CITATION: Bois v. MD Physician Services Inc., 2016 ONSC 8133

COURT FILE NO.: 13-59167

DATE: 2016/12/28

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Mark Bois

Plaintiff/Moving Party

– and –

MD Physician Services Inc., MD Physician Investment Management Inc. and MD Management Limited

Defendant/Responding Party

Morgan Rowe, for the Plaintiff

Ashlee L. Barber, for the Defendant

HEARD: June 14, 2016

RULING ON MOTION FOR SUMMARY JUDGMENT

Corthorn J.

Introduction

[1] The plaintiff brings this motion for summary judgment, pursuant to rule 20.04 of the Rules of Civil Procedure,[^1] seeking $114,916.79 in bonus payments that were approved, but not paid out, prior to his resignation in October 2011. Under the defendants’ plan, the bonus payable, if any, is based on the employee’s performance in the previous calendar year. The calculation of the bonus award is carried out early in each calendar year. A bonus, if awarded, is paid in three equal, annual instalments, with the first instalment paid in the year in which the bonus is awarded.

[2] The bonus payments to which the plaintiff claims entitlement are based on his performance in 2009 and 2010. The amount claimed represents the total of the third instalment of the bonus for 2009 and the second and third instalments of the bonus for 2010. In support of his claim, the plaintiff relies on the wording of the plan documents. In the alternative, the plaintiff submits that the payment terms of the incentive plan contravene the provisions of the Employment Standards Act, 2000[^2] (the “ESA”) and are therefore null and void.

[3] The defendants oppose the motion and argue that the terms set out in of the plaintiff’s letter of employment, supported by the plan documents, clearly bar the payment of the amounts claimed by the plaintiff. The defendants submit that in the event an employee voluntarily terminates his or her active employment, the employee forfeits any entitlements earned under the plan that remain unpaid as of the date of termination of employment. The defendants say that the active employment requirement is valid and enforceable and does not contravene the provisions of the ESA.

[4] The only evidence filed on the motion is the affidavit of the plaintiff, Mark Bois (the “Bois Affidavit”).

The Parties

[5] MD Physician Services Inc. (“MDPS”) provides financial and practice management products and services to physicians who are members of the Canadian Medical Association. MDPS is also the fund manager and trustee of a number of investment funds including the MD Private Investment Management Inc. (“MDPIM”) pool of funds.

[6] MDPIM provides discretionary investment management for physicians and their families. MD Management Limited (“MDML”) provides financial planning services for physicians and members of their families. Both companies are subsidiary corporations of MDPS (collectively, MDPS, MDPIM, and MDML are referred to as “the defendants”).

[7] Mark Bois (“the plaintiff”) became employed with MDML in August 1997 as a Financial Consultant. In 2007, he transitioned to a position as an Associate Investment Counsellor for MDPS. In 2010, the plaintiff was promoted to the position of Investment Counsellor. The plaintiff remained employed in that capacity with MDPS until October 2011, when he resigned from MDPS and, more broadly, from the employ of any one of the defendants.

Employment and Variable Incentive Plan

[8] When hired in 1997, the plaintiff was paid a salary and entitled to a bonus based on the bonus system in place at the time. The bonus system in 1997, and as it may have continued until 2007, is not relevant to the outcome of this motion.

[9] In 2007, the defendant MDPIM put in place a Variable Incentive Plan (“VIP”, or the “Plan”). The particulars of the Plan were set out in a five-page document (the “VIP-2007”). The Plan was available to all Investment Counsellors and Regional Investment Administrators. In 2009 and 2010, even when employed as an Associate Investment Counsellor, the plaintiff was eligible to earn and was awarded bonuses pursuant to the Plan.

[10] In summary, the Plan provided that the bonus would be calculated and approved every February, with the amount of the bonus based on an employee’s performance in the previous calendar year. Once calculated, the bonus would be payable in three equal installments. The first installment is paid in the calendar year in which the bonus was calculated and the remaining two-thirds are paid out in the following two years. For example, a bonus earned for an individual’s performance in 2007 would be paid to the employee in three equal installments in each of 2008, 2009, and 2010. The VIP-2007 explains that the payment schedule was based on “Canadian Tax laws”: The maximum limit for deferral of taxable income was identified by the defendants to be three years.

[11] The VIP-2007 sets out how the Plan would apply to employees whose employment was terminated; who died; who were not working by reason of disability, leave of absence, or retirement; who transferred out of the “line of business” to which the Plan applied, but remained within CMA Holdings Incorporated; or whose status changed from full-time to part-time (or vice versa).

[12] The final section of the VIP-2007 is titled “Reservation of Rights” and provides as follows:

The incentive award, if any, shall be awarded and paid only during the period of the participant’s Continuous Active Employment and the award has been granted as an inducement for the participant to remain in such Continuous Active Employment and as an incentive for increased efforts on behalf of MDF by the participant during the period of his/her Continuous Active Employment.[^3]

[13] By way of letter dated December 12, 2007, the plaintiff was advised of a new Base Compensation Program and his resulting increase in salary from $85,000 to $87,600. Neither the letter nor the salary information chart attached to it makes any reference to the Plan.[^4]

[14] When the plaintiff’s salary was reviewed in the fall of 2008, he requested an increase to his salary over and above the amount proposed by his then employer, MDPIM. The request was declined. The plaintiff was advised by the Vice-President of MDPIM at the time to focus instead on generating bonus payments under the Plan.

[15] When the plaintiff was promoted to the position of Investment Counsellor with MDPS in 2010, he received a letter of offer (the “March 2010 Letter”).[^5] The March 2010 Letter makes reference to the Base Compensation Package and states, “Your current incentive eligibility, a yearly incentive with a target of 20% and a maximum of 30% of your base salary, as well as your Variable Incentive Program (VIP) eligibility will remain unaffected.”

