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2018-12-03T19:23:43+00:00 December 4, 2018|Damages, Employment Law|

Bonus Calculations in Wrongful dismissal Cases

Interesting and important case from the Ontario Court of Appeal in Evans v. Paradigm Capital Inc. 2018 ONCA 952 (CanLII).

The appellant (Evans) was constructively dismissed on January 16, 2009 when the employer revised her position and, among other things, reduced her responsibility.  The trial judge determined that Evans was entitled to 11 months reasonable notice ($240,313.79) which included base salary, performance bonus, and a shareholders’ bonus.  After crediting the respondent for money it had already paid out and accounting for the appellant’s recovery of her mitigation expenses, the net amount owing was $137,055.54.  Evans appealed the trial judge’s calculation of the performance bonus based on her last percentage allotment and the employer’s actual financial results in 2009, rather than a three-year historic average of her performance bonus.

There were other grounds of appeal and cross-appeal, but I want to focus on the performance bonus.  The Court of Appeal, in dismissing this aspect of the appeal, agreed with the trial judge’s method of calculation of the performance bonus and stated as follows:

Although it may sometimes be appropriate to calculate damages based on an average of earnings, there is no requirement to do so: Clark v BMO Nesbitt Burns Inc., 2008 ONCA 663 (CanLII), 300 D.L.R. (4th) 313, at para. 35.  In general, damages for wrongful dismissal reflect the amount the plaintiff would have earned had her employment continued in accordance with the contract. The trial judge was not persuaded that there was any reason to depart from this approach and there is no reason to interfere with his decision, absent a palpable and overriding error.

Although historical averages are used, in some cases, to predict the likely bonus loss (if any) during the notional period of reasonable notice, historical averages are not always a good predictor of the future and there might be better and more accurate information available to calculate the bonus.