 and $784,300 respectively. Bain acknowledged Banker 4 and Banker 5 were both senior to him and had held positions with greater responsibility at UBS, but Auclair had told him that he had been evaluated higher than Banker 4 for 2012.
[43] Another part of Bain’s compensation at UBS was the payment of referral fees, which occurred when an employee at UBS referred a client to a different division of the company. The agreement provided that the employee who referred a client was entitled to 15 percent of the gross fees earned from that client over the first 3 years. Bain referred Mr. and Mrs. S to the Wealth Management division in June 2012. He received some referral fee payments up to September 30, 2013, but nothing further.
[44] After his termination, Bain attempted to find a job. He has been in contact with at least 115 different organizations on at least 331 occasions. Thus far, he has been unsuccessful in securing another job and remains unemployed; he has earned no employment income since leaving UBS.
[45] After Bain was dismissed, UBS terminated his Group Benefit entitlement. Since that time, Bain has incurred the sum of $14,616.77 in various expenses, which otherwise would have been covered by the firm plan.
[46] In cross-examination, Bain agreed that he had the option, but no obligation, of purchasing shares in UBS, which he exercised by payment with his own funds. The opportunity to purchase shares was called a performance distribution and was paid to the employees as income. Bain disagreed that this was the third component of his employment income with UBS.
[47] In 2006, with the plan of arrangement, UBS AG became the sole owner of UBS. The Shareholder Package stated that “beginning in 2008, the salaries, bonuses and benefits will be determined and paid in accordance with UBS’s then current practices.”
[48] Bain confirmed that pursuant to the EOP, he was given shares which vested in equal amounts over a number of years. Initially, the vesting period was three years but then it was changed to five years. For 2012, the shares vested 25 percent on March 1, 2015, 25 percent on March 1, 2016 and 50 percent on March 1, 2018. The shares which he was given prior to termination continued to vest after his dismissal.
[49] While Bain agreed in cross-examination that 2012 was a poor year overall for UBS, that was not true for M&A in Canada, where the revenues increased. While the bonus pool was reduced due to the financial crisis, he disagreed that he could not have expected to get anything more as a bonus than he did in 2011. His own revenue was four times what it was in 2011, and the Canadian arm did better than the American branch. Furthermore, Bain noted that his peers all got bonuses, except for Banker 2 who was also terminated. He received no bonus for 2013 and no explanation for this.
[50] I found Bain to be an intelligent, articulate witness, who answered questions in a forthright manner. He made no attempt to colour his evidence to assist his case.
Alain Auclair
[51] In 2000, Auclair joined UBS as a Managing Director, Investment Banking. He was familiar with the Plaintiff, since he had worked at Scotia with Bain for a couple of years before joining UBS. Since 2005, Auclair has held the role of Managing Director of Corporate Client Solutions for Canada, and he continues to work at UBS at the present time. In 2013, he reported to Steve Cummings, who was the head of Corporate Client Solutions for the Americas.
[52] In 2006, UBS AG became the owner of UBS, and following this transaction, in 2008, the compensation arrangement changed and different policies were put in place. The employees were given a higher base salary, and the bonus was paid partly in cash and partly in deferred shares. This was instituted, in part, to exert control over an employee who failed to act in an appropriate fashion.
[53] Auclair explained how the compensation scheme worked at UBS. The document entitled “Our Compensation in 2012” set out for the employees how their performance was to be assessed and how the bonus was to be determined. The Performance Measurement Management [“PMM”] had been introduced to review each employee in order to determine the proper compensation. Under this plan, the employee reviewed himself or herself, was reviewed by other employees and finally, by the managers. Cummings sent a memo dated November 19, 2012, in which he set out certain criteria to be used when the evaluations of Executive and Managing Directors were done.
[54] After the PMM was completed, the most senior group leaders and Managing Directors did a final review of the employee. A rating was obtained for the employee, which ranged from underperformance, needs improvement, good performance, excellent or outstanding. There would be a discussion with the employee, including feedback, and the Banker’s Scorecard would be reviewed to assess the employee’s overall contribution to UBS. These various items would be circulated among the group heads of the various divisions, and finally, the bonus would be determined by the head of the Americas and Human Resources in the U.S. In 2012, Auclair was a group head, and he played an active role in determining the amount of an employee’s bonus, although he did not make the final decision.
[55] In 2012, Auclair agreed that he assessed Bain as excellent against the criteria set out in the Cummings memo. He was complimentary about him and the work that he did with his team. Bain was rated as excellent by four of his peers, as outstanding by another and he was ranked as a good performer by others. The Feedback Report 2012 for Bain set out his objectives for that year. He agreed that Bain exceeded 16 of the 22 objectives identified. Auclair was involved in discussions with his superiors, and he hoped to rank Bain on the high end of the good performer scale. However, at the end of the day, Bain was ranked by others on the low end of the good performer scale for 2012, and there was nothing Auclair could do about that. 2011 and 2012 were difficult years for the investment banking section of UBS, in part due to a large judgment against UBS for the investment fraud, which had to be paid.
[56] When Auclair attended the meeting in New York with Murray and Cummings and the other heads, he initially ranked Bain in the excellent category. When questioned, he would not agree that he thought Bain was, in fact, excellent. When he left the bonus meeting, he assessed Bain at the high end of the good performance rating. He acknowledged that he attempted to persuade Murray and Cummings to give him a bonus because of the work he had done and his results in 2012, but was unsuccessful.
[57] In early 2013, Auclair was asked by his superiors to place the senior members of the investment banking team into buckets: Bucket 1 for those who were the top producers and critical to the operation; Bucket 2 for the next 25 percent, who were not top tier but who were key players; and Bucket 3 for the next 15 percent, who should get a bonus if available. By email, dated February 7, 2013, to Cummings and Murray in New York, he placed Bain in Bucket three after analyzing what he brought to the company. According to Auclair, one of the main reasons for this placement was Bain’s ability to generate new business for UBS in the future. Auclair testified that by placing Bain in Bucket three, it made it unlikely he would get a bonus for 2012. When he made this assessment, Auclair stated he had no inkling that Bain would be terminated.
[58] On February 16, 2013, Auclair received an email from Steve Cummings, to whom he reported in New York. Cummings noted that 2011 and 2012 had been difficult years for UBS and the company needed to adopt a leaner structure and “reduce the head count.” Auclair had no input into the decision to cut the M&A department in Canada. This decision was made by the co-heads of M&A for the Americas. It was communicated to Auclair by email, dated February 18, 2013. Auclair testified that, in his view, it was a tough decision, but it had to be made in the circumstances.
