Future Base Salary Increases Form part of Employee’s Damages Upon Termination
August 6, 2015
In a recent decision of the Ontario Superior Court of Justice, the Court awarded damages for wrongful termination to an employee based upon the customary salary increase the employee would have received had he been actively working.
The employee, a 56 year old, 22 ½ year Director of Business Development, had been terminated without cause. The employee brought a summary judgment motion seeking damages for wrongful termination and argued that he was entitled to the salary increase and the bonus he would have received during the common law notice period based upon the historic award of salary increases and average bonus for the two years preceding his termination.
The employer did not cross-examine on the employee’s evidence in respect to the salary increases, nor present any evidence as to the salary increases received by other employees in the year of the termination. On the bonus issue, the employer argued that the bonus should be averaged over the preceding three years, as was customary based upon prior decisions, including the bonus he received for the year of termination.
The Court awarded damages based on the employee’s base salary as increased to reflect a 2% increase for the next salary increase following the termination. The Court found that 2% was within the range of increases the employee had consistently received and it was also consistent with what the employee believed other comparable employers had received in the year of his termination. The employer did not dispute this evidence.
On the issue of the bonus, in view of the fact that the employer did not provide the information necessary to calculate the bonus for the year of termination, nor provide evidence of what other comparable employees had received, the Court accepted the employee’s proposed calculation.
Finally, as the notice period was to extend beyond the date of the decision, the Court exercised its discretion to follow the decision of Correa v. Dow Jones Markets Canada Inc. (1997) 1997 CanLII 12268, to hold that any money to be earned by the Plaintiff during the notice period be impressed with a trust and be paid by the Plaintiff to the Defendant upon the expiry of the notice period.
This decision is unusual in that it awards damages based on an increase in salary which would have occurred after the termination date, which is a variance from the more common approach of awarding prospective salary increases only if already granted. The approach taken is similar to how Courts have approached bonus payments and other periodic forms of compensation over the reasonable notice period. While it is unclear as to whether it will be followed by other courts, for now, it leaves open an argument for employees to make even when negotiating termination packages.
This decision also confirms the wide discretion which the Court maintains to impose upon an employer a calculation of damages where the employer fails to present evidence to rebut an employee’s allegations as to what the employee would have received but for the termination. An argument by an employer of uncertainty or difficult quantification may well be met with a Court imposing its own view of what is appropriate to “fill in the gaps”.
Chen v. Purdue Pharma Inc., 2015 ONSC 1967 (CanLII)
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