[16] The March 2010 Letter addresses the terms and timing of incentive and Plan payments, including with respect to an employee who is no longer employed or has given notice of termination of his employment with MDPS. Those terms are discussed in detail in the Analysis section of this ruling.

[17] The final paragraphs of the March 2010 Letter include the following statement: “The terms and conditions outlined above constitute all of the material terms of your employment relationship with us and you acknowledge that you are relying on no representations or promises with respect to your employment other than as outlined herein.”

[18] The March 2010 Letter is signed by both a representative of MDPS and the plaintiff.

[19] In a December 2010 letter, MDPS advised the plaintiff of a change to its approach to compensation and the impact of the change on him.[^6] References are made in the letter to salary ranges, incentive targets, and recognition of “the value and contribution of high performing employees.” No mention is made of the Plan.

[20] As part of a new approach to compensation, the defendants introduced a new variable incentive plan with an effective date of January 3, 2011. The terms of the new plan are set out in the related plan document (the “VIP-2011”). There are differences between the wording of the VIP-2007 and the VIP-2011, including with respect to the stated purpose, objectives, and payment terms. Those differences are discussed in the Analysis section below.

[21] The final section of the VIP-2011 is titled “Other Terms”; it includes the following statements:

• “This plan supersedes all previously communicated incentive plans”; and

• “This plan does not represent a contract for employment.”

[22] In October 2011, the plaintiff resigned from his position as an Investment Counsellor with MDPS.

[23] It is undisputed that the plaintiff earned bonuses pursuant to the Plan for the years 2009 and 2010 and that, as of October 2011, when the plaintiff resigned, the total of the bonus payments which had accrued and remained unpaid for those two years was $114,916.79 (the “Bonus”).[^7] The plaintiff has not, since the date of termination of his employment, received any payment towards that amount. The defendants refuse to pay the Bonus; they rely on an active employment requirement with respect to entitlement to payment of the Bonus. The defendants’ position is that the plaintiff forfeited his entitlement to the Bonus when he resigned from his position with MDPS.

Preliminary Matters

[24] The parties agree that this matter is appropriate for summary judgment, given that the only issue before me is how the active employment condition in the Plan and the plaintiff’s letter of employment should be interpreted in light of principles of contractual and statutory interpretation.

[25] Additionally, there is no dispute between the parties as to the facts. The defendants did not tender an affidavit in support of their position, nor did they cross-examine the plaintiff on his affidavit.

[26] Pursuant to the “culture shift” approved by the Supreme Court of Canada in Hryniak v. Mauldin,[^8] judges are mandated to manage the summary judgment process in a manner consistent with the principle of proportionality. I find that the issues in this matter are capable of determination by way of summary judgment.

[27] I pause to note that the defendants did not file a notice of cross-motion. However, they request relief in the form of summary judgment dismissing the plaintiff’s claim of entitlement to payment of the Bonus. The developments in the law subsequent to the decision in Hryniak, are such that should I find that there is no genuine issue requiring a trial, a cross-motion is not a pre-requisite to consideration of the relief requested on behalf of the defendants.[^9]

The Issues

[28] The issues to be determined on this motion are as follows:

1. On what terms is the plaintiff’s claim of entitlement to payment of the Bonus to be determined?

2. Did the plaintiff have notice of those terms?

3. If those terms include an active employment requirement, does that requirement contravene the provisions of the ESA?

Positions of the Parties

a) The Plaintiff’s Position

[29] The plaintiff relies on the wording of the VIP-2011 as the basis for his entitlement to payment of the Bonus. In summary, the plaintiff’s position is as follows:

• The VIP-2011 was unilaterally imposed on and, in any event, accepted by the plaintiff. As a result, he is entitled to rely on the wording of that document in support of his entitlement to payment of the Bonus.

• The wording of the 2011 document supersedes both (a) the wording of the VIP-2007; and (b) the contents of the March 2010 Letter in which reference is made to the VIP-2007.

• There is nothing in the wording of the VIP-2011 which results in an employee forfeiting payment of a bonus accrued and remaining unpaid as of the date of the employee’s resignation.

[30] The plaintiff submits that the changes in the wording of the plan document, from the 2007 version to the 2011 version, are a reflection of the development of case law subsequent to 2007 in which employees who are “good leavers” are treated differently than employees whose employment is terminated for cause. Having chosen to resign from his position with MDPS, the plaintiff submits that he falls within the category of “good leavers” and, as a result, is entitled to payment of the Bonus.

[31] The plaintiff’s position is that he always understood that the Plan was part of his overall compensation package. However, he denies that he was given notice of the particular terms pursuant to which bonuses were payable. As a result, he did not understand that upon resigning from MDPS he would be forfeiting his entitlement to payment of the Bonus.

[32] The plaintiff also takes the position that the active employment requirement for payment of the Bonus, regardless of its source or basis, contravenes the ESA and is therefore void.

b) The Defendants’ Position

[33] The defendants submit that the plaintiff knew or ought to have known that (a) active employment was a requirement for payment of the Bonus; and (b) when resigning from MDPS in October 2011 he would be forfeiting payment of same. The defendants rely on the March 2010 Letter as the critical document for both the terms relevant to the payment of the Bonus and notice to the plaintiff of the active employment requirement.

[34] The defendants submit that the VIP-2011 is not relevant to payment of the Bonus because the VIP-2011 came into effect after the accrual of the Bonus. However, even if it is found to be relevant, the VIP-2011 includes the active employment requirement of which the plaintiff knew or ought to have known.

[35] In addition, the defendants submit that the active employment requirement does not contravene the provisions of the ESA.