[59] Auclair met with the Plaintiff, on February 28, along with Katie Thickett from Human Resources. He explained that the prior two years had been challenging for UBS and with the decision to cut the M&A department in Canada, Bain’s job was redundant and he was being terminated. Katie Thickett did the calculations of the severance amount and provided Bain with the letter indicating that UBS was offering him 14 months of severance; Auclair testified that he thought the $495,133 figure was the severance based on salary plus a gratuitous amount. He denied that the figure was comprised of his total compensation including bonus. It was a very professional meeting and Bain received the news well. Contrary to the evidence of Bain, Auclair denied that he advised Bain he would not be getting a 2012 bonus during the termination meeting on February 28.
[60] When Bain did not accept the severance amount as set out in the letter, UBS did not pay it to him but simply paid the statutory minimum amounts. Auclair denied that this was done to exert financial pressure on Bain to accept the proposed amount from UBS.
[61] Auclair was not happy that Bain did not get a bonus for 2012, but given that he ranked him in Bucket 3, he was “okay” with the decision, which had been made by his superiors in New York. He spoke to him on March 3 and advised him that he would not be getting a bonus because it had been a difficult year and tough decisions had to be made.
[62] Auclair disagreed that the decision to award Bain a zero bonus for 2012 was inconsistent with his own evaluation of Bain or the evaluation of him by his peers. Auclair testified that the other directors, the comparators listed in exhibit 5, had better assessments than Bain did and were placed in higher buckets. Banker 1 was rated excellent and was in Bucket 2. Banker 3 was rated outstanding and was placed in Bucket 1.
[63] Auclair was not involved in determining the compensation of Banker 4 or Banker 5, the other Managing Directors. However, Auclair believed it was inappropriate to use Banker 4 as a comparator because he was much more senior than Bain and had worked globally for UBS. Similarly, Banker 5 was a long term employee with UBS and was the head of a group, with more seniority than Bain.
[64] Auclair disagreed that the reason Bain did not get a bonus in 2012 was because he was going to be terminated. According to Auclair, it was just a coincidence that Banker 2, who was also fired the same day as Bain, did not get a bonus. He agreed that the bonus pool was sufficient in 2012, such that the Managing Directors and Executive Directors all got bonuses, with the exception of Banker 2 and Bain, both of whom were terminated. He acknowledged that when he told Bain on February 28 that he was being let go, he knew he was not getting a bonus for 2012, but he did not advise him on that date.
[65] I did not find Auclair to be an impressive witness. When he was asked questions in cross-examination, even those that were straight forward, he was evasive in his responses. When his own documentation was put to him, he refused to agree with basic propositions and attempted to qualify his comments. His response to questions concerning his own evaluations of Bain was but one example of the manner in which Auclair was unwilling to agree with statements put to him, based on his own documentation, because he feared it would not be helpful to the position of UBS in this trial. It seemed that he sought to “tow the party line” at all costs. Where the evidence of Bain and Auclair differs, I prefer the evidence of Bain.
Analysis
[66] Bain was terminated from UBS on February 28, 2013, without cause, after 14 years of service with the company. The issues for my determination are as follows:
a. What is the appropriate length of notice? b. Should Bain have received a bonus for 2012 and the stub year of 2013? c. Should the damages be calculated based on total compensation or something else? d. Is Bain entitled to his mitigation expenses? e. Is Bain entitled to the expenses paid due to lack of group benefits? f. Is Bain entitled to payment for the referral fees? g. Is Bain entitled to vacation pay?
Notice Period
[67] An employee who has been dismissed without cause is entitled to damages based on the income that individual would have earned during a period of reasonable notice. In determining what the appropriate notice period is for Bain, I am cognizant of the reality that there is no one “correct” answer. The solicitor for the Plaintiff submits that 21 months is the proper notice period, while counsel for the Defendant urges me to find that 14 months is appropriate.
[68] In Bardal v. Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.), the court canvassed what constitutes “reasonable notice” for a dismissed employee. In that case, McRuer C.J.H.C. stated:
There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant. [Emphasis added.]
Counsel agree that Bardal continues to be the leading case on the notice period issue, and both made reference to it in their closing arguments.
[69] I am mindful of the comments of Laskin J.A. in Minott v. O’Shanter Development Company Ltd. (1999), 42 O.R. (3d) 321 (C.A.) where he stated, “Determining the period of reasonable notice is an art not a science. In each case trial judges must weigh and balance a catalogue of relevant factors. No two cases are identical; and, ordinarily, there is no one ‘right’ figure for reasonable notice. Instead, most cases yield a range of reasonableness.”
[70] In Panimondo v. Shorewood Packaging Corp. (2009), 73 C.C.E.L. (3d) 99 (Ont. S.C.), Strathy J. (as he then was) stated succinctly, “The duty of the court, in applying the Bardal principle, is to determine whether the specific notice given by the employer was reasonable in all the circumstances and, if not, to determine what notice or compensation in lieu should have been given” (citations omitted).
[71] An examination of the facts of the case at hand reveals that Bain was 32 years of age when he joined UBS in 1999, with five years of experience in the investment banking business. When he was dismissed, he was almost 46 years of age. He has one degree, a Bachelor of Commerce, and he is certified as a Chartered Accountant, although he has not worked in this capacity since 1994. He was continuously employed from the time of his graduation until 2013. He is presently 49 years of age.
[72] With regard to character of employment, Bain had been promoted at UBS to the position of Managing Director, Head of Canadian M&A. This was a senior management position, and Bain was responsible for directing his team. As Strathy J. noted in Panimondo, “It is presumed that there are fewer employment opportunities available for those whose specialized knowledge and skills demand higher managerial positions with comparable salaries and benefits” (citations omitted). This has been confirmed in numerous cases in Ontario, including Minott.
[73] “[L]ength of service” is another factor identified in Bardal. Here, Bain had worked continuously for UBS for 14 years.
[74] I turn finally to the availability of similar employment, having regard to the experience, training and qualifications of the servant. I consider this factor based on the prevailing situation in early 2013, when Bain was terminated. Bain graduated from university in 1990; he has a single undergraduate degree. He was in his mid-forties at the time of his dismissal. These factors could be viewed in a negative fashion by a prospective employer, particularly in an industry that is subject to volatile conditions.
[75] Inducement can also be a relevant factor to be considered, when determining the proper notice period: Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701. Counsel for the Plaintiff argues that inducement is a material factor and ought to be considered when determining the proper period of notice. In Wallace, the Supreme Court noted that
inducements are properly included among the considerations which tend to lengthen the amount of notice required. [N]ot all inducements will carry equal weight when determining the appropriate period of notice. The significance of the inducement in question will vary with the circumstances of the particular case and its effect, if any, on the notice period…. [Citations omitted.]
[76] In my view, inducement is a factor which would, generally, carry more weight and tend to extend the notice period in situations where an employee is terminated fairly early in the new job, having been induced to leave a prior, secure position. That is not the facts of the case before me. Bain had worked at Scotia for four years and had received a promotion when he was contacted by a former colleague who invited him to consider joining UBS. I accept Bain’s evidence that he was not looking for alternative employment at the time he was called and that he was content with his job at Scotia. As often happens, in similar situations, Bain was attracted by the opportunities UBS presented, including the nature of the transactions, the people he would be working with and the chance to earn significant income.
