Overview

[1] The plaintiff Demetri Andros was dismissed without cause by the defendant Colliers Macaulay Nicolls Inc. The defendant is a large Canadian commercial real estate services company with 15,000 professionals in more than 500 offices operating in 68 countries.

[2] Mr. Andros brings a motion for summary judgment in his wrongful dismissal case.

[3] The dispute between Mr. Andros and the defendant relates to the enforceability of a termination clause in the employment agreement between them signed by Mr. Andros on August 21, 2009. Mr. Andros was terminated on January 19, 2017.

[4] On termination, Mr. Andros received what he was entitled to under the Employment Standards Act, 2003, S.O. 2000, c. 41 (ESA) in accordance with the termination provision in his employment agreement.

[5] Mr. Andros argues that the termination provision is unenforceable because it represents an attempt by the defendant to contract out of employment standards provided under the ESA. Accordingly, he seeks: i) an additional notice period (to the 8 weeks’ notice he was given) with the result that he will receive 12 months’ notice; ii) a bonus associated with the 12 months’ notice; iii) a bonus for the period January 1 to January 19, 2017 (during which he worked prior to termination); and iv) damages in lieu of employment benefits equal to 10% of his base salary for the common law notice period beyond the 8 weeks’ notice provided.

[6] The defendant argues that the termination provision was drafted intentionally to rebut the presumption of termination of employment on reasonable notice by clearly specifying some other period of notice. Under that provision, Mr. Andros was entitled to the notice specified in the agreement, or notice in accordance with the ESA, whichever was greater. If Mr. Andros were terminated after a relatively short period of employment, four years, for example, he would be entitled to two months’ notice pursuant to the agreement as opposed to four weeks’ notice pursuant to the ESA. Accordingly, the defendant argues, the provision purposely sets out two notice periods and awards the employee the greater of the two upon termination.

Issues

[7] The issues in this matter are as follows:

Is this case an appropriate case for summary judgment?
Is the termination provision in Mr. Andros’ employment agreement enforceable?
If the termination provision is unenforceable, to what common law notice is Mr. Andros entitled?
Is Mr. Andros entitled to a bonus for 2017?
Is Mr. Andros entitled to compensation for loss of employment benefits during any additional common law notice period?

Issue 1: Is this case an appropriate case for summary judgment?

[8] Rule 20.04(2)(a) of the Rules of Civil Procedure provides that the court shall grant summary judgment if it is satisfied that “there is no genuine issue requiring a trial with respect to a claim or a defence.” As a result of amendments to Rule 20, the powers of the court to grant summary judgment have been enhanced to include weighing the evidence, evaluating credibility of a deponent and drawing any reasonable inference from the evidence.

[9] In Hryniak v. Maudlin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court of Canada held, at para. 49:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[10] In Peticca v. Oracle ULC, [2015] O.J. No. 1985, Myers J. observed, at para. 2, that “[w]rongful dismissal cases with no cause alleged are an area that is particularly well suited to summary judgment. The principal facts required to assess the notice period … are generally not in issue”. See also Beatty v. Best Theratronics Ltd., 2015 ONCA 247, 2014 ONSC 3376 and Camaganacan v. St. Joseph’s Printing Ltd., [2010] O.J. No. 3953 (S.C.J.).

[11] Generally, the adequacy of a terminated employee’s mitigation efforts and the quantification of pay in lieu of notice do not amount to genuine issues requiring a trial. See: Adjemian v. Brook Compton North America, [2008] O.J. No. 2238 (S.C.J.) at paras. 21-23.

[12] The parties, as do I, agree that summary judgment would be appropriate in this case. Most of the material facts, apart from whether Mr. Andros’ entitlement to bonuses was discretionary, are not in dispute and the parties are in agreement on the issues to be decided. I am confident that I can find the necessary facts and apply the relevant law to the evidence based on the record before me.

Issue 2: Is the termination provision in Mr. Andros’ employment agreement enforceable?

[13] Paragraph 4 of the employment agreement entitled “Term of Employment” includes the following provision:

The Company may terminate the employment of the Managing Director by providing the Managing Director the greater of the Managing Director’s entitlement pursuant to the Ontario Employment Standards Act or, at the Company’s sole discretion, either of the following:

a. Two (2) months working notice, in which case the Managing Director will continue to perform all of his duties and his compensation and benefits will remain unchanged during the working notice period.

b. Payment in lieu of notice in the amount equivalent of two (2) months Base Salary.

[14] At the time of Mr. Andros’ termination, he had worked for the defendant during two periods. The first period ran from September 2001 to August 2004, when he chose to leave the company to pursue other career opportunities. The second period ran from February of 2009, when he was hired as a Senior Associate, to January 19, 2017, when he was terminated, after having been promoted to the position of Managing Director commencing September 1, 2009. As Managing Director, he was responsible for valuation and advisory services throughout the Greater Toronto Area and Ontario, except Ottawa, overseeing the operation of 20 professionals.

