Unpaid Bonus Limitations – some thoughts…

Our client had been employed over a few years by a successful family operated business.  Notwithstanding that his compensation consisted of a base salary and large potential bonus, he did not receive bonuses on the level that he anticipated.

Our client did not receive anything in writing from the employer that would allow our client to determine the entitlement to a bonus or how bonuses were being calculated by the employer during his employment or after.

Our client was ultimately terminated without cause.

On bringing claim for the unpaid bonuses and wrongful dismissal, the employer brought a motion seeking to have a portion of our client’s claim for unpaid bonuses dismissed as falling outside the two (2) year limitation period.

The employer’s position was that because the claim was brought more than two (2) years after the date on which the bonus payments ought to have been made, the claim was out of time.

While we brought forward a number of factual issues that we believed made the employer’s position untenable (including the lack of clarity as to when the bonuses ought to have been paid, fraudulent concealment etc.), in our analysis of the case we were immediately struck by how these same facts would have supported a claim for constructive dismissal had the employer not ultimately terminated our client.

Any lawyer consulted with an unpaid bonus situation akin to this one (prior to the ultimate termination) would have likely advised the client of the ins and outs of the law of constructive dismissal, with the usual warning that such claims are very difficult to establish.

However, in examining the caselaw on unpaid bonuses it was interesting that almost all of the jurisprudence were in the context of constructive dismissal claims [Ilkay v. Acadia Motors Ltd., (2006), 276 D.L.R. (4^th) 762 (N.B.C.A), Piron v. Dominion Masonry Ltd., 2013 BCCA 184 (CanLII), Landry v. 1292024 Ontario Inc., (2006) O.J. No. 1832 (Ont.S.C.J.].

Further, we understood that the limitation period for a constructive dismissal claim runs, not from the independent act(s) of repudiation by the employer, but rather on acceptance of the repudiation by the employee and their departure from the relationship

In light of this, it became immediately apparent that the employer’s intent to apply a two (2) year limitation period from the point that each individual bonus payment was not made would be manifestly unfair if a different result would be available to our client if the claim was one of constructive dismissal (ie. without an overt termination by the employer).

Using this approach we successfully persuaded the motions judge, and ultimately the Divisional Court on appeal, that consistency and fairness required that our client’s claim for bonuses unpaid potentially more than two (2) years prior to the claim should not be found to be outside the limitation period.

While it may very well be that this approach is ultimately not favoured at trial, in the context of a summary judgment motion and motion seeking leave to appeal, we managed to enlist support for what we believed to be the proper approach on these claims.

D. Jared Brown – Lead Counsel

Owed Unpaid Bonuses? Its Not Too Late For A Lawsuit

Maybe you didn’t know you were entitled to a bonus. Maybe you didn’t want to have that potentially career killing conversation with your employer. These are just two of the reasons why you may not have pursued unpaid bonus amounts owing to you.

But how long is too long to wait? The Limitations Act, 2002 generally requires that you sue within two (2) years of discovering a claim. Does this mean you can’t recover against a current or former employer for bonuses you should have received more than two (2) years ago? Not necessarily.

In a recent motion before the Ontario Superior Court of Justice (leave to appeal denied by the Divisional Court), Brown Litigation persuaded the court not to dismiss our client’s claims for bonuses payable more than two (2) years before the start of the lawsuit. In agreeing to postpone the determination of the limitation period to trial, the court found the limitation period had not clearly expired and relied on the following cases:

Saltsov v. Rolnick[i] – The Limitation Period May Not Commence Until Resignation or Termination

In Saltsov, the court acknowledged that employees could not reasonably be expected to sue their employers while still employed with them, as doing so would negatively impact their employment.

The motion judge in our client’s case applied the law in Saltsov and stated that “it would have been neither workable nor fair to expect [our client] to have jeopardized his job by suing for bonus while still actively employed at [his company].” According to Saltsov, the limitation period for your unpaid bonus claims may be deemed to have commenced not when the bonuses were payable, but rather on the date of your resignation or termination.

Novak v. Bond[ii] – The Court Will Take Individual Circumstances into Account

The Supreme Court of Canada confirmed in Novak that individual circumstances can be considered in determining when a plaintiff should have known to sue. The court stated that, “in some cases, the plaintiff’s own circumstances and interests may be so compelling that it cannot be reasonably said that he or she could bring an action within the prescribed time period,” also noting that “people ought to be encouraged to take steps short of litigation to deal with their problems,” and “they should not be compelled to sue when to do so runs counter to a vital interest.”

The motion judge in our client’s case considered Novak in light of our client’s position as an employee of the defendant, and stated that “an employee is in a vulnerable situation and entitled to a subjective appreciation of his circumstances in connection with understanding his realistic and reasonable alternatives in responding to conduct and decisions affecting him or her.” Novak mirrors section 5(1)(b) of our Limitations Act, 2002, and the court accepted that our client may not have personally discovered that a claim was necessary to collect the bonuses.

Halloran v. Sargeant[iii] – Fraudulent Concealment Precludes a Limitation Defence

It is well established at law that defendants cannot rely on the limitation defence where they have engaged in fraudulent concealment. In Halloran, the court ruled that an employee’s claim for termination pay was not out of time due to fraudulent concealment on the part of his employer. The employer failed to advise the employee of certain key facts. It was stated that acts amounting to fraudulent concealment may be as minimal as “a mere failure to inform.”

The motion judge in our client’s case cited Halloran in concluding that our client’s employer had engaged in fraudulent concealment by failing to provide sales figures that our client needed to determine and calculate his potential bonus entitlement. It follows from this decision that if the information necessary to determine your bonus entitlement was not made available to you by your employer, the limitation period may not apply to your unpaid bonus amounts.

Final Thoughts

When it comes to a claim for unpaid bonuses, while you should always be encouraged to bring forward known claims in a timely manner, there are certain exceptions to the usual two (2) year limitation period. Whatever your situation may be, don’t assume it’s too late to sue for the bonus amounts owing to you, consult legal counsel.

Lauren Findlay, Associate, and D. Jared Brown – Lead Counsel

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[i] Saltsov v. Rolnick, 2010 ONSC 914.

[ii] Novak v. Bond [1999] 1 S.C.R. 808 (S.C.C.).

[iii] Halloran v. Sargeant (2001), 142 O.A.C., 286, affirmed by the Ontario Court of Appeal (2002), 163 O.A.C. 138.