[77] The evidence was clear that Bain had concerns about job security and that is the reason he insisted on six months’ minimum notice and the guarantee of a certain amount of bonus. These provisions were included in his employment agreement with UBS. However, Bain worked for 14 years with UBS and expressed no regrets about his career with them until the time of his termination. In my view, inducement is a factor, but not one that ought to be given significant weight in the analysis of the proper notice period, given the length of time Bain worked at UBS and how his career unfolded.
[78] The senior position Bain held at the time of termination was an important one. While I accept that the issue of what constitutes reasonable notice is not determined by the length of time it takes a dismissed employee to find a new job, I can take into account the extensive job search of Bain, which unfortunately has not resulted in him finding new employment. Simply put, it has been challenging for Bain to find another position in the industry. His attempts to secure alternate employment since his dismissal are impressive, despite his lack of success. There was no evidence that Bain had been anything less than diligent in pursuing his search for a new job and the defence did not argue that he had failed to mitigate.
[79] I agree with the statement of MacPherson J. (as he then was) in Ryshpan v. Burns Fry Ltd. (1995), 10 C.C.E.L. (2d) 235 (Ont. Ct. (Gen. Div.)) where he noted, “… in perhaps the majority of wrongful dismissal cases courts apply a ‘rule of thumb’ that an employee should receive notice of one month for each year of service.” While the defence argues that this reasoning ought to apply and the proper notice period is 14 months, I note that the “rule of thumb” is just that, and it is subject to the possibility of a longer notice period, depending on the facts of a particular case. In this case, 14 months’ notice would be at the low end of the range of reasonable notice.
[80] I have reviewed the various cases to which counsel referred me during the course of argument. While the solicitor for the Plaintiff argued that the inducement factors and the press release were similar factually to Lin, I cannot accept this submission. In Lin v. Ontario Teachers’ Pension Plan, 2016 ONCA 619, the Court of Appeal directly cited the trial judge’s finding that the conduct of the employer “was damaging to his prospects and impeded his efforts to find another job.” As a result, the trial court assessed the range of reasonable notice and fixed it at the upper end of this range, “to reflect the additional challenge of finding replacement employment because of the circumstances of Lin’s termination.” The Court of Appeal in Lin did not overturn the trial judge.
[81] In Bain’s case, I heard no evidence that suggested UBS had made any negative comments about Bain; rather, the evidence was consistent that he was well regarded at UBS but had to be terminated because his job was no longer necessary. While I appreciate the press release was not the way the news of Bain’s termination was supposed to be announced by either of the parties, there were no disparaging remarks about Bain’s performance or abilities. It was embarrassing for Bain, to be sure, and I accept the evidence of Bain that the investment banking community is a small one. The fact that the press release indicated that the Canadian branch of M&A was closing due to lack of success, with Bain as head of that division, could have been perceived in a negative light by others in the business. However, that misstep was not intentional on the part of UBS and on this basis, factually, the case can be distinguished from Lin.
[82] In my opinion, after taking the Bardal factors into consideration, along with the other facts peculiar to this case, I am of the view that the appropriate notice period is 18 months.
Bonus
2012
[83] The Defendant takes the position that the Plaintiff is not entitled to a bonus, that it was discretionary and did not form an integral part of his remuneration. In Wolfman v. Rocktenn-Container Canada, L.P., 2015 ONSC 1432, Faieta J. considered the issue of whether a bonus plan for an employee was an “integral part” of his compensation, stating:
The following factors are germane to whether a bonus was an integral part of an employee’s compensation: (a) the bonus is received each year although in different amounts; (b) bonuses are required to remain competitive with other employers; (c) bonuses were historically awarded and the employer had never exercised its discretion against the employee; and (d) the bonus constituted a significant component of the employee’s overall compensation.
[84] A consideration of these factors makes it clear that Bain’s bonus was an integral part of his remuneration: he received it in different amounts annually; he had always been awarded a bonus in his 14 years of employment with UBS; and it was a significant component of his income. As the court noted in Schumacher v. Toronto Dominion Bank (1997), 147 D.L.R. (4th) 128 (Ont. Ct. (Gen. Div.)), “Where the bonus was promoted as an integral part of the employee’s cash compensation, it would be inappropriate and unfair to the employee to be deprived of the bonus by reason of the unilateral action of the employer.” Clearly, his bonus was important to Bain; that is why he negotiated a minimum bonus as a term of his employment contract when he decided to leave Scotia and join UBS.
[85] Courts have reviewed the granting of discretionary bonuses to employees who were terminated and the analysis undertaken is helpful to the issues that must be determined in Mr. Bain’s case.
[86] In Greenberg v. Meffert (1985), 18 D.L.R. (4th) 548 (Ont. C.A.), the Court of Appeal considered whether a real estate agent, whose employment was terminated, was entitled to commissions from sales that he would have been entitled to if he were still employed, such commissions being at the sole discretion of the company. The court stated that termination of employment did not mean the agent was not entitled to his commission; rather, it obligated the company to make a discretionary decision on the commission entitlement, regardless of the fact that the agent was no longer an employee. In that case, Robins J.A. stated:
… the discretion must be exercised in a reasonable way, not arbitrarily or capriciously but for good reason. Simple fairness dictates that construction, and particularly so where the exercise of the discretion can result in a windfall to the company.
Apart altogether from the question of reasonableness, a discretion must be exercised honestly and in good faith.
[87] Chann v. RBC Dominion Securities Inc. (2004), 34 C.C.E.L. (3d) 244 (Ont. S.C.) involved a factually similar case of an investment banker who was dismissed without cause. His remuneration package was a combination of base salary and bonus, which was wholly discretionary. In considering his bonus entitlement, Wilton-Siegel J. articulated what comprises a proper exercise of discretion:
The Executive Committee retains the sole discretion to award the discretionary cash bonus. However, it is also clear … that this discretion must be exercised in a fair and reasonable manner. In other words, it is an implied term of the employment agreement between RBCDS and its investment banking professionals that this discretion will be exercised in a fair and reasonable manner.
The determination of whether the defendant’s representatives established the discretionary cash bonus in a fair and reasonable manner involves an examination of the process adopted by the defendant’s representatives and of the factors taken into consideration. The plaintiff is entitled to a process which ensures that the determination is made with adequate information regarding his relative contribution to the defendant’s financial performance. It is also incumbent upon the decision-maker to consider only factors which are reasonably related to the firm’s performance and, as far as is practicable, to apply those factors consistently among employees and from year to year. [Emphasis added.]