Analysis

Issue No. 1: Terms of Payment

[36] The parties agree that the VIP-2007, the March 2010 Letter, and the VIP-2011 (the “Documents”) are to each be considered on the basis that a commercial contract is to be interpreted,

(a) as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;

(b) by determining the intention of the parties in accordance with the language they have used in the written document and based upon the “cardinal presumption” that they have intended what they have said;

(c) with regard to objective evidence of the factual matrix underlying the negotiation of the contract, but without reference to the subjective intention of the parties; and (to the extent there is any ambiguity in the contract),

(d) in a fashion that accords with sound commercial principles and good business sense, and that avoids a commercial absurdity.[^10]

[37] The parties also agree that, when interpreting the Documents, I am to follow the approach outlined in the Supreme Court of Canada decision in Sattva Capital Corp. v. Creston Moly Corp.[^11] In Sattva, at para. 47, Rothstein J. highlighted that the “interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction.” The common-sense approach requires that the document be read as a whole; the words be given their ordinary and grammatical meaning; and the meaning given to words be consistent with the circumstances surrounding and known to the parties at the time of the formation of the contract.[^12]

[38] The contract that was the subject of the dispute in Sattva was negotiated between two corporate entities. In that regard, the contract in Sattva is distinguishable from the terms of the Plan. The latter were (a) drafted exclusively by the defendants; and (b) unilaterally imposed on the plaintiff. Regardless, the parties agree that the principles set out in Sattva are applicable to interpretation of the Documents.

a) The VIP-2007

[39] In the first paragraph of the VIP-2007, the purpose of the Plan is identified as “to attract, retain and motivate client-facing advisors and reward exceptional client-facing advisor performance.” I find that there is nothing ambiguous in the stated purpose of the VIP-2007. It is clear that retention of employees is an element of the purpose of the Plan. In his affidavit, the plaintiff acknowledges the purpose of the Plan.

[40] The VIP-2007 sets out the terms pursuant to which entitlement to payments are affected by reason of termination of employment, death, disability, leave of absence, retirement, transfer, or a change from full-time to part-time status (or vice versa). Under the heading “Termination of Employment”, the Plan provides as follows:

In the event a Participant’s continuous Active Employment terminates, either voluntarily or involuntarily and whether for cause or not for cause, the Participant will immediately forfeit any entitlement to any payments under this plan whether attributable to prior years or to the current year.

Continuous Active Employment means actively performing duties or exercising responsibilities and providing services to MDF, without interruption or termination. If the participant has been provided or is entitled to notice of termination of his employment, Continuous Active Employment shall be deemed terminated upon the actual cessation of the active performance of duties or responsibilities in providing services to MDF, notwithstanding any required notice period that must be fulfilled before termination as an employee can be effected under applicable law.

[41] There is, in my view, nothing ambiguous or unclear about the wording of that provision of the Plan.

[42] The clarity of the payment term quoted in paragraph 40, above, is enhanced when consideration is given to the payment terms related to death or retirement of an employee. In the event of death, the employee’s incentive payment entitlement as of the date of death is calculated immediately, the deferral period is waived, and payment of the entire amount owed is immediately. On retirement, amounts earned but not paid as of the date of retirement are paid out pursuant to the usual deferral schedule. I find that the differences between entitlement to and timing of incentive payments under the various scenarios are clear and the bases for same easily understood.

[43] The significance of continuous active employment, as a requirement for entitlement to payment, is demonstrated by the “Reservation of Rights”’ provision of the VIP-2007. That provision, quoted above, at paragraph 12, emphasizes that the incentive bonus is “awarded and paid only during the period of the participant’s Continuous Active Employment”. In that provision, the award is described as an “inducement” for (a) remaining continuously, actively employed; and (b) increased efforts on the part of the participant.

[44] It was perhaps with a view to addressing the “surrounding circumstances” that the plaintiff included in his affidavit a description of his understanding of the overall compensation scheme and the terms, over time, of the Plan. The defendants dismiss that understanding as subjective evidence, which is not to be considered for the purpose of interpreting the Documents. The defendants submit that I am entitled to rely only on objective evidence as to the surrounding circumstances.

[45] The evidence of the plaintiff is that he understood that the purpose of the Plan was to provide the benefit of tax-deferral to employees. In his affidavit, the plaintiff explains in detail his understanding as to why the defendants introduced the Plan:

• To assist the defendants in matching revenues to expenses;

• To compensate employees at a level commensurate with industry standards while minimizing the financial risk to the defendants; and

• To have the employee assume some of the risks associated with the plan, because the bonus payable was tied to the employee’s ability to bring in net new assets over and above the employee’s annual targets.

[46] I find that, because the wording of the Plan was unilaterally imposed, the plaintiff’s understanding of the compensation package, including the Plan, is not relevant to the circumstances surrounding the creation of the Documents. The plaintiff’s understanding, if relevant to anything, may be relevant to the issue of notice to the plaintiff of the active employment requirement. The issue of notice is discussed in the next section of this ruling.

[47] In any event, the surrounding circumstances “must never be allowed to overwhelm the words [of a contract]…. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract”.[^13]

b) The March 2010 Letter

[48] I agree with the defendants that the contents of the March 2010 Letter are relevant to the determination of the terms pursuant to which the plaintiff is entitled to payment of the Bonus. That letter addresses both incentive eligibility and Plan eligibility as follows:

All incentive and VIP payments are made in February and/or March following the calendar year to which they apply. In any given year, you must be a permanent employee of the CMAH Group of Companies on December 31 of the year for which the incentive is paid and continue to be so employed on the payment date(s) to receive a payment. Any employee who is no longer employed with the organization or has given notice of termination prior to the payout date will not be eligible to receive a payment.

