An employee earns a substantial amount of money each year in variable bonuses. Are they entitled to that bonus as part of their severance? If so, how do you assess what they should get when the amounts varied greatly from year to year?
The Ontario Superior Court of Justice recently issued an interesting decision addressing this issue and providing guidance. In Warren v. Canaccord Genuity Corp.1, the Court found that the employee was entitled to damages for reasonable notice at common law, including bonuses. In this blog we discuss how the Court calculated the employee’s bonus.
Key Facts
Warren was 52 years old at the time of dismissal; he was with Canaccord for 18 years and held the position of Managing Director when he was dismissed without cause on September 6, 2019.
The Court found that Warren was entitled to a 21month notice period, including bonus payments.
The way the Court calculated Warren’s bonus was an important factor because his annual bonus payments fluctuated substantially from year to year, so not factoring that into the calculation would potentially yield an incorrect prediction for what he would have earned in bonus during his notice period. Hence the key issue was the appropriate approach to calculating Warren’s bonus.
Bonuses and Notice Periods
When an employee is entitled to reasonable notice at common law, bonuses are payable by default. Courts apply a two-part test to determine whether a bonus is in fact payable during the notice period:
- Is the bonus in question part of the employee’s compensation package?
- If so, the bonus is payable unless there is a contractual or other term that effectively displaces the employee’s entitlement to the bonus during their notice period.
This is what Warren’s employment agreement provided with respect to bonus payment eligibility:
“You must be employed at the time of the payment to be eligible for this discretionary bonus.”
That wording may seem like sufficiently clear language to displace the presumption that the bonus is payable, but as Canaccord came to realize, it was not. Courts have confirmed that for these purposes, the period of employment includes the applicable notice period, so the common law entitlement was not displaced. Accordingly, the Court noted that Canaccord “appropriately abandoned” their position that Warren was not eligible for a bonus, which was their argument before the matter went to trial.
Calculating Warren’s Bonus Payments
Since Warren was entitled to a bonus during his 21-month notice period, the key issue was how to calculate the value of that entitlement. Two approaches were proposed; Canaccord argued that Warren’s bonus should be calculated as an average of the last three years, whereas Warren argued that the right approach was a “comparator approach” which would calculate his bonus based on what Canaccord employees in comparable roles received.
Although both approaches have merit, the Court noted that the appropriate approach depends on the facts of each case. Here, the Court decided that the comparator approach was appropriate for three reasons.
Bonus Fluctuated Significantly from Year to Year
First, Warren’s bonus fluctuated significantly from year to year, so it would be unfair to use a three-year average, which is better suited when there are moderate fluctuations. Warren’s bonus payments in his last three years with Canaccord were: $665,000 in 2017, $810,000 in 2018 and $540,000 in 2019.
Availability of Evidence
The second reason that informed the Court’s decision to apply the comparator approach was the availability of evidence. There was plenty of evidence the Court could examine to assess the bonuses earned by comparable employees, so it could confidently estimate Warren’s bonuses during his notice period.
Comparable Employees Subject to Same Criteria
The third reason was that the comparable employees were subject to the same criteria as Warren for bonus eligibility – Canaccord’s market success and individual performance.
Since damages for reasonable notice must place the employee in the same position they would have been in had they still been employed, the comparator approach was favoured because the three-year average would not have accurately captured key factors, such as Canaccord’s market success during the notice period, or Warren’s performance.
Further, Warren could have realistically received a much higher bonus than the average of the last three years.
The Court’s Decision
Consequently, Warren’s damages during his notice period were $4,646,366.47.
After factoring in amounts paid by Canaccord on account of the termination (such as statutory termination pay), and Warren’s mitigation income, the final figure was cut by $1,534,901.82.
Warren was entitled to the balance: $2,540,073.95.
Don’t be a Precedent
Canaccord could have avoided paying millions of dollars in damages had it used an employment agreement with an enforceable termination clause and bonus provisions which would have limited Warren’s bonus entitlement to only the statutory notice period.
Fortunately, we are here to help employers draft and implement strong contracts and policies. As Stuart likes to say, these are employers’ single best way to limit dismissal costs, and Warren does a great job of illustrating what happens when such documents are not in place.
Employees can also benefit greatly from working with counsel. We work with employees who have been dismissed to assess their severance entitlements, negotiate a package in line with their entitlements, and if need be, to litigate their cases.
Think you need an employment lawyer? You probably do!
Sources
- Warren v. Canaccord Genuity Corp., 2026 ONSC 547 (CanLII), <https://canlii.ca/t/khzzp>, retrieved on 2026-02-11