[15] When Mr. Andros was terminated, he was earning a salary of $170,000 per year in base compensation and benefits including RRSP contributions, dental, extended health, and life insurance benefits.

[16] Prior to his termination, Mr. Andros had been paid a bonus for each fiscal year following his promotion in 2009, which was paid in February of the year following the fiscal year in which the bonus was earned.

[17] The defendant submits that on termination the plaintiff was paid everything he was entitled to pursuant to the ESA in accordance with paragraph 4 of the employment agreement. The notice pursuant to the ESA was greater than the notice provided in clause 4a or 4b and Mr. Andros was entitled to the greater amount.

[18] Consequently, Mr. Andros received the following:

all outstanding wages up to and including the date of termination;
a lump sum payment in lieu of notice of termination in the amount of $27,200.62, representing eight (8) weeks’ salary up to and including March 17, 2017;
a lump sum severance payment in the amount of $40,800.92 representing approximately twelve (12) weeks’ salary (including severance in respect of his employment with the defendant for the 2001-2004 period);
his 2016 bonus paid via direct deposit on the February 15, 2017 pay date;
all accrued and unpaid vacation pay earned to the end of the notice period; and
coverage for all benefits up to and including March 17, 2017.

[19] The defendant further submits that Mr. Andros was not entitled to any bonus for 2017 or any part thereof. This submission is based on the defendant’s position that Mr. Andros’ entitlement to a bonus was discretionary and, in any event, he was not an employee “in good standing” in February of 2018 when 2017 bonuses were payable, as required by the agreement.

[20] Mr. Andros’ submission is focused on the alternative notice provisions set out at clauses 4a and 4b, notwithstanding that these provisions did not apply on the plaintiff’s termination. He submits that these clauses violate the ESA because, if they had applied on his termination, they would have awarded him less than he was entitled to under the ESA.

[21] Mr. Andros submits that section 64 of the ESA is violated because clause 4a makes no specific mention of severance pay and sections 60 and 61 of the ESA are violated because clause 4b makes no specific mention of employment benefits and non-discretionary bonus compensation during the notice period. Mr. Andros submits that these omissions result in an attempt by the defendant to contract out of its statutory obligations under the ESA, making the termination provision unenforceable, with the result that the plaintiff is entitled to reasonable notice at common law.

[22] For the reasons that follow, I find that the termination provision in Mr. Andros’ employment agreement potentially reduces the benefits to which he could be entitled on termination to something less than he would be entitled to under the ESA. Consequently, the termination provision is ineffective in rebutting the presumption of reasonable notice of termination at common law and is therefore unenforceable.

The Law and General Principles

[23] Section 5 of the ESA provides as follows:

No contracting out

5(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.

Greater contractual or statutory right

(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.

[24] In the recent decision of Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158, 134 O.R. (3d) 481 (Wood), Laskin J.A. set out certain principles for the interpretation of employment agreements at paras. 15, 16, 25 and 28, which are useful in this case. They are as follows:

At common law, an employee hired for an indefinite period can be dismissed without cause, but only if the employer gives the employee reasonable notice. In Machtinger v. HOJ Industries Ltd., 1992 102 (SCC), [1992] 1 S.C.R. 986, at p. 998, the Supreme Court characterized the common law principle of termination of employment on reasonable notice “as a presumption, rebuttable if the contract of employment clearly specifies some other period of notice.” (para. 15)

Ontario employers and employees can rebut the presumption of reasonable notice by agreeing to a different notice period. But their agreement will be enforceable only if it complies with the minimum employment standards in the ESA. If it does not do so, then the presumption is not rebutted, and the employee is entitled to reasonable notice of termination. (para. 16)

The question of the enforceability of the termination clause turns on the wording of the clause, the purpose and language of the ESA, and the jurisprudence on interpreting employment agreements. That jurisprudence is now well-established. I will summarize it briefly. (para. 25)

The importance of employment and the vulnerability of employees when their employment is terminated give rise to a number of considerations relevant to the interpretation and enforceability of a termination clause:

• When employment agreements are made, usually employees have less bargaining power than employers. Employees rarely have enough information or leverage to bargain with employers on an equal footing: Machtinger, p. 1003.

• Many employees are likely unfamiliar with the employment standards in the ESA and the obligations the statute imposes on employers. These employees may not seek to challenge unlawful termination clauses: Machtinger, p. 1003.

• The ESA is remedial legislation, intended to protect the interests of employees. Courts should thus favour an interpretation of the ESA that “encourages employers to comply with the minimum requirements of the Act” and “extends its protections to as many employees as possible”, over an interpretation that does not do so: Machtinger, p. 1003.