[88] In Mathieson v. Scotia Capital Inc. (2009), 78 C.C.E.L. (3d) 76 (Ont. S.C.), the court considered the legal principles that apply in the granting of a discretionary bonus. While an employer could “adjust the weight given to various factors from year to year. … What is important in terms of fairness, is that the criteria each year are reasonable, that they are communicated to employees and that they are applied ‘consistently among employees’” (citations omitted).
[89] In Mathieson, the court did not disagree with the law governing discretionary bonuses as articulated in Chann, nor did the court retreat from the principle that the exercise of discretion must be done reasonably and fairly.
[90] Simply because a bonus is awarded in the sole discretion of an employer does not mean that it can be done in an arbitrary or unfair fashion or that the employer can decide that an employee should not get a bonus without following a fair, identifiable process. The employer may adjust the weight given to various factors, given the market conditions and other changeable criteria, but that does not obviate the requirement that the exercise must be done in a fair manner. The court must analyze the evidence in a particular case and decide whether the process that was followed was fair and reasonable.
[91] As I have noted, UBS had a detailed compensation scheme in place and had the stated goal of transparency and fairness in the granting of bonuses. The fact that the bonus was solely in the discretion of management did not relieve UBS from its obligation to follow a process that was fair and reasonable, using objective criteria applied consistently among employees.
[92] UBS was not obligated to award its directors huge bonuses simply because historically, that was what occurred. As the court noted in Mathieson, the bonus amount was flexible and might be controversial. For example, in 2011, Bain was given what can be described as a paltry bonus, compared to his historical bonuses. The explanation for that, given by Auclair, which I accept, was that the company had suffered a major blow with the $2.5 billion dollar judgment that had to be paid by UBS. All of the managers received reduced bonuses that year, not just Bain.
[93] Historically, the bonuses for the directors at UBS were significant, far in excess of their salaries. It was necessary to have a detailed scheme in place for the determination of these bonuses from the perspective of both the employer and the employees. Bain’s employment agreement stipulated that any bonus in excess of the agreed upon minimum bonus would be in the sole discretion of management, consistent with the bonus scheme of the company.
[94] Auclair confirmed that UBS had a specific process in place for assessing the performance of its employees from 2008 onwards. In exhibit 3, tab 2, the PMM process is set out: “The goal of the PMM Committee is to ensure teams are treated fairly and that common standards are upheld at each performance level and class year.” The various performance ratings are specified and described, how the evaluation process takes place, including the various factors that are examined.
[95] In 2012, UBS delivered a Compensation Report which noted that UBS had implemented changes in 2012 to the compensation framework: “Employees are assessed not just against defined objectives, but also on a relative basis against their peers within the firm. This enables us to fairly differentiate performance, and consequently compensation, in an objective, transparent and disciplined manner.” A memo was given from Steve Cummings to Auclair in November 2012, detailing the review process for Managing and Executive Directors.
[96] Turning to the evidence related to Bain and his performance in 2012, his feedback report contains many assessments where he exceeded the objective set and exceeded the demands of his role. Auclair’s comments were positive, noting that Bain had lost a number of members of his team, yet he was able to close the deals. He noted Bain was respected by clients. The comments of others are very complimentary: “extremely professional,” “great partner,” “earns the respect of his colleagues globally,” “excellent M&A partner,” and “handles difficult or overly demanding clients well.”
[97] Auclair’s evaluation of Bain for 2012 contains many “exceeded objective” assessments. Auclair testified that in 2012, he thought the Plaintiff was an excellent performer. When he met with the decision-makers in New York to discuss bonuses for Canadian employees, Auclair wanted Bain to be ranked on the high end of the good performance scale.
[98] Bain’s numbers for 2012 were higher than for 2011. For example, his Banker Statement, which calculates the value of the various transactions he was involved in, quantified the number at $35,807,178. His total for 2011 was $9,653,596. The revenue for the Canadian M&A, which Bain was the head of, increased from $12.9 million in 2011 to $17.6 million in 2012, a year that Auclair described as “challenging” for UBS.
[99] Apart from 2011, which was an aberration, Bain’s bonuses ranged from $225,000 to $1,600,000. The bonus was, at minimum, 66 percent of his total compensation and in some years, it was 87-91 percent. There is no evidence that his performance deteriorated in 2012 or that there was some other reason that he was not given a bonus.
[100] Exhibit 5 sets out the bonuses that were paid to the comparators in 2012. They ranged from $402,300 for an Executive Director to $2,212,244 for another Managing Director. The only other director who did not receive a bonus, although he had a good performance rating, was Banker 2, who was terminated the same day as Bain.
[101] Auclair denied repeatedly that the reason Bain did not receive a bonus for 2012 was due to the fact he was being dismissed. However, he failed to offer any alternative explanation for the fact that Bain was not given any bonus; not even a small one. Even in 2011, when Auclair testified that the numbers were low and that the bonus pool was much diminished, Bain was still given a bonus, even though it was very low compared to his historical bonuses.
[102] The comparators in exhibit 5 may have been assessed higher than Bain and may have been with the company for a greater length of time; that might explain why their bonuses might have been higher than Bain’s, if he had been awarded one. It does not, however, explain why Bain received nothing. Auclair assessed Bain as excellent, based on the criteria set out in the Cummings memo; that had to mean something to the decision-makers in New York. The peer reviews were very positive.
[103] I am at a loss to understand on what basis UBS decided that Bain was not entitled to a bonus for 2012. Auclair’s testimony that notwithstanding his own assessment of Bain, he was “okay” with the decision not to give him a bonus, struck me as disingenuous. I do not accept that it was a coincidence that the only two managers who did not receive a bonus for 2012 were the two who were terminated. The timing of the terminations and the failure to grant a bonus does not assist the defence.
[104] When asked to explain the decision not to award a bonus to Bain, Auclair repeated that 2011 and 2012 were difficult years for UBS. I do not accept this as a legitimate explanation, and it does not support a finding that the discretion concerning the award of a bonus was exercised reasonably and fairly with respect to Bain. It is not the case that the bonus pool was so reduced that none of the managers was given a bonus. And, indeed, exhibit 5 confirms that the other managers, the comparators, (with the exception of Banker 2) all received significant bonuses: ranging from $402,300 to $2,212,244, and averaging out at $953,461.
[105] Clearly, there was a large bonus pool from which to make the bonus payment to Bain, had UBS been inclined to do so. The position of UBS that Bain was treated fairly in regard to his bonus for 2012 and 2013 was not supported by the evidence at trial. All of the evidence confirmed that Bain was a hard-working and productive employee for 2012, yet he received no bonus at all.
[106] Furthermore, on the issue of bonuses, Bain made notes during his discussions with Auclair concerning his bonuses for 2011 and 2012. Bain’s notes were marked as exhibits 8 and 9 at the trial. They were made at the time and confirm Bain’s evidence about what he was told by Auclair about how the decisions were made about his bonus.