[49] The plaintiff submits that the wording of the March 2010 Letter is ambiguous because of the references to “payment date(s)”, “payout date”, and “payment”. I note that, in the VIP-2007, reference is made to the “Payout Rate” and to “payouts”. I find that the reference to one or more of “payout(s)”, “payout date”, or “Payout Rate” in the VIP-2007 and/or the March 2010 Letter does not result in any ambiguity of the terms of either document.

[50] The VIP-2007 includes a chart which sets out the method of calculation of award payments. The “Payout Rates” are identified in “bps” units. No definition is provided for “bps”. Under the heading “Change in Status”, the VIP-2007 explains that an employee who changes from full-time to part-time (or vice versa) “will have their incentive payouts pro-rated as of the effective date of the status change”. In the section titled, “Payout Frequency”, the VIP-2007 provides that “[t]he payouts will be completed in the February timeframe of each year to accommodate the approval of the plan payouts by the HR and Compensation committee.”

[51] I find that, when the VIP-2007 is read as a whole, it is clear that “payout” means the amount of the incentive plan award calculated on the basis of the chart which appears in the document. “Payout” is not interchangeable with “payment”. Based once again on the document when read as a whole, I find that “payout date” means the date on which the arithmetic calculation of the award amount is carried out. The “payout date” is distinct from the payment date, with the latter meaning one of the three dates on which each of the three equal installments of the incentive award is paid.

c) The VIP-2011

[52] I agree with the defendants that the terms of the VIP-2011 are not relevant to the outcome of this motion. The VIP-2011 states that it is effective from January 3, 2011 forward and that it would be reviewed and revised on January 1, 2012. There is nothing in the VIP-2011 which identifies that it was intended to apply retrospectively to bonuses accrued and which remained unpaid for any years prior to the 2011 calendar year. As a result, I find that the VIP-2011 is not determinative of the plaintiff’s claim of entitlement to payment of the Bonus.

[53] If, however, I am wrong and the wording of the VIP-2011 is relevant to the outcome of the motion, I find that the VIP-2011 includes an active employment requirement applicable to an employee who voluntarily terminates his employment with the defendants. The sections of the VIP-2011 upon which I base that finding include the following:

Employee Eligibility

To be eligible for the Variable Incentive plan, the employee must be employed in an eligible role as outlined below. [Note: The eligible roles include Investment Counsellor.] To receive a payment an individual must maintain continuous active employment with MD Physician Services with no breaks in service and to be an employee at the time of payout.

Termination of Employment

Involuntary Termination

Employees terminated for cause immediately forfeits [sic] any entitlement to payments under the plan whether earned in the current year or in previous years.

Voluntary Termination and Resignation

Any employee who has left the organization or has given notice to leave the organization on or before the incentive payment date will not be eligible to receive a payment.

[54] The plaintiff highlights that in the VIP-2011 a specific distinction is made between involuntary termination and voluntary termination of employment. The plaintiff submits that the distinction was introduced by the defendants in response to a development, subsequent to 2007, in the law of wrongful dismissal.

[55] In a number of the cases relied upon by the plaintiff, consideration was given to the nature of the compensation to which an employee was entitled during his or her notice period. In those cases, it was determined that an employer who was found to have wrongfully or constructively dismissed an employee should not be permitted to benefit from such conduct. As a result, compensation payable during the notice period was to include any benefits and bonuses accrued prior to and otherwise payable during the notice period.[^14]

[56] The plaintiff submits that these cases (a) highlight the development in the law of wrongful dismissal giving recognition to “good leavers”; and (b) mandate that “good leavers” not be treated the same as employees whose employment is terminated for cause. The plaintiff’s position is that the defendants revised the wording of the plan documents and included the distinction between voluntary and involuntary termination of employment in the VIP-2011 specifically to recognize “good leavers”.

[57] The “Involuntary Termination” section of the VIP-2011 may well be a direct response to the “good leaver” cases. If so, in my view the response is not for the reason submitted by the plaintiff. In my view, that section of the VIP-2011 is an attempt on the part of the defendants to avoid the obligation to include variable incentive plan payments of any kind in the compensation paid in lieu of notice for an employee whose employment is involuntarily terminated.

[58] An alternative argument made by the plaintiff with respect to the VIP-2011 is that the reference made to “payouts” in the “Final Approval” section of the VIP-2011 is relevant to entitlement to a “payment” even after the date of voluntary termination of employment. I disagree and find that “payouts” does not have either the meaning of or the relevance to entitlement submitted by the plaintiff.

[59] Like the VIP-2007, the VIP-2011 includes a chart which sets out the eligible individual performance measures. The measures are again described as “Payout Rates” and identified in units of “bps”. In regions in which there is both a Regional Manager and an Assistant Regional Manager, the total management payout based on 12.5 bps is split between them, with the former receiving 7.5 bps and the latter receiving 5.0 bps. An “MRA” (a term not defined in the document) receives a payout based on 12.5 bps. Under “Final Approval”, the VIP-2011 states that “[t]he HR and Compensation Committee of the Board, reviews the Variable Incentive Plan payouts annually and provides the final approval of the payouts.”

[60] I find that in referring to a “payout” the VIP-2011 document is addressing the arithmetic calculation of the amount of the variable incentive payment to be made. As a result, “payout” has a specific meaning and is not interchangeable with “payment”, the latter of which appears in subsequent sections of the VIP-2011.

d) Summary

[61] In summary, I find as follows:

• In combination, the VIP-2007 and March 2010 Letter are clear and unambiguous in identifying the active employment requirement for entitlement to payment of the Bonus.

• The terms of the VIP-2011 are not relevant to the plaintiff’s entitlement to payment of the Bonus.

• If, however, I am incorrect in my finding and the terms of the VIP-2011 are relevant to the plaintiff’s entitlement to payment of the Bonus, then the wording of the VIP-2011 is also clear and unambiguous in identifying the active employment requirement for such entitlement to payment of the Bonus.

