Aug 1, 2019

Ontario Court of Appeal provides fresh guidance on capped notice periods and post-termination bonus entitlements

Dawe v. The Equitable Life Insurance Company of Canada, 2019 ONCA 512 (CanLII)

On June 19, 2019, the Ontario Court of Appeal released its decision in Dawe v. Equitable Life Insurance ‎Company, 2019 ONCA 512 (“Dawe”), finding that:‎

  • only “exceptional circumstances” warrant a reasonable notice period in excess of 24 months;‎
  • employers can stipulate “active employment” as a precondition to the payment of bonus ‎entitlements, provided that the precondition is clearly and carefully drafted; and ‎
  • ‎employers must draw an employee’s attention to any precondition that purports to restrict the ‎employee’s post-termination bonus entitlements, especially in circumstances where the ‎precondition is added to an existing bonus plan.‎

In Dawe, the Ontario Court of Appeal found that although an “actively employed” precondition in a bonus ‎plan clearly restricted an employee’s post-termination bonus entitlements, the employer could not rely on ‎the precondition because the employee did not have knowledge of the precondition. In particular, although (a) the employee was provided with a copy of the applicable bonus plan, and (b) the applicable bonus plan was accessible on the employer’s intranet, the employee did not have knowledge of the precondition because the employer failed to specifically draw the employee’s attention to the precondition. ‎

With fresh guidance from the Ontario Court of Appeal on the level of precision and detail needed to draft ‎an “actively employed” precondition that clearly restricts post-termination bonus entitlements, employers ‎should consider revising their bonus plans and policies accordingly. If employers have not already done ‎so, employers should also specifically draw their employees’ attention to any such “actively employed” preconditions.