[107] During the discussion about the 2012 bonus on January 24, 2013, Bain was told that he had been ranked as an excellent employee by everyone who evaluated him, including Auclair. He ended up with a good rating. Auclair told him that 2012 was a strong year, with lots of transactions being completed with fewer people. Auclair told Bain that he was doing what UBS expected of him and more. He was described as a “great partner.” There was no suggestion during this meeting that Bain would not get a bonus; in fact, there was nothing negative about his performance that was imparted to him. Auclair offered suggestions for improvements, such as delegating more, but there was no indication of any problem or issue that might compromise his bonus. A month later, after the decision had been made to terminate Bain, he was not given a bonus.
[108] An employer is not bound to administer the bonuses in the same fashion each year; circumstances change, particularly in a volatile industry such as investment banking. However, the process followed must be fair and consistent among similarly situated employees. The fact that an employee is terminated because his job is redundant does not relieve the employer from exercising its discretion fairly.
[109] I agree with the comments of Wilton-Siegel J. in Chann, where he stated, “The fact that the decision to terminate the plaintiff’s employment had been made did not remove the need to approach the process of decision-making in the same manner as in past years. The plaintiff was contractually entitled to have his remuneration determined on the same basis as in prior years and for other employees in the same year.”
[110] Similarly, Bain was entitled to have his bonus for 2012 determined by UBS in the same manner as it did for other employees, and as it had done historically. I conclude that the fact that Bain was being terminated was the driving factor behind the decision of management not to award him a bonus. Despite Auclair’s denial of a link between the dismissal and zero bonus, the email from Murray, dated February 16, 2013, when the decisions were being made, confirms that the subjects of compensation and headcount were “inextricably linked”. In my view, UBS did not treat Bain fairly when dealing with the 2012 bonus and contravened their own process and stated intention to be transparent and objectively based.
[111] An ancillary argument advanced by the Defendant is that after the plan of arrangement in 2006, the system of compensation changed and Bain agreed with the new terms, which precluded him from getting a bonus if he were no longer employed with UBS at the time his bonus would otherwise be paid. Bain’s Total Compensation Statement for 2011 states:
Any discretionary incentive payment including any cash and equity award will be determined at or following the end of each calendar year, based on a number of factors including, without limitation, your individual performance relative to expectations and/or objectives as agreed with your manager, and the achievement of financial and non-financial objectives by your business area and UBS. You will not earn and have no right (whether contractual or otherwise) to be paid nor be eligible to receive any discretionary incentive award if you are not in employment with UBS on the Incentive Payment Date or if either you or UBS have served notice of termination on or before the Incentive Payment Date.…
Later in the document, that date is set out as March 15, 2012.
[112] It is submitted that Bain accepted those terms, and the terms of his employment letter no longer govern. UBS argues that an employee’s rights, including the right to a discretionary bonus, can be limited or eliminated by clear contractual language. UBS argues that Bain is not entitled to a bonus for 2012 because he was dismissed prior to the payment date.
[113] The difficulty with this argument is that the evidence in this case does not support it. The evidence on what transpired after 2008 was sparse, leading me at times to wonder what the employees were told about the changes that would be in effect after the takeover and what difference, if any, that made to the terms under which they were employed with UBS.
[114] There was no evidence that Bain accepted a fundamental change to his entitlement to a bonus. In cross-examination, the document indicating that if he was not employed with UBS at the time of the payment of a bonus, he would not be entitled to the bonus, was put to Bain. It was suggested to him that by accepting his bonus, he also accepted the terms set out in that document. Bain testified that the statement was given to him, there was no discussion about the terms of his bonus for 2011, and he never agreed with its contents. There was no evidence that these new limitations were brought to the attention of Bain by UBS, discussed with him, accepted by him and formed part of his contract of employment.
[115] While counsel for UBS relies on Kieran v. Ingram Micro Inc. (2004), 189 O.A.C. 58 (C.A.) in support of this argument, in my view, this case does not assist the defence on this point. The court in that case specifically noted that the provisions of all three plans were clear, without ambiguity, stating, “While a plan that addresses only ‘cessation of employment’ may create an ambiguity, the plans at issue in this case do not. The focus of the inquiry is on the wording of the particular plan,” and, “[t]hese plans are not ambiguous. Mr. Kieran is bound by their plain language, which is determinative” (citations omitted).
[116] There are a number of documents from UBS which were filed in evidence that make reference to the bonus scheme. The Defendant cannot “cherry pick” certain portions from the documents that assist the position of the defence and submit that the Plaintiff agreed with these terms simply because he continued to be employed by UBS. There are other provisions in the Compensation Plans that are in direct opposition to the argument advanced by the defence.
[117] For example, in the Common Terms of the Compensation Plans for 2012, section 7.1.2 states, “Nothing in the Plan Rules, the Common Terms, or the operation of a Plan forms part of the contract of employment of an employee. The rights and obligations arising from the employment relationship between the employee and the corporation or any member of the Group are separate from and not affected by a plan.”
[118] In my view, the reasoning set out in Schumacher, is applicable to the case at hand. In that case, the plan provided that employees had to be actively employed at the time the bonus was paid, in order to receive it. Schumacher was constructively dismissed and the employer took the position it did not have to pay the bonus pursuant to the terms of the agreement. The court stated:
His involuntary inability to comply with the condition of the PCP ought not to be justification for the Bank in declining the award of the bonus as part of Schumacher’s damages. If that were the case, an employer would achieve a significant advantage by wrongfully terminating an employee because the severance package would not have to include any bonus. Where the bonus was promoted as an integral part of the employee’s cash compensation, it would be inappropriate and unfair to the employee to be deprived of the bonus by reason of the unilateral action of the employer. I do not agree with the position taken by the Bank on this third issue. Schumacher remains entitled to consideration of a bonus, both for the period he worked and the notice period.
I agree with this reasoning and find it is applicable to the case of Bain.
[119] Bain was terminated at the time that bonuses were determined and paid to UBS employees. He worked diligently during 2012; there was no hint of his pending dismissal. He expected payment of a significant bonus, as had been the custom for the prior 13 years he had been with UBS. He was dismissed on February 28, so if I accepted the argument of the defence, he became disentitled to a bonus through the unilateral actions of UBS, over which Bain had no control. In my view, that would be an unfair result. He ought to have been considered for a bonus, just as the comparators were. The same evaluation process ought to have been followed as with the other directors, using the same objective criteria in a transparent manner. This was not done.
2013
[120] Bain worked at UBS until March 22, 2013. All of the evidence confirms that during that period of time, he acted professionally and worked conscientiously to promote UBS and to transition his existing files. His Banker’s Statement for the three months of 2013 that he worked at UBS shows actual revenue of approximately $2 million and expected revenue of close to $16 million.
