Ted's Blog

Guidance For Employee's Entitlements To Bonus And Stock Options Upon Termination

From Mackenzie Irwin of MacDonald & Associates:

Employees are entitled to claim damages for loss of alternate compensation methods, particularly where that benefit is an integral part of their compensation, unless there is a contractual term limiting that employee's common law rights upon termination. Where a plan contains terms that limit or place conditions on the payment of a bonus, the question the Courts must determine is whether the wording of the bonus plan was sufficient to limit the employee's common law right to damages for lost compensation. . . . In that regard, the plan language must be clear and unequivocal, and it must be understood by the employee that their right to entitlements under the plan will not persist through the reasonable notice period.

Employers are increasingly turning to hybrid compensation structures to create incentive based compensation for their employees. Common examples include bonus incentives, employee stock options, or restricted share units. It is important for both employer and employee review their plan with an experienced employment lawyer to ensure it is understood and enforceable.