Employers seeking to avoid paying bonuses to terminated employees during the notice period must ensure their contracts contain explicit and unambiguous language. The rulings in Paquette v TeraGo Networks Inc, 2018 ONCA 618 (“Paquette”) and Matthews v Ocean Nutrition Canada Ltd, 2020 SCC 26 (“Mathews”) clarify that the entitlement to bonuses during the notice period hinges on whether the bonus is an integral part of the employee’s compensation and whether the contract explicitly restricts this entitlement. The courts will scrutinize any restrictive clauses and require that they clearly cover the circumstances that arise upon termination. These decisions underscore the importance of precise contractual drafting and recognizing employees’ common law rights to compensation during the notice period.
Employment Standards Act, 2000 (“ESA”): Defining “Wages” and Payment Obligations
Central to the discussion is the ESA’s definition of “wages,” which encompasses various forms of employee compensation. Nevertheless, bonuses, notably those dependent on the discretion of the employer and unrelated to hours, production, or efficiency, are explicitly excluded from the ESA’s definition of wages.
Section 11(5) of the ESA sets forth stringent timelines for wage payment post-termination, mandating that employers disburse any entitled wages within a specified timeframe, typically within seven days after termination or the next scheduled payday, whichever is later. Complementing this provision, Section 13(1) prohibits employers from withholding or deducting wages without proper authorization.
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