[121] The comments I have made in the preceding paragraphs about the nature of the discretionary bonus apply to the 2013 stub year as well. The bonus was an integral component of Bain’s compensation and cannot be ignored: see Paquette. Since I have found that he was denied a bonus for 2012 because of his dismissal, it follows that he was not paid a bonus for the stub year of 2013 for the same reason. This was not fair; Bain was never given an explanation for the failure of UBS to award him a bonus for the work he did until March 22, 2013.
Quantum of 2012 Bonus
[122] It is Bain’s position that he is entitled to a bonus based on the average total compensation received by the comparators in 2012 or alternatively, a bonus based on the average bonuses paid to the comparators. Both of these approaches exclude Banker 2 who was terminated and did not receive a bonus.
[123] Counsel for the Defendant submits that the Plaintiff is not entitled to any bonus in the form of notional shares of UBS, which would vest outside of any reasonable notice period. Rather, he argues, any bonus payable should be determined based on the amounts received by one comparator, Banker 3, and only on the cash portion of his bonus. Alternatively, it is submitted, any bonus ought to be calculated based on the average cash bonus only of the comparators without inclusion of EOP.
[124] Whether a dismissed employee is entitled to non-cash bonuses which vest over time depends on the nature of the plan and its provisions. The cases that are relied on by UBS on this point are all specific to the plan that was in effect in the particular case.
[125] In Schumacher, the court noted that the terms of that plan required that any outstanding stock options would be forfeited upon the employee’s termination, unless they became exercisable within a period of 60 days after dismissal. It was due to this provision that the court refused to award the Plaintiff the options, because the plan stipulated:
If a participant is terminated without cause, any outstanding options granted to that participant which are exercisable at the date of such termination of employment and which become exercisable in the sixty days following termination may be exercised at any time on or before the expiration of such sixty-day period. After that time all unexercised options and all options not yet exercisable will be forfeited by the terminated Participant. [Emphasis in original.]
The court found there was no ambiguity, but the decision not to grant the employee the options was based on the clear terms of the plan.
[126] Tab 97 of the JBD contains the EOP terms governing 2012/2013. This document specifically addresses employees who were resident of other jurisdictions. Appendix XII states that an award of options for an employee who was resident in Canada would be subject to a vesting period of two to five years from the grant date. For grants made in March of 2013, for the 2012 year, it stipulated that 25 percent of the award would vest on March 1, 2015, another 25 percent on March 1, 2016 and the final 50 percent on March 1, 2018.
[127] Section 5.1 of the document states that any unvested awards would be forfeited in the event employment terminates. However, section 5.2 states, “Notwithstanding Rule 5.1, any unvested awards will not be forfeited and will continue to vest in accordance with the terms of the plan if an employee’s employment terminates … due to redundancy.”
[128] Counsel for UBS argues that this section relates to notional shares that had been awarded to Bain, which had not yet vested, and which continued to vest following his termination within the notice period. I do not read this term in such a narrow fashion. Rather, it seems to me that had Bain been awarded a bonus in 2013 for his 2012 performance, which included stock options that would have vested in accordance with Appendix XII, under the language of the plan, I see no reason why those options would not have continued to vest; they would not have been forfeited.
[129] However, in the event that my interpretation of these provisions of the plan is incorrect, it is not necessary for me to decide the issue of vesting of shares outside of a notice period. In the same fashion as Sharpe J.A. distinguished between seeking pension benefits that the Plaintiff would have been entitled to had he continued to work and damages arising from the loss of those benefits in Taggart v. Canada Life Assurance Company (2006), 50 C.C.P.B. 163 (Ont. C.A.), Bain is not seeking the EOP award, so whether or not those shares would have vested during the notice period is not determinative. Bain is seeking damages at common law for compensation for his salary and bonuses which he would have earned had UBS not terminated his employment and failed to give proper notice. Bain had the right to work and receive his usual remuneration throughout the notice period or be paid in lieu thereof. That did not occur, and he is entitled to damages. The comments of the court in Paquette are applicable to the case at hand: “[T]he appellant is entitled to compensation as part of his damages for wrongful dismissal for the loss of his bonus for 2014 … and the lost opportunity to earn a bonus in 2015”.
[130] I need not determine what portion of any bonus would be cash and what would be EOP; indeed, based on the evidence at trial, it would be an impossible task. The Plaintiff is not asking for EOP shares; he is requesting damages based on compensation that includes salary and bonus. Even if Bain had been awarded a bonus which included EOP, if I were to accept the argument of the defence, pursuant to the terms and vesting schedule of the plan, at most, 25 percent of the shares would vest within the notice period. If I accepted the argument of the defence, UBS could manipulate the bonus and the award of EOP such that a dismissed employee would not receive them. Forfeiture of portions of a bonus which formed an integral part of the dismissed employee’s compensation would result in a windfall to UBS and unfairness to Bain.
[131] Arriving at the appropriate figure for a bonus for the 2012 year is an exercise that must, of necessity, include imprecision. The bonus was discretionary, and driven by a number of factors. No one held the identical job to the Plaintiff or had the same history with UBS. Counsel for the Plaintiff submits that the bonus ought to be determined by averaging the total compensation of the comparators, deducting Bain’s salary of $385,000 and arriving at a bonus figure of $1,010,961. Alternatively, it is submitted that an average of the 2012 bonuses for the comparators is the appropriate bonus amount for Bain: $953,461.
[132] While UBS argues that the Plaintiff ought not to receive a bonus, its alternative argument is that any bonus awarded to the Plaintiff ought to be only on the cash portion of the bonus of Banker 3, the comparator most similar to Bain. That amount is $166,000. Alternatively, counsel submits that the average of the cash bonuses of the comparators ought to be used to determine the appropriate bonus for Bain: $169,485.
[133] In my view, the fairest approach is to begin by examining the bonuses of the comparators. I prefer this over the total compensation approach suggested by counsel for the Plaintiff because the salaries of the comparators varied greatly—from $270,000 to $600,000. I do not accept the argument of the defence that the bonus ought to be restricted to the cash amounts of the bonus of the comparators because I reject the argument that the Plaintiff is not entitled to the EOP portion of the bonus, for reasons that I have set out. The Plaintiff is not seeking EOP or deferred shares in this lawsuit; he is seeking damages for the bonus he ought to have received. I agree that Banker 2 should not be included in the comparison because he was dismissed and received no bonus for 2012.
[134] None of the comparators gave evidence at the trial. Both Bain and Auclair made reference in their evidence to the comparators, but there was no detail provided; there were general statements only. Consequently, it is difficult for me to appreciate the difference in the jobs of the comparators to the job of Bain and how their compensation was arrived at, in terms of salary and bonus. My objective when fixing the amount of the Plaintiff’s bonus is to, as closely as possible, find the amount of the bonus Bain would have been awarded had he remained working for UBS. This involves an examination of his historical bonuses, as well as the bonuses of the comparators as well as other factors.