Issue No. 2: Notice of the Active Employment Requirement

[62] The plaintiff’s position is that he did not have notice of the active employment requirement and, as a result, the defendants are not entitled to rely on that requirement in refusing to pay the Bonus. The defendants submit that the plaintiff had knowledge or that any reasonable person in his position ought to have known of the active employment requirement.

[63] In summary, the plaintiff’s evidence with respect to his knowledge or lack of knowledge of the active employment requirement is as follows:

• When the Plan was introduced, there was some discussion regarding the Plan between the plaintiff, other employees, and managers. The provisions regarding active employment were never directly brought to the plaintiff’s attention or discussed with him. No limitations or restrictions on bonus payments were ever outlined to the plaintiff in writing at the time of approval or payment of bonuses earned from 2007 forward.

• The plaintiff’s understanding was that the introduction of the new Plan in January 2011 did not in any way impact his entitlement to payment of the balance of his bonus for either of 2009 or 2010.

• The plaintiff also understood that if he voluntarily terminated his employment with MDPS, he would still receive the balance owed to him, as of the date of termination of his employment, for the 2009 and 2010 bonuses. The balance owed would continue to be paid as if he had remained an employee (i.e. in equal, annual one-third installments).

[64] In my view, there are other factors to be considered with respect to the extent to which the plaintiff had notice of the active employment requirement. Those factors include the following:

• Compensation was a matter of concern to the plaintiff. In 2008, he requested a salary increase in excess of that proposed by the defendants. The request was declined and the plaintiff was told to focus on generating bonus payments pursuant to the Plan.

• The plaintiff was employed as a financial counsellor. I draw an inference and find that he is sophisticated in financial matters, including compensation.

• Both the VIP-2007 and the VIP-2011 are neither lengthy nor complex documents. I find that a person with the plaintiff’s training and expertise would not find them difficult to understand.

• Leaving aside the wording of the Plan documents, I find that the wording of the March 2010 Letter is succinct and explicit as to the active employment requirement.

[65] Whether the plaintiff had notice or ought to have known of the active employment requirement of the Plan is a question of fact.[^15]

[66] Based on the factors listed above, I find that the plaintiff had notice of the active employment requirement as of 2007, 2010, and 2011. Furthermore, he knew or ought to have known in 2011, when he resigned from the employ of MDPS, that he would be forfeiting entitlement to the Bonus.

Issue No. 3: Employment Standards Act, 2000

[67] The ESA defines what constitutes “wages”, prescribes when wages are to be paid to an employee whose employment has ended, addresses deductions from wages, and sets out the circumstances in which the terms of an employment contract prevail over the standards set by the statute. The first issue to be determined is whether the bonus payments pursuant to the Plan fall within the definition of “wages” in the ESA. If so, the second issue to be determined is whether the active employment requirement for payment of bonus awards contravenes the provisions of the ESA in any way and is therefore null and void.

[68] The plaintiff’s position is that the bonus payments fall within the definition of “wages” in the ESA. The defendants do not dispute that the bonus payments could be characterized as “wages” for the purpose of the ESA.

[69] However, the defendants submit that each bonus payment does not become part of the employee’s wages until the employee has fulfilled all of the criteria for entitlement to the payment, including that the employee be actively employed as of the date of each bonus payment. The plaintiff’s position is that the requirement for active employment as of the date of each bonus payment for a bonus earned prior to voluntary termination of employment contravenes the provisions of the ESA.

a) Definition of “Wages”

[70] “Wages” are defined in the ESA as:

(a) monetary remuneration payable by an employer to an employee under the terms of an employment contract, oral or written, express or implied,

but does not include,

(e) any 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.[^16]

[71] For the following reasons I find that the payments to which an employee is entitled pursuant to the Plan fall within the definition of “wages” in the ESA:

• The amount of the incentive award is determined on the basis of an arithmetic formula. The calculation based on that formula eliminates any discretion on the part of the defendants as to the amount of the award.

• The figures used in the calculation of the amount of the award include those based on an employee’s production. In both the VIP-2007 and the VIP-2011, reference is made to an amount payable “Per $100K of Production”. Both documents also refer to an employee’s “performance” and to a “performance threshold”. The latter two references do not, however, detract from the specific measure relied on to determine the amount of the award – the employee’s “production”.

[72] Given my finding that the incentive plan payments fall within the definition of “wages” in the ESA, it is necessary to determine whether the payment terms for the Plan contravene the provisions of the ESA and, if so, whether the payment terms are null and void.

b) Compliance With or Contravention of the ESA?

[73] The plaintiff acknowledges that active employment requirements have been accepted by the courts as valid and enforceable terms of employment contracts. The plaintiff does not take issue with the requirement to be actively employed with the defendants so as to earn a bonus pursuant to the Plan. The plaintiff takes issue with the requirement to be actively employed for entitlement to payment once a bonus has been earned (and awarded).

[74] The plaintiff submits that the latter aspect of the active employment requirement contravenes three sections of the ESA:

Section 5 − The prohibition from contracting out of the standards set by the ESA;

Section 11 − The standards for the timing of payment of wages; and

Section 13 − The prohibition against “withholding” wages.

[75] The defendants’ position is that the requirement for active employment as of the date of payment of a bonus earned prior to the voluntary termination of employment does not contravene the ESA. In the alternative, the defendant submits that the March 2010 Letter signed by the plaintiff serves as “written authorization” within the meaning of section 13 of the ESA for the defendants to withhold bonus payments earned but unpaid as of the date of resignation.

i) Statutory Provisions

[76] The prohibition from contracting out of the standards set by the ESA is set out in section 5 of the ESA as follows:

(1) Subject to subsection (2), no employer or agent of an employer and no employee or agent of an employee shall contract out of or waive an employment standard and any such contracting out or waiver is void.

