“Draconian” Bonus Language Upheld

A decision from the Ontario Court of Justice illustrates the importance of using clear, concise language for terms when drafting employment agreements.

In Kielb v. National Money Mart Co., the plaintiff was hired as Vice President and Division General Counsel. Initially, the plaintiff expressed concerns about his salary. However, his employment contract contained generous bonus provisions which could be up to 45-50% of his base salary, provided he met the limitation clause requiring him to be employed at the time the bonus was paid out. As a result, he accepted the offer.

The defendant later terminated the plaintiff without cause and offered him the obligatory two weeks statutory termination pay plus six week’s salary pursuant to his contract, contingent upon the plaintiff signing a full and final release. The bonus was not included as the plaintiff was terminated prior to the bonus payout date. The plaintiff refused to sign the release, claiming, among other things, that he was entitled to $86,239 for his bonus.

The Court concluded that the plaintiff was not entitled to the bonus. The language of the limitation clause made it clear that the plaintiff would not be entitled to the bonus if he was not employed at the time of the bonus payout date. The fact that another dismissed employee received the bonus did not result in the limitation clause being unenforceable as there were significant differences between the two contracts. Further, the plaintiff had notice of the clause and was given an opportunity to obtain legal advice before he signed the agreement.

Dismissing the plaintiff’s claim, the Court concluded that while the termination payments may have been somewhat draconian in their application, the terms were clear and the plaintiff had full knowledge of them.

A copy of this decision can be found here.

Questions relating to the content of the article may be directed to Donald Jordan, Q.C.