[135] I have determined that the fairest approach, when attempting to determine the proper bonus for Bain for 2012, is to take the bonuses received by the comparators, excluding Banker 2 and Banker 4, and then to take an average of this number. I have arrived at this conclusion for a couple of reasons. First, the evidence confirmed that Banker 4 was at a different level than Bain, despite the fact that they were both Managing Directors. Bain acknowledged that Banker 4 was senior to him, and had some senior coverage responsibilities. Furthermore, Banker 4 was focused on the mining industry and had a different history with UBS.
[136] Auclair confirmed that Banker 4 was a long term UBS employee who had held very senior roles outside of Canada. He had been the co-head of a group in the Americas (after which he moved to Europe) and was co-head of a very large group. Banker 4 held a very senior role with UBS Canada, and in this role he oversaw three businesses UBS ran in Canada. Banker 4 moved on to become the global head of a team for UBS. The evidence of both Bain and Auclair confirms that Banker 4 had been with UBS far longer than Bain, he had more seniority, his role was different than Bain’s and it had more of a global presence.
[137] Secondly, there were significant differences in their salaries: Banker 4 earned $600,000 and Bain earned $385,000. As well, the bonus received by Banker 4 in 2012 in the sum of $2,212,244, far surpassed the bonus of any of the other directors, for reasons which were not elaborated upon during the trial. His bonus was three times the bonus of the other Managing Directors. Thus, it seems that Banker 4, while a Managing Director, was in a different category than Bain or even Banker 5, and his compensation was different. Thus, in my opinion, his bonus ought not to be included when averaging the bonuses received by the comparators. Taking the average bonus of the three comparators, Banker 1, Banker 3 and Banker 5 results in a figure of $533,866.66, and I find that to be the bonus that ought to have been paid to Bain for 2012.
Quantum of 2013 Bonus for Stub Year
[138] For 2013, it is to be noted that Banker 1 and Banker 4 left UBS in 2013. Thus, it is appropriate to look at the remaining comparators, Banker 3 and Banker 5, and their total bonuses for 2013. Their average bonus for the year is $1,057,650. On a monthly basis, that works out to $88,138. All of the evidence is consistent that Bain worked diligently until he left March 22. He is therefore entitled to a bonus for 2.75 months at $88,138 a month, for a total bonus for that stub year of $242,380. If that seems high, I note that both Banker 3 and Banker 5 earned bonuses of approximately $1 million in 2013: significantly higher amounts than they did in 2012. Thus, I find that Bain is entitled to a bonus of $242,380 for the stub year of 2013.
Damages
[139] The Plaintiff claims damages based on Bain’s total compensation for the reasonable period of notice. Using the total compensation approach, for 21 months, the amount claimed is $2,190,313. Using the average bonus amount of the comparators, that figure is $2,143,294.
[140] The defence rejects the total compensation approach and argues the notice amount ought to be based on salary only. Using 14 months’ notice, that figure is $449,167. There ought to be no bonus paid for 2012 or the 2013 stub year, but if I do not accept this argument, the defence argues that the bonus ought to be limited to the cash bonus of Banker 3 for 2013 and 2014, for a further $327,750 + $112,490 or $440,240. From this, the monies received ought to be subtracted, leaving a net amount of $685,921. Alternatively, using the same methodology, but using the average cash bonuses of the comparators for 2013 and 2014, the figure is $700,130, over 14 months’ notice.
[141] I have found the reasonable notice period to be 18 months. The letter of employment states that Bain would receive compensation in lieu of notice, the amount of which “will be determined by reference to salary and bonuses”.
[142] For reasons that I have elaborated upon earlier, I do not accept that the EOP or its common terms supersede the employment contract. I have found that the bonus was an integral part of Bain’s compensation package. In the recent case of Paquette, the Court of Appeal had this to say about damages in wrongful dismissal actions:
The basic principle in awarding damages for wrongful dismissal is that the terminated employee is entitled to compensation for all losses arising from the employer’s breach of contract in failing to give proper notice. The damages award should place the employee in the same financial position he or she would have been in had such notice been given. In other words, in determining damages for wrongful dismissal, the court will typically include all of the compensation and benefits that the employee would have earned during the notice period.
Damages for wrongful dismissal may include an amount for a bonus the employee would have received had he continued in his employment during the notice period, or damages for the lost opportunity to earn a bonus. This is generally the case where the bonus is an integral part of the employee’s compensation package. [Citations omitted.]
[143] A look at the historical figures for Bain’s compensation while at UBS makes it clear that apart from 2011, which clearly was an aberration across the board for employees at UBS, his bonus was the greatest part of his compensation—it was at minimum, 66 percent of his remuneration and at its highest, 91 percent. To suggest that the damages ought to be based solely on the quantum of his salary does not accord with the terms of the employment contract, and it would not fulfil the goal of awarding damages: to place the employee in the position he would have been in had proper notice been given.
[144] Had Bain been employed with UBS during the 18 month notice period, he would have received a bonus for 2013 and for 2014. I find the reasoning of the Court of Appeal in Paquette compelling; as opposed to looking at the terms of the EOP in isolation, I adopt the approach as set out in Paquette and note that Bain has a right to damages at common law based on his complete compensation package, which includes the bonuses he would have received had he continued to work at UBS during the 18 month notice period, up to August 2014. To go to the next step, considering whether the plan itself limited such rights, I do not find that the compensation plan creates such limitations.
[145] Furthermore, the conduct of UBS at the time of Bain’s dismissal does not support the “salary only” theory of compensation. When Bain met with Auclair and Thickett on February 28 and was told he was being terminated, he was given a letter in which he was offered compensation based on 14 months’ notice. The letter stated, “… the company will pay you a lump sum payment in the gross amount of $495,133 equal to 14 months of total compensation”.
[146] Bain testified that Thickett advised him that the figure was based on his average compensation, including salary and bonus, for 2011 and 2012, dividing it to obtain a monthly figure and multiplying that by 14. That figure is $495,133. UBS subsequently retreated from this position, amended their statement of defence accordingly, and at trial, Auclair refused to concede that the figure was based on salary plus bonus for 14 months. Rather, it was asserted by Auclair that the figure was calculated using salary only, plus a “gratuitous payment,” the particulars of which he could not provide.
[147] I reject that evidence as untrue; Auclair signed the termination letter; for him to testify that he did not know how the figure of $495,133 was calculated is simply an example of Auclair being less than forthright with the court.
[148] To calculate the damages owed based on an 18 month notice period, to August 2014, using the average bonuses earned by the two remaining comparators who were employed at UBS during the period of 2013 to 2014, Banker 3 and Banker 5, and Bain’s base salary of $385,000, works out to $1,112,044 owed for 2013 and $750,000 for 2014 for a total damage figure of $1,862,044. The statutory payments Bain received from UBS under the Employment Standards Act, 2000 (being $155,480.77) must be deducted, leaving a net damage figure of $1,706,563.23.