• Termination clauses should be interpreted in a way that encourages employers to draft agreements that comply with the ESA. If the only consequence employers suffer for drafting a termination clause that fails to comply with the ESA is an order that they comply, then they will have little or no incentive to draft a lawful termination clause at the beginning of the employment relationship: Machtinger, p. 1004.

• A termination clause will rebut the presumption of reasonable notice only if its wording is clear. Employees should know at the beginning of their employment what their entitlement will be at the end of their employment: Machtinger, p. 998.

• Faced with a termination clause that could reasonably be interpreted in more than one way, courts should prefer the interpretation that gives the greater benefit to the employee: Ceccol v. Ontario Gymnastics Federation (2001), 2001 8589 (ON CA), 149 O.A.C. 315, Family Counselling Centre of Sault Ste. Marie and District (2001), 2001 4698 (ON CA), 151 O.A.C. 35. (para. 28)

Analysis

[25] Mr. Andros submits that the proper interpretation of clauses 4a and 4b of the employment agreement is that the employer is permitted to deny severance pay required by the ESA under clause 4a, and employment benefits and non-discretionary bonus compensation during the notice period required by the ESA under clause 4b. In support of this argument, he relies, in part, on the principle set out in Garreton v. Complete Innovations Inc., 2016 ONSC 1178 (Garreton), which holds that an employment contract must be considered at the time it is executed and that if the termination provision does not comply with the notice and severance (if applicable) provisions of the ESA at the outset, then it is void and unenforceable. Potential violation is sufficient.

[26] Mr. Andros also submits that the wording of the provision alone must be considered to decide whether it contravenes the ESA, not what the employer may have done on termination or what the employer actually provided to the employee on termination. That the employee received everything he was entitled to pursuant to the ESA on his termination is not a relevant consideration. Similarly, even if the employee receives more than he or she is entitled to on termination, that result will not rebut the common law presumption of reasonable notice. This is well settled law. See, for example, Wood at para. 43, Garreton at para. 27, Wright v. The Young and Rubicam Group of Cos. (Wunderman), 2011 ONSC 4720, [2012] C.L.L.C. 210-018 (Wright) and Stevens v. Sifton Properties Ltd., 2012 ONSC 5508, 5 C.C.E.L. (4th) 27.

[27] Mr. Andros relies on the Wood decision and other jurisprudence in support of his position that the termination provision in his employment agreement attempts to reduce benefits that would be available to the him under the ESA but for the limiting language included in the termination provision.

[28] A lack of clarity, and the possibility of more than one interpretation, arise in particular with respect to clause 4a, which does not explicitly provide for severance, and clause 4b, which does not provide for the payment of employee benefits and non-discretionary bonuses.

[29] In Wood, the Court of Appeal stated at para. 21:

In summary, Deeley’s statutory obligations to give Wood at least eight weeks’ notice of termination of her employment, to continue its contributions to her benefit plans during the notice period, and to pay her severance pay of eight and one-third weeks’ salary were employment standards. Deeley was precluded from contracting out of any of these employment standards, unless it substituted a greater benefit for Wood. Contracting out of even one of the employment standards and not substituting a greater benefit would render the termination clause void and thus unenforceable, in which case Wood would be entitled to reasonable notice of termination of her employment at common law.

[30] The enforceability of the termination provision in Mr. Andros’ employment agreement is challenged by the fact that while the employer contracted out of an employment standard (i.e., notice) and provided a greater benefit, namely, the notice period in 4a, it also contracted out of the obligation to provide severance and benefits, without substituting a greater benefit.

[31] The Court of Appeal in Wood refers to the Wright case, where Low J. said the following regarding the termination provision she found to be void because it excluded benefits included in the statute:

15 The defendant argues that the employment agreement does not exclude benefits during the period of notice. It is said that the provision: "This payment will be inclusive of all notice, statutory, contractual and other entitlements to compensation and statutory severance and termination pay you have in respect of the termination of your employment and no other severance, separation pay or other payments shall be made." refers only to payments to be made directly to the plaintiff and does not contemplate the question of benefits which are implicitly to continue for the statutory notice period in accordance with the requirements of the Act as in Roden v. Toronto Humane Society, 2005 33578 (ON CA), [2005] O.J. No. 3995 (Ont. C.A.).

16 I do not accept that submission. Benefits are part of the compensation. Benefits are purchased for the employee by payments made by the employer to a benefits provider. This agreement was drawn by the employer. Even if there is an ambiguity, the ambiguity should be resolved in accordance with the principle of contra proferentum. The fact that the defendant continued benefits for the statutory notice period under the Act does not change the meaning of the language used in the agreement stipulating that the payments under the termination provisions are to be inclusive of "all ... entitlements to compensation". The agreement provides for payment of base salary only. Payment of base salary, if treated as inclusive of all entitlements to compensation, means that there will be no other compensation flowing to the employee — in short, no benefits.