(2) If one or more provisions in an employment contract or in another Act that directly relate to the same subject matter as an employment standard provide a greater benefit to an employee than the employment standard, the provision or provisions in the contract or Act apply and the employment standard does not apply.

[77] The timing of payment of wages is prescribed by section 11 of the ESA, which provides as follows with respect to payment of wages generally and payment of wages upon termination of employment:

(1) An employer shall establish a recurring pay period and a recurring pay day and shall pay all wages earned during each pay period, other than accruing vacation pay, no later than the pay day for that period.

(5) If an employee’s employment ends, the employer shall pay any wages to which the employee is entitled to the employee not later than the later of,

(a) seven days after the employment ends; and

(b) the day that would have been the employee’s next pay day.

ii) Analysis

[78] The defendants rely on three Ontario decisions in support of the validity of active employment requirements in contracts of employment: Goldsmith v. Sears Canada Inc.,[^17] Kieran v. Ingram Micro Inc.,[^18] and Poole v. Whirlpool Corp.[^19] In particular, the defendants highlight the statement made by Pollak J. at paragraph 45 of her decision in Goldsmith, “the courts have enforced the requirement to be ‘actively employed’ on the date of payment of bonuses.”

[79] The general acceptance of active employment requirements by the courts, on a case-by-case basis, is not disputed by the plaintiff.

[80] The three cases cited above and the cases relied on by the plaintiff are all wrongful dismissal cases (collectively referred to as “the Wrongful Dismissal Cases”).[^20] In those cases the issue of entitlement to a bonus payment was considered in the context of determining the compensation to which the employees, if wrongfully dismissed, were entitled throughout their respective periods of reasonable notice (i.e. had they been given reasonable notice).

[81] The essence of the Wrongful Dismissal Cases is that an employee who is found to have been wrongfully dismissed is entitled to the wages and benefits he would have had the right to claim, had he been employed during the period of reasonable notice. The employer is therefore prevented from benefiting from a wrongful termination of employment. I note that in the Wrongful Dismissal Cases, the distinction is made between an employee who voluntarily brings their employment to an end and an employee who is wrongfully dismissed.[^21]

[82] The Wrongful Dismissal Cases do not support the plaintiff’s position. The decision in Martell, for example, supports the defendants’ position that the active employment requirement for the payment of each one-third portion of the bonus is valid. In that case, a bonus awarded was payable in three equal annual installations. In Martell the plan document referred to each portion of the bonus “vesting” as of each payment date. The employer argued that the employee was not entitled to the second portion of a bonus (scheduled to ‘vest’ on May 1, 2002) because he had been informed prior to the vesting date that his employment would end thereafter.

[83] The trial judge found that the employee had been wrongfully dismissed and was entitled to compensation in lieu of notice. The trial judge determined that the notice period ended on May 5, 2002. The compensation awarded included the portion of the bonus payable on May 1, 2002. The compensation did not include the final portion of the bonus, which was payable on May 1, 2003. The trial judge enforced the terms of the bonus plan. There was no finding that the active employment requirement for payment of the bonus was in any way controversial or contravened the employment standards legislation (of British Columbia). The decision of the trial judge in that regard was upheld on appeal; it was specifically described as “reflect[ing] a correct application of the law”.[^22]

[84] In summary, the Wrongful Dismissal Cases do not support the plaintiff’s claim; they favour the defendants’ reliance on the active employment requirement and their refusal to pay the Bonus to the plaintiff.

[85] I am also of the view that the plaintiff’s self-characterization as a “good leaver” does nothing to support his claim. He is more appropriately described as a “voluntary leaver”. As discussed above, in that capacity he knew of the consequences of resignation. The plaintiff must live with those consequences unless the active employment requirement contravenes the ESA.

[86] In three of the cases relied on by the plaintiff and/or the defendants, the decision-maker was required to determine entitlement to compensation of an employee who had resigned from their employment. Those cases are Hsu v. Key Equipment Finance Canada Ltd.,[^23] Patterson v. Hanson Hardscape Products Inc.,[^24] and Portanova v. Sun Life Financial (collectively referred to as “the Resignation Cases”).[^25]

[87] In Hsu, an employee who resigned from the responding party’s employ in October 2002 sought payment of a pro-rata share of an incentive bonus for the calendar year 2002. The Employment Standards Officer who dealt with the matter at first instance denied the claim. The employee applied to the Ontario Labour Relations Board for review of the decision at first instance. Vice-Chair Serena found that the bonus formed part of the employee’s wages. She then considered whether the employee qualified under the terms of the bonus plan for payment of the bonus.

[88] The plan provided for pro-rata bonus payments to an employee who commenced employment part way through and remained employed as of the end of a calendar year. The plan also included what the Vice-Chair referred to as “disqualifying language”[^26]:

Pro-rated Awards − The Target opportunity assumes participation in the plan for the entire calendar year …

Section 3.5 – Termination of Employment

If a Participant’s employment is terminated, either voluntarily or involuntarily, the Participant will be entitled to receive all awards earned up to the Participant’s termination date. Such awards will be paid either on the Participant’s termination date, last pay date, and/or on the next regular payment date for the payment incentive awards under the Plan, as shall be determined by the Plan Administrator. Any incentive awards not earned by a Participant prior to his or her termination date will be forfeited upon termination. For the purposes of this [section], the term “earned” includes those awards which are (1) directly linked to the Participant’s individual productivity, and (2) specifically allocated to the Participant prior to his or her termination date.[^27]

[89] The Vice-Chair found that because the employee had tendered his resignation part way through the calendar year, he did not meet the express terms of the plan and had not, prior to termination of his employment, earned a pro-rata share of the bonus. As a result, it was not necessary to consider the former employee’s entitlement (or not) to payment of the bonus.