Other Damage Claims
Vacation Pay
[149] Section 35.2 of the ESA provides that when an employee is terminated, he or she is entitled to receive a minimum amount of vacation pay, which is calculated to be 4 percent of wages. Section 1(1) defines wages as “monetary remuneration payable by an employer to an employee under the terms of an employment contract,” but does not include “sums paid as gifts or bonuses that are dependent on the discretion of the employer and that are not related to hours, production or efficiency”.
[150] Counsel agree that Bain is owed 16.24 days up to his date of departure, March 22, 2013. He is also owed 3.85 days for the 8 week notice period pursuant to the ESA. Thus, 20.10 vacation days are owed to the Plaintiff. The parties disagree on how the daily rate of pay ought to be calculated: the Plaintiff submits it should be based on total compensation, while the Defendant argues it should be calculated on salary only.
[151] The solicitor for the Plaintiff uses Banker 3 and Banker 5 as comparators and takes the numbers that they actually earned in 2013 as total compensation. Banker 3 earned $1,410,300 in salary and bonus, and Banker 5 earned $1,715,000. An average of these numbers is $1,562,650. When that number is divided by the number of work days on an annual basis, it yields a daily rate of $6,010. The gross number is $120,801. Subtracting the amount that Bain received when he was terminated for vacation pay, $24,063, the amount owing to Bain is $96,738.
[152] The solicitor for UBS uses Bain’s salary only for the calculation and does not include bonus amounts. Thus, based on $385,000, that yields a daily rate of $1,481. Doing the same math, the amount of vacation pay owed is $5,700.
[153] The evidence at trial made it clear that the bonus paid to directors at UBS was based on performance, the employee’s contribution to various transactions, the revenue generated by that employee’s participation in various deals as well as a number of other factors set out by UBS. The bonus was based, in part, on how an employee produced and how diligent he or she was in their work at UBS. Thus, I do not find section 1(1) is applicable and precludes inclusion of the bonus when calculating entitlement to vacation days.
[154] Counsel for UBS relies on Technica Group Inc. v. Mooyekind, [2013] O.E.S.A.D. No. 971 (Ont. Labour Relations Board). The issue before the Board was whether the Applicant was entitled to receive his mining bonus when he resigned from his job, not the basis for the calculation of the amount of vacation pay the dismissed employee was entitled to receive. Further, Technica can be distinguished because the policy of the employer in that case was that the bonus was NOT related to hours worked, production or efficiency. That is very different than the evidence about the nature of the bonus Bain was entitled to at UBS. While the bonus was discretionary, there were definite factors on which it was based, including performance.
[155] I am of the view, for the reasons articulated earlier when considering how Bain’s bonus ought to be determined, that it is neither fair nor appropriate to base the calculations on his salary alone. Bain’s bonus was a significant component of his remuneration. His letter of employment provided that upon termination he was entitled to not less than six months’ notice and “for greater clarity, the amount of equivalent compensation will be determined by reference to salary and bonuses.”
[156] In my view, a fair approach to calculate the vacation pay that is owed to Bain is to use Bain’s salary ($385,000) plus the average bonus of the comparators in exhibit 5 for 2013 ($1,057,650). I do not think it is appropriate to use the total compensation approach urged by the solicitor for the Plaintiff because the salaries of Banker 3 and Banker 5 exceeded that of Bain, and there is no evidence his salary would have been increased in 2013. Using this approach, the vacation pay to which the Plaintiff is entitled is therefore $87,472.
Benefits
[157] Exhibit 6 sets out the benefits incurred and not paid from May 2013 up to November 2014, in the sum of $14,616.77. The defence does not argue with that number, but submits that the payment should only include the period of proper notice, which is 14 months or $7,361.42.
[158] Since I have found the proper notice period to be 18 months, the Plaintiff is entitled to payment of his benefits up to the end of August 2014, for a sum of $14,187.52.
Referral Payments
[159] There was an agreement between the wealth management branch of UBS and the securities division for referrals. If a client was referred to a different part of UBS, there was an agreement that was signed by the client and registered, and the employee who referred the client would receive 15 percent of the gross fees earned by UBS over a three year period.
[160] Bain referred Mr. and Mrs. S to the Wealth Management division of UBS in 2012. Bain testified that he received the referral fees up to September 30, 2013, and nothing after that. The ASF provides the amounts attributable to the Mr. and Mrs. S account for the last quarter of 2013 and up to December 31, 2014, for a total sum of $13,394, rounded up. This is based on a 21 month notice period.
[161] The defence argues that the amount outstanding, based on 14 months’ notice, is $6,559.65. Since I have found the notice period to be 18 months, I find the Plaintiff is entitled to referral payments to the end of August for a sum of $10,521.81.
Mitigation Expenses
[162] The Plaintiff sent out 374 emails to find a new job in M&A or as an investment banker. He spoke to at least 187 people at 115 different organizations. In addition, he has sent out his resume. Unfortunately, as of the date of the trial, Bain remains unemployed.
[163] In his efforts, the Plaintiff has incurred $1,277.13 in expenses, which he claims as damages. While the Defendant does not dispute entitlement, it argues it should be for the period of reasonable notice, 14 months. The mitigation expenses claimed cease April 29, 2014, which is the 14 month time frame.
[164] I have reviewed exhibit 7 and in my view, all of the expenses claimed are proper, and the Plaintiff is entitled to damages in the sum claimed of $1,277.13.
Conclusion
[165] The Plaintiff shall have judgment against UBS as follows:
- 2012 Bonus: $533,866.66;
- 2013 Stub Bonus: $242,380;
- 18 Month Notice Period: $1,706,563.23;
- Vacation Pay: $87,472;
- Benefits: $14,187.52;
- Referral Payments: $10,521.81;
- Mitigation Expenses: $1,277.13; and
- Total Sum of Damages: $2,596,268.35.
[166] In addition, there will be pre-judgment interest, in an amount to be calculated. The action is dismissed against the Defendant, UBS Securities LLC.
[167] Counsel for UBS requested an order sealing certain documents which reveal the salary and bonus information for the comparators. This motion was not opposed by the Plaintiff. I agree that any material that makes reference to the salary, bonus, assessments or remuneration of the five comparators shall be sealed. This includes but is not limited to exhibit 2 tabs 77, 117, 124 and exhibit 5. Counsel for UBS shall forward to me a draft order for my signature along with a redacted form of this judgment, removing references to the comparators.
[168] If counsel cannot agree on costs, I may be contacted.
[169] I extend my thanks to Mr. Paliare and Mr. Shields for their unfailing courtesy to the court and their efficient use of the court’s time.
D.A. Wilson J.