17 In my view, the clause excludes benefits and is therefore in violation of s. 5(1) and s. 61(1)(b) of the Act.

[32] The defendant submits that silence with respect to severance in clause 4a and benefits in clause 4b is not fatal to the enforceability of the termination provision and relies on Roden v. Toronto Humane Society, 2005 33578 (ON CA), [2005] O.J. No.3995, (2005), 259 D.L.R. (4th) 89 (Ont. C.A.) (Roden). The defendant argues that the language used in clauses 4a and 4b of the termination provision do not expressly limit an employee’s benefits to something less than those required under the ESA. Rather, it remains silent on benefits other than notice. In Roden, at para. 55, the contract provided that the employee could be terminated “upon providing the Employee with the minimum amount of advance notice or payment in lieu thereof as required by the applicable employment standards legislation.” Gillese J.A. held that because the termination clause was simply silent about the employer’s obligation to continue to contribute to the employee’s benefit plans, the provision did not contract out of an employment standard and was thus not void. It was held, at para. 62, that the “without cause provisions do not attempt to provide something less than the legislated minimum standards; rather they expressly require the [Society] to comply with those standards.” In Roden, the clause dealt only with the Society’s obligation to give notice of termination or to pay a lump sum for the notice period. It did not exclude the Society’s obligation to continue to contribute to the employee’s benefit plans during the notice period. The common law presumption of notice was rebutted notwithstanding the fact that each employment standard of the ESA was not specifically articulated in the termination clause. A key distinction between Roden and the case at bar is that the clause in question in the Roden case made specific reference to applicable employment standards legislation. No such reference is made in clauses 4a and 4b.

[33] In the case of Nemeth v. Hatch Ltd., 2018 ONCA 7, 44 C.C.E.L. (4th) 19 (“Nemeth”), the termination clause provided:

The Company’s policy with respect to termination is that employment may be terminated by either party with notice in writing. The notice period shall amount to one week per year of service with a minimum of four weeks or the notice required by the applicable labour legislation.

[34] On appeal, the court applied the principles set out by Laskin J.A. in Wood, distinguished the finding in Wood, and held that the employer had not attempted to contract out of the ESA because “severance” was not included in the termination clause. The silence in the termination clause did not denote an intention to contract out of the ESA. The termination clause only sought to limit the amount of notice that the appellant would have received on termination. The Court of Appeal held that the provision did not violate the ESA as the employer was still obligated to continue the employee’s benefits and comply with the ESA. The clause was found to be enforceable notwithstanding that it only dealt with the obligation to give notice and did not contain all-inclusive language that plainly included benefits. However, in the case at bar, unlike in Nemeth, there is no referential incorporation of the ESA with respect to clauses 4a and 4b. This omission is problematic.

[35] In North v. Metaswitch Networks Corporation, 2017 ONCA 790, at para. 24, the Court of Appeal provided further clarification that the rule from Wood, following Machtinger, requires a court to find the whole termination clause to be void if it contracts out of even one employment standard.

[36] At best, the termination provision in Mr. Andros’ employment contract is unclear or ambiguous as to whether he would have been entitled to severance had clause 4a applied on his termination, and employee benefits had clause 4b then applied. The Machtinger and Wood cases confirm that a termination clause will only rebut the presumption of reasonable notice if its wording is clear: “Faced with a termination provision that could reasonably be interpreted in more than one way, courts should prefer the interpretation that gives the greater benefit to the employee: Ceccol v. Ontario Federation (2001), 2001 8589 (ONCA), 148 O.A.C. 315, Family Counseling Centre of Sault Ste. Marie and District (2001), 2001 4698 (ONCA), 151 O.A.C. 35 (Machtinger at para. 28). In Nemeth, it was held, at para. 12, that a “high degree of clarity is required and any ambiguity will be resolved in favour of the employee.”

[37] As noted in Wood (at para. 28), following Machtinger, an employee should know at the beginning of their employment what their entitlement will be at the end of their employment. The termination provision is not explicit. Mr. Andros would not have known, with certainty, when he signed the employment agreement whether he would be paid severance (if he were so entitled) in accordance with clause 4a, or whether he would be entitled to employee benefits in accordance with clause 4b. Neither clause 4a nor 4b makes reference to entitlements under the ESA, other than notice, and neither clause makes reference to the employment standards legislation specifically or generally.

[38] The defendant submits evidence of the employer’s intention and obligation with respect to employee benefits with reference to paragraph 9 of the employment agreement. There it is expressly stated that the defendant may in its discretion alter, amend or eliminate any employee benefit program, subject to provincial and federal laws. It submits that compliance with the ESA is implicit in this statement. However, in light of the principles articulated in Machtinger and Wood, I find this statement alone to be insufficient to rebut the presumption of reasonable notice. The question of enforceability turns on the wording of the termination clause, the purpose and language of the ESA, and the jurisprudence on interpreting employment agreements: Wood at para. 25.

