Most of the time, when a client comes to see me about a wrongful dismissal, the client tells me, “I only want what I am entitled to.” However, most of the time, the client does not really know what he or she is entitled to in damages or compensation. The Court of Appeal’s decision in O’Reilly v. IMAX Corporation provides a useful summary of what a wrongfully dismissed employee can expect.
The issue in this appeal concerned the employee’s entitlement to exercise stock options, receive bonuses and take advantage of other aspects of his remuneration package during the period of reasonable notice following a termination without cause. This is an issue that is not as clear as one might expect. In a footnote to this decision, the Court of Appeal indicated that it heard appeals dealing with this issue four times in 2019.
To clarify the analysis of this issue, the Court of Appeal summarized the following principles at paragraph 32 of the decision:
- A wrongfully dismissed employee is entitled to damages for the loss of wages, salary and other benefits, that would have been earned during the reasonable notice period.
- This principle applies to bonuses, stock options, or incentives that are an integral part of the employee’s compensation, as well as pension benefits that would have accrued or been earned during the reasonable notice period.
- In considering whether the loss of such benefits is recoverable, the court undertakes a two-step analysis.
- The first step requires a determination of the employee’s common law right to damages for breach of contract, bearing in mind that the measure of damages is the amount to which the employee would have been entitled had the employer performed the contract.
- The second step requires the court to determine whether the terms of the relevant contract or plan unambiguously alter or remove the employee’s common law rights, having regard to the presumption that the parties intended to apply the law, in the absence of clear language to the contrary.
This last principle operates in a similar fashion to a notice provision or termination clause in an employment contract. More information on this topic can be found here.
In short, the language in the document must be clear and unambiguous in taking away the employee’s common law entitlements. Otherwise, the employee is entitled to receive compensation for the value of every aspect of his or her remuneration package over the course of the period of reasonable notice.
In dismissing the employer’s appeal, the Court of Appeal concluded that the language used in the employee’s remuneration plan did not unambiguously remove his right to damages for the loss of his stock option that would have vested during the reasonable notice period.