Bonus Pay in Severance Packages
When an employee faces a wrongful dismissal, they often engage the services of an experienced Toronto employment lawyer. Among other benefits, an employment lawyer will help an employee review a severance package, negotiate a severance package, or commence a wrongful dismissal claim (or constructive dismissal claim, depending on the specific circumstances). In any of these cases, an employee will seek their full compensation entitlements as a result of their termination of employment, which includes base salary, health benefits, pension benefits, stock options, and incentive or variable compensation (especially bonus pay). But are employees always entitled to receive their bonus pay in a wrongful dismissal case or when negotiating a severance package under Ontario employment law?
Bonus Pay and Wrongful Dismissal
Many employees receive bonuses as part of their compensation package, which is over and above their regular base salary or wages. These bonuses can be performance-based, commission-related, or simply a yearly payout.
Oftentimes, an employer considers bonus pay to be “discretionary” (at its own choosing, and not guaranteed payment to an employee), while at other times it is considered non-discretionary (guaranteed to the employee and follows a set formula based on meeting individual performance and company goals).
The question then arises: what happens to your bonus entitlement if you are wrongfully dismissed from your employment? This answer often depends on a few important factors, such as:
– did the employee waive (forfeit) any bonus entitlement as part of an employment contract or bonus plan (or similar documentation)?
– is there a valid or enforceable forfeiture clause in an employment contract or bonus plan impacting the employee’s bonus pay entitlement upon termination of employment?
– did the employer clearly communicate the forfeiture clause in the employment contract or bonus plan to the employee during their employment (and before the termination of employment)?
– would the employer have awarded the employee with bonus pay had their employment continued?
– did the employee historically receive bonus pay during their employment?
The Importance of Bonus Plan Documentation
The specific terms of your employment contract or bonus plan can significantly impact your claim. Among other things, you should for details regarding:
- Eligibility criteria: Who qualifies for the bonus?
- Calculation method: How is the bonus amount determined?
- Payout schedule: When are bonuses typically paid?
Severance Packages in Ontario
When faced with a wrongful dismissal, negotiating a severance package is crucial. A severance package is a lump sum payment from your employer to compensate for lost wages and benefits during your job search.
Factors Affecting Severance Package Value
In negotiating a severance package, employment lawyers consider various factors that influence the value of a severance package, including:
- Reasonable notice period: This is a very important benchmark for calculating severance pay.
- Your salary and benefits: Higher salaries and benefits translate to a larger severance package.
- Your age and position: Older or more senior employees may receive a higher severance.
- The strength of your wrongful dismissal case: A strong case strengthens your negotiation position.
Negotiating Your Severance Package
Negotiating a severance package can be stressful, but with preparation, you can increase your chances of a fair outcome.Here are some tips:
- Know Your Rights: Educate yourself on wrongful dismissal laws and severance package standards in Ontario.
- Gather Documentation: Collect employment contracts, pay stubs, performance reviews, and any evidence supporting your wrongful dismissal claim.
- Seek Professional Advice: Consider consulting with an employment lawyer specializing in wrongful dismissal. They can advise you on your legal options and guide you through the negotiation process.
- Start High: Present a severance package offer that exceeds your initial expectations.
- Be Prepared to Compromise: Negotiation is a two-way street. Prepare to find a middle ground that benefits both sides.
- Do Not Sign Severance Package Under Pressure: Take your time to review the severance package offer. It is important for you to not feel pressured to sign immediately and get a consultation with an Ontario employment lawyer before signing the severance package.
Non-Discretionary Bonuses in Wrongful Dismissal Cases and Severance Package Negotiations
If your bonus is non-discretionary, and you’re wrongfully dismissed, you could be entitled to compensation for:
- Pro-rated Bonus: This covers the portion of the bonus you earned before your termination.
- Bonus During Notice Period: You may be entitled to the bonus you would have received had you been given reasonable notice.
For example, if you typically receive a yearly bonus in December, but are wrongfully terminated in July, you might be entitled to:
- The portion of the bonus you earned for your work from January to July (pro-rated bonus).
- The estimated bonus you likely would have received for the remaining notice period (August to December).
Call an Ontario Wrongful Dismissal Claim Lawyer
If you are an employee in Ontario who believes you have a wrongful dismissal claim (or a constructive dismissal claim), please contact our Toronto wrongful dismissal claim lawyer to arrange a confidential consultation to review and better understand your employee rights and options, including pursuing a human rights claim while you negotiate your severance package. We are here to protect your employee rights and best interests. With our detailed employment contract review with an Ontario employment lawyer, you can invest in your future by protecting your rights if you are ever terminated from your employment, including to ensure you receive a fair severance package, deal with a wrongful dismissal claims or constructive dismissal claims.