[90] I agree with the submission on behalf of the plaintiff that Hsu is distinguishable from the plaintiff’s claim because there is no dispute in the matter before me as to whether the plaintiff “earned” the Bonus prior to the date of his resignation. The dispute is as to whether the entitlement of the plaintiff to continued payment of the Bonus was extinguished by reason of his resignation.

[91] In Patterson, the issue was whether an employee who had resigned was entitled to payment of a bonus. The employee claimed that he had, on the basis of his performance, earned a bonus of approximately $24,000 for the calendar year 2011. He resigned in February 2012. The payment date for the bonus earned by the employee for his 2011 performance was March 15, 2012. The bonus, if earned and payable, would have been paid in full on that date.

[92] The bonus plan considered in Patterson included the following terms:

• Participation in the bonus plan and all rights under the plan ceased on the employee’s last day of “Full Service”, which was defined as a period in which the employee was actively reporting for work.

• For defined “Qualified Reasons”, an employee or former employee who was no longer eligible to participate in the bonus plan was eligible for payment. However, resignation was not included in the definition of “Qualified Reasons”.

• Resignation was instead addressed in “Non-Qualified Reasons”, in which it was provided that “Resignation for any reason prior to the calculation and distribution of the award” disentitles the employee to payment from the plan.

[93] The parties in Patterson agreed that if the active employment requirement was sufficiently communicated to the employee, then the bonus was not payable. Therefore the central issue was whether the employee had received notice of the active employment requirement. The trial judge concluded that the employer had not effectively communicated the active employment requirement to the employee. The employer was therefore not entitled to rely on the requirement in refusing to pay the amount due as of March 2012.

[94] In my view, Patterson is not of particular assistance given that the focus of the decision is on the issue of notice of an active employment requirement. It is, however, noteworthy for the agreement between the parties in Patterson on the following point. If the Court found that the employee was given reasonable notice of the active employment requirement, then the employer was entitled to rely on that requirement in refusing to pay the bonus claimed.

[95] In Portanova, the employee signed a contract of employment which included the following active employment requirement: “Your participation in the bonus payment is contingent upon you being employed by Sun Life at the time of payment (February of the year following the plan year) and upon your completion of assigned objectives.”[^28]

[96] The terms of the particular incentive compensation plan were set out in a plan document. The “Eligibility” section was as follows:

All regular full-time and regular reduced employees below the officer level are eligible to participate in the incentive plan.

To be eligible for an incentive award, an employee must:

be employed with Sun Life Financial as of October 1 of the calendar year;

be actively employed with Sun Life Financial for at least three consecutive months during the calendar year; and

be employed with Sun Life Financial at the time incentive awards are paid out.[^29]

[97] The employee tendered his resignation in January 2001 and his last day of work was in February 2001. He claimed entitlement to a bonus payment based on his performance in 2000. In 2001 the payout date for the bonus was at the end of March. The employer refused to pay the 2000 bonus amount to the employee because he did not meet the requirement for active employment as of the date of payout.

[98] The employee submitted his claim for payment of the bonus to an Employment Standards Officer. The claim was denied and the employee applied to the Ontario Labour Relations Board for review of the decision at first instance. The key findings made by Vice-Chair Silverman include the following:

• It was open to the employer to make payment of the bonus on the payout date conditional upon active employment as of the payout date.[^30]

• Based on the manner in which information about the active employment requirement was disseminated by the employer, the employee knew or ought to have known of the active employment requirement.[^31]

• The employee cannot be wilfully blind to the terms of the incentive plan, by his own action or inaction, and claim entitlement in the face of language saying that he is not so entitled.[^32]

• When the employee chose to resign he knew or should have known that he was rendering himself ineligible by not being employed on the payout date.[^33]

[99] The decision in Portanova was, like the decision in Patterson, focused on the issue of notice of the active employment requirement.

[100] In summary, the Resignation Cases do not support a finding that the active employment requirement in the Plan contravenes the provisions of the ESA.

[101] In my view, it is the distinction between “wages earned” (section 11(1) of the ESA) and “wages to which the employee is entitled” (section 11(5) of the ESA) that permits employers to impose an active employment requirement with respect to wages other than those earned on a recurring basis. The wages to which an employee is entitled as of the date of termination of employment may be broader than wages earned during the recurring pay period in which the date of termination falls. It is pursuant to section 11(5) of the ESA, and the equivalent provisions in employment standards legislation in other provinces, that a determination is required in wrongful dismissal cases as to all forms of wages to which an employee is entitled during the reasonable notice period. To determine the wages payable may require consideration of a bonus plan, like the Plan before me, and calculation of bonus wage “entitlement” (a) based on the wording of the particular plan; and (b) during the notice period.

[102] I am satisfied that the defendants considered the wages, including bonus payments, to which the plaintiff was entitled pursuant to section 11(5) of the ESA as of the date of the plaintiff’s resignation. I find that the defendants rightfully and correctly determined that by reason of his resignation the plaintiff’s entitlement to the Bonus was extinguished.

c) Withholding Wages

[103] As an alternative argument, the defendants rely on the March 2010 Letter as written authorization from the plaintiff to withhold the bonus accrued as of the voluntary termination of his employment.

[104] The ESA precludes an employer from withholding wages unless authorized by another Ontario or a federal statute or in writing by the employee. Section 13 of the ESA provides as follows:

(1) An employer shall not withhold wages payable to an employee, make a deduction from an employee’s wages or cause the employee to return his or her wages to the employer unless authorized to do so under this section.

(3) An employer may withhold or make a deduction from an employee’s wages or cause the employee to return them with the employee’s written authorization.