Written Submissions re Bergeron v. Movati Athletic (Group) Inc., [2018 ONSC 885](https://www.canlii.org/en/on/onsc/doc/2018/2018onsc885/2018onsc885.html) (Bergeron)

[39] Following the hearing of the motion, the plaintiff brought to the attention of the court the Bergeron case, which was released on February 6, 2018. In the weeks that followed this release, each of the plaintiff and defendant provided written submissions on Bergeron. Given that a notice of appeal has been filed in respect of this decision, I have not referred to it in my reasons.

Issue 3: If the termination provision is unenforceable, to what common law notice is Mr. Andros entitled?

[40] Having determined that the termination provision in the employment agreement is unenforceable, for the reasons that follow, I find that the plaintiff is entitled to eight months’ reasonable notice under the common law. I arrive at this notice period based on the facts of the case, applying the factors set out in Bardal v. Globe & Mail Ltd., 1960 294 (ON SC), [1960] O.J. No. 149, (1960), 24 DLR (2d) 140 (Ont. HCJ) and considering other relevant jurisprudence. The Bardal factors include: i) the character of employment: ii) the length of service; iii) the age of the employee; and iv) the availability of similar employment, having regard to the experience, training and qualifications of the employee.

[41] Mr. Andros is a 45-year-old, well-educated individual, who had been continuously employed until 2017 at large corporations such as RBC CMBS Financial Group, Merrill Lynch Canada, and the defendant Colliers Macaulay Nicholls Inc. His relatively young age, employment history and experience bode well for his ability to find suitable comparable employment. The commercial real estate market in the Greater Toronto Area continues to be robust. His efforts at mitigation in evidence before this court demonstrate that he has numerous contacts in this field and he has reached out to many of them to let them know that he is looking for employment opportunities.

[42] I did not factor into Mr. Andros’ notice entitlement the two years and four months during which he worked for the defendant between 2001 and 2004 as he urged me to do. Following that period of employment, Mr. Andros resigned of his own volition to pursue other career opportunities. There is no evidence to suggest that Mr. Andros was induced to return to the defendant and when he did return he was treated as a new employee and asked to sign a fresh employment agreement. I do not find that Mr. Andros maintained continuous employment over the two periods. The court has discretion to decline to consider prior years of service in determining a reasonable notice period at common law: Leonard v. Kohler Canada Co. (c.o.b. Canac Kitchens), (2009), 183 A.C.W.S. (3d) 130, [2010] C.L.L.C. 210-007 (Ont. Sup. Ct.) at para. 17.

[43] Mr. Andros’ position as a Managing Director with supervisory responsibilities for 20 professionals over a moderate period of employment (August, 2009 to January, 2017) justifies an eight-month notice period: Bullen v. Proctor & Redfern Ltd., [1994] O.J. No. 340 (Gen. Div.).

[44] Other cases involving employees whose circumstances were analogous to those of Mr. Andros support this entitlement. In Hiscox v. A.E. LePage Real Estate Services Ltd., [1986] O.J. No. 585 (H.C.J.), the plaintiff was a 46-year-old Vice-President and General Manager of the National Appraisal Division of a large real estate firm. He was dismissed without cause. His length of service was approximately 14.5 years and he was awarded 14 months’ notice. In Novosel v. Reigl, [1993] 46 C.C.E.L. 245 (Ont. Gen. Div.), the plaintiff was a vice-president of a company that made molds. When his employment came to an end, he was 46 years old and had been employed by the company for almost 15 years; he was the second person in the organization. The court held that was entitled to 15 months’ notice. In the case of Rachert v. Teligence (Canada) Ltd., 2011 CarswellBC 328, the plaintiff, Mr. Rachert, was 46 years of age with a degree in commerce and had gained a fair amount of marketing experience when he was terminated as a junior brand manager. He had been employed by the defendant for almost 9 years. After considering the plaintiff’s age, education and marketing experience, and the fact that he had some managerial responsibilities, the court awarded him 9 months’ notice, approximately one month per year of employment. In the case of Rajput v. Menu Foods Ltd., [1984] O.J. No. 2290, (1984), 5 C.C.E.L. 22 (Ont. H.C.J.), the plaintiff, Mr. Rajput, had been a chemist for the defendant for approximately nine years. At the end of his employment with the defendant he was 44 years of age, the vice-president of quality control and production, and heavily relied on by the president of the company. The court found that Mr. Rajput had been terminated for cause; however, the court went on to assess damages and noted that it would have fixed a period of 9 months, for 9 years of service, with regard to the length of service, the degree of responsibility and the age of the plaintiff. In the case of Haviv v. Comdata Corp. (1995), 16 C.C.E.L. (2d) 55 (Ont. Gen. Div.), the plaintiff was in a managerial position and had served as an employee of the defendant for 12 ½ years. He was 43 years of age and had limited formal education. He did not make any efforts to find alternative employment in the first two months following termination or make use of the assistance offered by the defendant in this regard. The court found the reasonable notice period in this case to be 10 months, factoring in a general slowdown in the economy.

