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In-house counsel terminated before six-figure bonus payout loses on appeal

|Written By Mallory Hendry
In-house counsel terminated before six-figure bonus payout loses on appeal
Susan Crawford says a strict reading of the court’s decision suggests it’s really whether the language is clear and unambiguous and whether it violates the Employment Standards Act and not really the negotiating power.

A recent Ontario Court of Appeal decision is a good one for employers when it comes to drafting employment agreement language, says a lawyer involved in the case.

“Given some of the decisions that have come out of the Court of Appeal which have required pretty high standards for employers in terms of drafting employment agreement language, it was encouraging to see the court unanimously uphold the language that the parties negotiated in this case,” says Susan Crawford, of Crawford Chondon & Partners LLP who represented Money Mart in Kielb v. National Money Mart Company.

“It was a great decision for the client and I think for employers generally.”

The case, covered by Law Times in 2015, stemmed from the termination of Jonathan Kielb in April 2010. Kielb, a lawyer, was hired by National Money Mart Co. but the company terminated him without cause two months before the end of the company’s fiscal year, and a few days before he qualified for a six-figure bonus.

The language of the employment agreement in effect limited his bonus entitlement through a limitation clause that “provided that the bonus did not accrue and was only earned and payable on the pay-out date.”

As he wasn’t employed by the company on the September payout date, Kielb did not receive the expected bonus of just over $100,000, which represented 60 per cent of his annual $170,000 salary. He did, however, receive two weeks’ pay in accordance with the Employment Standards Act, according to the facts of the case.

Kielb argued he only took the job because the manager assured him of the bonus, and that the limitation clause was unenforceable due to its ambiguous and contradictory nature, and because it also contravened the ESA.

In the June 12, 2015 decision, Superior Court Justice Suhail Akhtar agreed the bonus payment was an integral part of Kielb’s compensation but concluded the limitation clause wasn’t contrary to the public interest or ambiguous and was, therefore, enforceable.

Kielb appealed, and it was dismissed on May 5 in a unanimous decision. While not addressed in the decision, she thinks it helped her client’s case that Kielb was a lawyer himself and therefore there was no imbalance of power when he signed the employment agreement.

“A strict reading of the court’s decision would suggest that it’s really whether the language is clear and unambiguous and whether it violates the Employment Standards Act and not really the negotiating power — that’s certainly the focus of their decision,” Crawford says. “But in the back of their minds it probably helped us that he was a lawyer who had a lot of experience.”

Crawford says some issues were raised for the first time on appeal, and “in terms of parties litigating that was helpful to have the court take time to talk about those new grounds of appeal as well.”

The decision states “the evidentiary record is lacking and it would be prejudicial to the respondent to permit the appellant to advance this argument at this late stage” when addressing the last ground of appeal — that the trial judge erred in finding the termination clause enforceable and therefore Kielb is “entitled to his common law notice period, which he calculates as six months.”

Costs of $15,000 were awarded in the appeal decision. The amount “wasn’t quite the amount we asked for” but it took into account the fact they had dropped their cross-appeal that morning, Crawford says.

“We had a strong case on appeal and from our clients’ perspective that’s what we really wanted to focus on,” she says, noting that including the trial decision, Kielb is now looking at $50 000 in costs.


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