In 2020, the Supreme Court of Canada provided guidance on the language employers should use in bonus and other similar plans to limit employee entitlements to pay in lieu of bonuses and incentive compensation after their employment has ended. The Court stated that the contractual language “must be absolutely clear and unambiguous” and it is insufficient to simply state that the employee must be “actively” employed or providing services in order to receive a bonus. This decision demonstrated that the language in bonus plans and other similar plans will be held to a high standard when assessed by the Court. Recently, the Ontario Superior Court provided further guidance on the enforcement of bonus plans.

In Boyer v Callidus, 2024 ONSC 20, the employee joined Callidus in 2009 as a Vice-President. Callidus introduced a Deferred Bonus Policy as well as a stock option plan in 2014. In 2016, the employee retired from Callidus. The employee subsequently brought a lawsuit for unpaid and deferred bonus amounts, lost stock options and unused vacation.

Callidus defended the lawsuit and argued that its Deferred Bonus Policy included language that stated, an employee “must be employed by [Callidus] to receive his or her principal amount of Deferred Bonus or any interest thereon.” The employee argued that he was entitled to stock options that should have vested upon his retirement, as this was a fundamental part of his compensation. Callidus also argued that their Amended and Restated Incentive Plan (the “Incentive Plan”) stated that the expiry date for any unvested portion of stock options was the date of termination of employment. Further, Callidus explained that it had a “use it or lose it policy” with respect to unused vacation.

The Court found that Callidus did not provide the employee with the Deferred Bonus Policy, which meant that he was unaware that he would not be paid for earned and deferred bonuses after his employment ended. Callidus was also aware of the employee’s intention to retire but did not advise the employee of the terms of the Deferred Bonus Policy. As a result of this, the Court found that Callidus could not use the language in the Deferred Bonus Policy to preclude a deferred bonus payout when the employee retired. Further, the trial judge stated, “If this was a condition of Mr. Boyer’s employment, it was incumbent on Callidus to inform him of such a condition and obtain his agreement.”

The Court determined that Callidus also failed to provide the employee with a copy of the Incentive Plan. Interestingly, the Court found that the Callidus’ Chief Operating Officer advised the employee that his retirement fell under the exception in the Incentive Plan, such as death, where the stock options would continue to vest. Similar to the Deferred Bonus Policy, Callidus could not rely on any limiting language in the Incentive Plan.

The Court also found in favour of the employee regarding the unused vacation. Callidus, again, did not advise the employee of the “use it or lose it” policy and therefore could not rely on it. Callidus was ordered to pay the employee $1,831,933.88 in total damages.

Takeaway

This case is a reminder to employers that all Company plans and policies should be provided to employees and their agreement should be documented in a formal contract. These plans and policies should also be clear and unambiguous to ensure the best chance at enforceability. If you require assistance with bonus or incentive plan language, or any related employment matters, the lawyers at Heeney Vokey LLP are happy to help.