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Landmark employment law ruling made by Canada’s Supreme Court

Employers in British Columbia and other provinces in Canada might be interested in a recent Supreme Court ruling in connection with the rights of dismissed employees to bonuses under employment law. The ruling followed a case that involved an employee who claimed benefits and bonus pay after he was forced to resign.

The case

The plaintiff employee was an experienced chemist employed by a manufacturer of nutritional supplements from 1997 through 2011. As part of the company’s management, the employee was a participant in a long-term plan, making him eligible for an incentive bonus pay-out in the event of the company going up for sale. The former employee claimed to have resigned in 2011 due to mistreatment by managers, alleging a hostile work environment forced him to leave. This happened more than a year after the sale of the company to a competitor.

The ruling

According to the Supreme Court’s ruling, the new owners of the business constructively terminated the chemist’s employment without giving him the 15-month notice period to which he was entitled. The employer assumed that the man was not owed the bonus because he was no longer an employee. The court determined that, if the employee had received the reasonable notice period, he would have been entitled to the benefits and bonuses during the notice period as a part of his employment contract.

Lessons for employers

Employers in Canada are advised to frequently review termination clauses to ensure the language of hiring letters and employment agreements are clear and correct. Similarly, compensation and equity plans, stock options and bonuses must reflect the law. Employers must also bring the impact of the termination clauses to the attention of employees. Furthermore, British Columbia employees should be encouraged to seek independent legal counsel to assess a clause’s compatibility under the applicable employment standards.

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