[45] I find that Mr. Andros has made reasonable efforts at mitigation. As noted, he has made contact with his colleagues and others in the industry to seek out leads for executive level positions. He has also incorporated his own company which offers appraisal services, but had not, by the date of the hearing, had any significant earnings. The standard for mitigation is one of reasonableness and not perfection: Paquette v. TeraGo Networks Inc., 2015 ONSC 4189, varied on other grounds at 2016 ONCA 618 (Paquette) at para. 46.

Issue 4: Is Mr. Andros entitled to a bonus for 2017?

[46] The “Compensation” provision at paragraph 5 of the employment agreement consists of two paragraphs. The first paragraph sets out the quantum of Mr. Andros’ salary and describes it as the “Base Salary”. The second paragraph describes performance bonuses, the relevant clauses of which are as follows:

You are eligible for the following performance bonuses in accordance with the following terms:

a. Up to and including a departmental operating profit margin of 10%, an amount will be equal to twenty (20%) percent of net income of the Toronto Appraisal Division after deductions for all expenses and charges including national, regional, and divisional overhead allocations including your Base Salary.

b. On that portion of departmental operating profit margin in excess of 10%, an additional amount [sic] five (5%) percent of net income of the Toronto Appraisal Division after deductions for all expenses and charges including national, regional, and divisional overhead allocations including your Base Salary.

c. An amount will be equal to one (1%) percent of net income of the Canadian Appraisal and Realty Tax Division after deductions for all expenses and charges including national, regional, and divisional overhead allocations.

e. You are required to be an employee in good standing with the company at the time bonuses are payable.

[47] Mr. Andros submits that the bonuses to which he was entitled, based on an arithmetical calculation, were intended to recognize his financial contributions and formed an integral part of his compensation. For the reasons that follow, I agree that Mr. Andros’ bonuses, as described in his employment agreement, were non-discretionary and an integral part of his employment income. Accordingly, his damages for wrongful dismissal include compensation for the bonus he did not receive for the 2017 fiscal year.

[48] Mr. Andros received bonuses in each of the fiscal years ending in 2009 to 2016, covering the period of his employment while he worked as a Managing Director. In 2014, 2015 and 2016, being the last three years of his employment, he earned bonuses in the amounts of $79,228.25, $127, 933.80 and $49,757.51, respectively. He seeks compensation for the bonus he did not receive in 2017 in two parts: i) a pro rata share of his expected 2017 bonus for the period he was employed (January 1, 2017 to January 19, 2017) in the amount of $4,457.98; and ii) the equivalent of his expected 2017 bonus based on a notice period of 12 months in the amount of $85,640.09. Mr. Andros calculates the value of the 2017 bonus by taking the average of the bonuses he received in each of 2014, 2015 and 2016. In making this calculation, Mr. Andros relies on the decision in Paquette, at para. 49, in which the Court of Appeal calculated Mr. Paquette’s entitlement to bonus compensation using a similar method of averaging.

[49] The defendant submits that the bonuses are discretionary because: i) they are based on corporate performance and not individual performance and therefore cannot form part of an employee’s compensation; ii) the employment agreement specifically provides that Mr. Andros is “eligible” for performance bonuses as opposed to “entitled” to them; and iii) at the time each bonus was paid to Mr. Andros the bonus statement unambiguously stated: “your bonus is awarded at the discretion of the company.”

[50] The defendant also submits that Mr. Andros is ineligible to receive any bonus payment for 2017 because his employment agreement requires that he be an employee “in good standing” at the time that bonuses are payable. Therefore, the defendant argues, Mr. Andros would not be eligible for any bonus in 2017 as the 2017 bonuses would be determined at the end of 2017 and payable in February of 2018. At that time Mr. Andros was not an employee “in good standing” as his notice period ended on March 17, 2017.

Is the bonus discretionary?

[51] In the case of Wolfman Rocktenn Container Canada, 2015 ONSC 1432, at para. 37, Faieta J. set out the factors to be considered in determining whether compensation for lost bonuses should form part of the plaintiff’s damages claim: “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.”

[52] Mr. Andros received a bonus in each of the years he was employed as a Managing Director. The amounts varied from year to year and the defendant did not exercise any discretion to decline to pay a bonus to him while he was Managing Director. They constituted a significant component of Mr. Andros’ overall compensation. The application of these factors militates in favour of a finding that Mr. Andros’ bonus was an integral part of his compensation.

