In the recent Ontario Superior Court of Justice decision, Kielb v National Money Mart Company[1], an employee was denied a bonus payment upon termination based on the provisions of the employment contract.  In the decision, Justice Akhtar confirmed that “the harshness of [a] provision does not make it invalid if both parties have agreed to it”.

The plaintiff, a lawyer named Jonathan Kielb, commenced employment with National Money Mart Company (“Money Mart”) in 2008. The employment contract that Mr. Kielb signed included a termination clause, as well as the following provision in respect of his bonus (the “Limitation Clause”):

Any bonus which may be paid is entirely at the discretion of the Company, does not accrue, and is only earned and payable on the date that it is provided to you by the Company. For example, if your employment is terminated, with or without cause, on the day before the day on which a bonus would otherwise have been paid, you hereby waive any claim to that bonus or any portion thereof. In the event that your employment is terminated without cause, and a bonus would ordinarily be paid after the expiration of the statutory notice period, you hereby waive any claim to that bonus or any portion thereof.

On April 21, 2010, Money Mart terminated Mr. Kielb’s employment on a without cause basis, and offered him 8 weeks of pay in lieu of notice (inclusive of the 2 weeks of statutory termination pay), in compliance with the termination clause of his employment contract.

With respect to the bonus, since Mr. Kielb was not an employee on the September 17, 2010 payment date, and the payment date was not within Mr. Kielb’s statutory notice period, Mr. Kielb did not receive any bonus payment in respect of the 2010 fiscal year. [2]

Mr. Kielb’s position was that the bonus was an integral part of his compensation, and therefore should be payable up to the last day worked and through the contractual notice period, despite the language in the Limitation Clause.  Mr. Kielb argued that because the bonus was an integral part of his compensation the Limitation Clause was unenforceable, because it was: contrary to public policy, inconsistently applied, and/or ambiguous, contradictory and illegal.

In considering Mr. Kielb’s arguments, Justice Akhtar came to the following conclusions:

  • Given Money Mart’s representations to Mr. Kielb at the time of hiring, the bonus did form an integral part of his compensation package. However, the Limitation Clause was not contrary to public policy and as such, it operated to restrict Mr. Kielb’s right to the bonus payment. Mr. Kielb was dismissed in April and since the bonus payment date did not fall within the 2-week statutory notice period, Mr. Kielb was not entitled to any bonus payment.
  • Additionally, while Money Mart’s treatment of Mr. Kielb’s bonus entitlement may have differed from its treatment of other terminated employees’ entitlements, Mr. Kielb was nevertheless ineligible for the bonus payment because of the terms of the Limitation Clause.
  • Lastly, the Limitation Clause was unambiguous. The language was clear that Mr. Kielb was only entitled to a bonus if the payment date fell within the statutory notice period, and since the payment date was well outside of this period, Money Mart was not required to make a bonus payment.

This case is a good example of how an employer can use clear and unambiguous language in an employment contract to restrict its liabilities upon termination, specifically with respect to bonus payments.  While Money Mart’s verbal representations to Mr. Kielb about its bonus program caused the bonus payment to be an integral part of his compensation package, Mr. Kielb accepted the position with full knowledge that on termination his entitlements would be restricted by the Limitation Clause, and was consequently bound by its terms.