(5) Subsection (3) does not apply if,

(a) the employee’s authorization does not refer to a specific amount or provide a formula from which a specific amount may be calculated;

(b) the employee’s wages were withheld, deducted or required to be returned,

(i) because of faulty work,

(ii) because the employer had a cash shortage, lost property or had property stolen and a person other than the employee had access to the cash or property, or

(iii) under any prescribed conditions; or

(c) the employee’s wages were required to be returned and those wages were the subject of an order under this Act.

[105] Based on my interpretation of sections 11(1) and (5) of the ESA, I find that the payment terms of the Plan do not amount to “withholding” wages within the meaning of section 13(1) of the ESA.

[106] If I am wrong in that regard, then the defendants’ reliance on written authorization from the plaintiff to withhold wages must be considered. The March 2010 Letter does not “refer to a specific amount or provide a formula from which a specific amount may be calculated”. I find that the March 2010 Letter does satisfy the requirements of section 13(5)(a) of the ESA.

Disposition

[107] In summary, I order as follows:

1. The plaintiff’s motion for summary judgment, and for an order requiring the defendants to pay the Bonus to the plaintiff in accordance with the terms of the VIP, is dismissed.

2. The defendants are granted summary judgment, dismissing the plaintiff’s claim for payment of the Bonus.

[108] I remain seized of this matter. If there are any other matters which one or both of the parties wish to bring before the Court, the matters are to be brought before me.

Costs

[109] In the event the parties are unable to agree upon costs of the motion for summary judgment, they may make written submissions as follows:

a) The submissions shall be limited to a maximum of four pages, exclusive of a bill of costs;

b) Written submissions shall comply with Rule 4 of the Rules of Civil Procedure;

c) Hard copies of any case law or other authorities relied on shall be provided with the submissions and shall comply with Rule 4 of the Rules of Civil Procedure with respect to font size;

d) The submissions, the documents referred to therein, case law, and other authorities, shall be on single-sided pages;

e) Written submissions shall be delivered by 5:00 p.m. on the tenth business day following the date on which this Ruling is released; and

f) In the event any party wishes to deliver a reply to the costs submissions of the opposing party, the reply submissions shall be delivered by 5:00 p.m. on the fifteenth business day following the date on which this Ruling is released. Reply submissions shall comply with paragraphs (a) to (d) above.

Madam Justice Sylvia Corthorn

Released: December 28, 2016

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Mark Bois

Plaintiff/Moving Party

– and –

MD Physician Services Inc., MD Physician Investment Management Inc. and MD Management Limited

Defendant/Responding Party

RULING ON MOTION FOR SUMMARY JUDGMENT

Madam Justice Sylvia Corthorn

CITATION: Bois v. MD Physician Services Inc., 2016 ONSC 8133

COURT FILE NO.: 13-59167

DATE: 2016/12/28

Released: December 28, 2016

[^1]: R.R.O. 1990, Reg. 194. [^2]: S.O. 2000, c. 41. [^3]: Although not defined in the document outlining the Plan, it is assumed that “MDF” refers to MD Financial Group. [^4]: Letter from MDPIM to Mark Bois dated December 12, 2007 − Bois Affidavit, at exhibit “F”. [^5]: Letter from MDPS to Mark Bois dated March 16, 2010 − Bois Affidavit, at exhibit “G”. [^6]: Letter from MDPS to Mark Bois dated December 1, 2010 − Bois Affidavit, at exhibit “H”. [^7]: Letter from MDPS to Mark Bois dated March 31, 2011 − Bois Affidavit, at exhibit “K”. [^8]: 2014 SCC 7, [2014] 1 S.C.R. 87. [^9]: See King Lofts Toronto I Ltd. v. Emmons, 2014 ONCA 215, 40 R.P.R. (5th) 26, at para. 14 and Kassburg v. Sun Life Assurance Co. of Can., 2014 ONCA 922. [^10]: 2249778 Ontario Inc. v. Smith (Fratburger), 2014 ONCA 788, at para. 19, citing Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, 85 O.R. (3d) 254, at para. 24. [^11]: 2014 SCC 53, [2014] 2 S.C.R. 633. [^12]: Sattva, at para. 47. [^13]: Sattva, at para. 57. [^14]: See Martell v. Ewos Canada Ltd., 2005 BCSC 43, at para. 67; Schumacher v. Toronto-Dominion Bank (1997), 1997 CanLII 12329 (ON SC), 147 D.L.R. (4th) 128 (Ont. S.C.), at pp. 184–85. [^15]: Sattva, at para. 58. [^16]: ESA, s. 1(1). [^17]: 2015 ONSC 3214. [^18]: (2004), 2004 CanLII 4852 (ON CA), 33 C.C.E.L. (3d) 157 (Ont. C.A.). [^19]: 2011 ONSC 4100, aff’d 2011 ONCA 808. [^20]: The cases relied on by the plaintiff include, for example, Rosscup v. Westfair Foods Ltd., 1999 ABQB 629, 248 A.R. 275 and Martell v. Ewos Canada Ltd. et al., 2005 BCSC 43. [^21]: See, for example, Martell at para. 67. [^22]: Martell, appellate decision at para. 27. [^23]: 2003 CanLII 7658 (ONLRB). [^24]: 2013 CanLII 54058 (Ont. Sm. Cl. Ct.) [^25]: [2003] O.E.S.A.D. No. 1110 (ONLRB). [^26]: Hsu, at para. 35. [^27]: Hsu, at para. 19. The pro-rated awards section provided for an employee who began his or her employment part-way through the year and who remains employed as of the end of the calendar year to receive a pro-rated award. [^28]: Portanova, at para. 5. [^29]: Portanova, at para. 6. [^30]: Portanova, at para. 21. [^31]: Portanova, at paras. 20 to 25. [^32]: Portanova, at para. 23 [^33]: Portanova, at para. 26.