[53] Consideration must also be given to the agreement between the two parties. The defendant argues that the bonus was based on corporate performance and not individual performance. However, the employment agreement was specifically tailored to Mr. Andros and refers to his role as Managing Director, to which he was promoted at the time the agreement was executed. Mr. Andros’ evidence was that in this role he was responsible for Valuation and Advisory Services throughout Greater Toronto and Ontario, excepting Ottawa, and he had oversight over 20 professionals. It is reasonable to infer that Mr. Andros and the team he supervised would be expected to contribute to the operating profit margin of his department on which bonus calculations would be based. It would also be reasonable for Mr. Andros to believe that the bonuses calculated on annual operating profit margins were intended to reward him for the financial contributions made by him and his team to the Toronto Appraisal Division.

[54] A description of the bonus eligibility criteria is included in the “Compensation” paragraph together with the description of Mr. Andros’ “Base Salary.” The use of the word “Base” in this context, suggests that enhancements to his salary are contemplated, by bonuses, for example. A description of the bonus eligibility criteria immediately follows the description of the Base Salary without so much as a new paragraph number or letter. A plain reading of the compensation section would lead an employee to fairly conclude that his compensation has two component parts, namely, a Base Salary and a bonus based on profitability, calculated in accordance with a formula. The use of the word “eligible” is modified by the phrase “in accordance with the following terms”, meaning not that the employee would be eligible for the bonus in the discretion of the employer, but, rather, that the employee would be ‘eligible’ for a bonus depending on the operating profit margin year to year.

[55] The fact that the defendant included a sentence in the bonus statement issued with the bonus payment to Mr. Andros in each year from 2009 to 2016 stating that the bonus was being paid in the discretion of the defendant is not determinative of a discretionary bonus. Such statements are only evidence of the defendant’s purported intention regarding the entitlement but not evidence of the parties’ intention when the employment agreement was made.

[56] In Paquette, the Court of Appeal made the following comment, at para. 17, regarding discretionary bonuses: “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: see Brock v. Matthews Group Limited (1988), 20 C.C.E.L. 110, at para. 44 (Ont. H.C.J.), aff’d (1991), 34 C.C.E.L. 50, at paras. 6-7 (Ont. C.A.) (appeal allowed in part on other grounds) (Brock); Bernier v. Nygard International Partnership, 2013 ONCA 780, affirming 2013 ONSC 4578, at para. 44 (Ont. S.C.), aff’d, at para. 5 (Ont. C.A.). This can be the case even where a bonus is described as “discretionary”: see Brock, at para. 44 (Ont. H.C.J.), aff’d, at paras. 6-7 (Ont. C.A.).”

[57] Accordingly, I find that the bonus was not discretionary and did form an integral part of Mr. Andros’ income.

The effect of the requirement for Mr. Andros to be “in good standing”

[58] The defendant submits that the employment agreement specifically provides that in order to be eligible for a bonus, Mr. Andros must be an “employee in good standing with the company at the time bonuses are payable”. Mr. Andros was terminated on January 19, 2017 and his notice period came to an end on March 17, 2017. The 2017 bonuses were calculated at the end of 2017 and paid in February of 2018 when Mr. Andros was no longer an employee in good standing. The defendant further submits that this term was open to negotiation at the time the agreement was made and that, while Mr. Andros made several handwritten changes to the agreement to his advantage before executing it, he made no change to this provision.

[59] The requirement that the employee be “in good standing” is similar to the requirement that the employee be “actively employed” at the time bonuses are paid. The latter expression has been judicially considered and the analysis of such a pre-requisite, as set out in the Court of Appeal decision in Paquette, is instructive. Mr. Paquette was awarded 17 months’ notice but was denied compensation for lost bonuses on the basis that his bonus plan required him to be “actively employed” at the time his bonus was paid. The lower court found that while he might be “notionally” an active employee during the reasonable notice period, he would not be an “active employee” and therefore would not qualify for a bonus. Mr. Paquette appealed that decision.

[60] At para 16, the Court of Appeal held that: “The 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: Sylvester v. British Columbia, 1997 353 (SCC), [1997] 2 S.C.R. 315, at para. 1. 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: Davidson v. Allelix Inc. (1991), 1991 7091 (ON CA), 7 O.R. (3d) 581 (C.A.), at para. 21.”

[61] The Court of Appeal allowed the appeal and, at paras. 30 and 31, van Rensburg, J.A. set out the steps to be considered in determining bonus entitlement. First, the employee’s common law rights must be determined. If, as in the case of Mr. Paquette, the bonus was an integral part of the terminated employee’s compensation, then the employee would be entitled to receive the bonus payment on the date of the bonus payment if he had continued to be employed during the notice period. Second, it must be determined whether there is something in the bonus plan that would remove the employee’s common law entitlement. The question is not whether the contract is ambiguous, but whether the wording of the plan unambiguously alters or removes the employee’s rights.

[62] In applying these principles, the Court of Appeal referred to its earlier decision in Taggart v. Canada Life Insurance Co., (2006), 50 C.C.P.B. 163 (Ont. C.A.), which dealt with pension benefits, and found that in considering the meaning of “active service”, the claim is not for the benefits themselves, but for the common law contract damages as compensation for the benefit the employee would have earned had the employer not breached the contract of employment. The employee had the contractual right to work and be paid throughout the entire notice period. Once the compensation for that period is determined, then the terms of the agreement can be considered to determine whether they unequivocally and unambiguously provide an exception to the rule. Is there something in the contract itself that takes away or limits the common law right? In Taggart, the requirement for “active service” did not. Similar conclusions were reached by the Court of Appeal in Schumacher v. Toronto-Dominion Bank (1997), 1997 12329 (ON SC), 147 D.L.R. (4th) 128 (Ont. Gen. Div.), aff’d on other grounds (1999), 1999 3727 (ON CA), 173 D.L.R. (4th) 577 (Ont. C.A.), leave to appeal refused, [1999] S.C.C.A. No 369, Bernier v. Nygard International Partnership, 2013 ONCA 780, affirming 2013 ONSC 4578, and Lin v. Ontario Teachers’ Pension Plan, 2016 ONCA 619 and by this court in Bain v. UBS, 2016 ONSC 5362.

[63] In Paquette, the Court of Appeal concluded, at para. 47, that: “A term that requires active employment when the bonus is paid, without more, is not sufficient to deprive an employee terminated without reasonable notice of a claim for compensation for the bonus he or she would have received during the notice period, as part of his or her wrongful dismissal damages.”

[64] In the case at bar, there is no term of the employment agreement that expressly and unambiguously sets aside Mr. Andros’ right to damages through the common law notice period. The requirement that he be an employee in “good standing” at the time of the payment of the 2017 bonus is insufficient for this purpose. Accordingly, I find that Mr. Andros is entitled to compensation for the bonus he would have earned for the period during 2017 that he did work (January 1, 2017 to January 19, 2017) and for the notice period that followed, which I have determined to be eight months.

Issue 5: Is Mr. Andros entitled to compensation for loss of employment benefits?

[65] Mr. Andros seeks compensation for the loss of benefits for the notice period beyond the 8 weeks’ notice period following his termination during which he continued to be entitled to benefits. The onus is on Mr. Andros to prove his losses as a result of the termination of his employment. He has not provided any evidence of actual loss incurred by him as a consequence of his loss of benefits. There is, for example, no evidence in the record as to whether Mr. Andros replaced the benefits that he would have had during the longer notice period. Damages for wrongful dismissal are aimed at putting the employee who was wrongfully terminated in the same position he would have been had he been had the employer provided reasonable notice. Based on the evidence before me, I am not able to calculate the damages that Mr. Andros allegedly suffered as a consequence of the loss of benefits.

Disposition

[66] The plaintiff is entitled to damages for his wrongful dismissal as follows:

His base salary at the time of termination for the balance of the notice period (being the difference between eight months’ notice and the twelve weeks’ notice for which he has already been compensated).
Compensation for the bonus he would have received for the period from January 1, 2017 to January 19, 2017 and the eight months that followed, had he been an employee in good standing in February of 2018 when such bonus was paid. Such compensation shall be calculated on a 2017 bonus amount equal to the average of the bonuses he received for each of 2014, 2015 and 2016.

Costs

[67] The plaintiff is entitled to his costs. If the parties cannot agree on costs, they may make written submissions as to costs. I would ask the plaintiff to make his submissions, including a costs outline and written submissions that do not exceed three (3) pages within 21 days of this judgment. The defendant may make any responding submissions, which should not exceed three (3) pages within one (1) week thereafter.

Dietrich J.

Released: May 9, 2018

COURT FILE NO.: CV-17-572463

DATE: 20180509

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

DEMETRI ANDROS

Plaintiff/Moving Party

– and –

COLLIERS MACAULAY NICOLLS INC.

Defendant/Responding Party

REASONS FOR DECISION

Dietrich J.

Released: May 9, 2018

Andros v. Colliers Macaulay Nicolls Inc., 2018 ONSC 1256

Case Summary

Overview

Issues

Issue 1: Is this case an appropriate case for summary judgment?

Issue 2: Is the termination provision in Mr. Andros’ employment agreement enforceable?

The Law and General Principles

Analysis

Written Submissions re Bergeron v. Movati Athletic (Group) Inc., [2018 ONSC 885](https://www.canlii.org/en/on/onsc/doc/2018/2018onsc885/2018onsc885.html) (Bergeron)

Issue 3: If the termination provision is unenforceable, to what common law notice is Mr. Andros entitled?

Issue 4: Is Mr. Andros entitled to a bonus for 2017?

Is the bonus discretionary?

The effect of the requirement for Mr. Andros to be “in good standing”

Issue 5: Is Mr. Andros entitled to compensation for loss of employment benefits?

Disposition

Costs

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Issues

Statutory Provisions 5

Legal Tests 4

Legislation 2