Post-Termination Bonus Entitlement in Fluctuating Industries

Under common law principles, employees terminated without cause are owed pay in lieu of notice of their termination. There is no “rule of thumb” for determining how much notice a departing employee is entitled to. Rather, courts apply the well-known “Bardal” factors in order to assess the individual circumstances of each case and arrive at a reasonable notice period. Pay in lieu of notice may include both base salary and bonuses, depending upon the wording of any applicable employment agreements or incentive compensation policies. Where bonus compensation is properly included in a departing employee’s termination payout, calculating its scope becomes a difficult exercise in industries with volatile or cyclical market performance, where bonuses similarly fluctuate from year to year in response. A recent Ontario Superior Court of Justice decision has clarified how such bonuses should be determined, in precedent-setting case law relevant to employers across Canada.

Determination of Compensation

In Warren v. Canaccord Genuity Corp., the Ontario Superior Court of Justice considered a case involving an employee, Warren, who was terminated without cause by his employer, Canaccord. The main questions before the Court were the length of notice and the size of the bonus that Warren was entitled to.

Warren had been employed by Canaccord for 18 years as an investment banker in the mining industry; specifically, he was the Managing Director of the mining group at the time of his termination. While Warren’s base salary had not changed in several years, his annual income was dependent on the size of his annual bonus – which fluctuated based on Canaccord’s Canadian Capital Markets Pool and Warren’s own performance.

Justice Schabas notably rejected the “rule-of-thumb” approach in this decision and instead opted for a consideration of the Bardal factors alone – including the characteristics of Warren’s employment, his length of service and specialized experience, his age, and the availability of similar employment – examined in light of several previously decided cases. In the court’s view, Warren was entitled to 21 months of reasonable notice of termination, and the remaining issue was a determination of his bonus.

Canaccord proposed using an average of Warren’s prior bonuses dating back three years, while Warren proposed a comparator approach that looked to current employees in similar positions and the bonuses they earned during the notice period.

Court’s Approach to Employee Bonus Entitlement

The court considered Canaccord’s industry – mining – which generally fluctuates and had seen significant ups and downs during Warren’s years with the company. To highlight the historical volatility of Warren’s bonuses during his 18-year employment, the court noted how his bonus had ranged from $240,000 to as high as $3,025,000.

Justice Schabas also considered prior case law featuring employees whose bonuses had fluctuated significantly in response to business fluctuations from year to year. In these cases, courts have taken a comparative approach to determine what a terminated employee likely would have received as a bonus during the notice period, had they not been terminated.

In specific reliance on a previous case decided by the Ontario Superior Court of Justice, Justice Schabas identified the objective of finding “the amount of bonus [the employee] would have been awarded had he remained working for [the employer].” On that basis, the first step is to consider the bonuses of the comparators, alongside historical bonuses and other relevant factors.

In the case at hand, Canaccord had one of its best years in the period immediately following Warren’s termination. The mining industry as a whole was in a “bull market”, described in the decision as a “once-in-a-decade event in which the mining cycle peaked, leading to record-setting revenues”. Justice Schabas concluded that damages must reflect what Warren would have earned and been entitled to, but for his termination without cause, during the very profitable notice period.

Therefore, the court concluded that Warren’s bonus should be calculated in comparison to a comparable employee who had earned his bonus during Canaccord’s highly profitable years following Warren’s termination. The Court also considered Warren’s mitigation efforts and ability to find new employment within 6 months of his termination and deducted his earnings during the time he was employed within the notice period. Ultimately, Canaccord was ordered to pay Warren over $2,500,000 in damages.

Key Takeaways

For employers, this decision reinforces several important considerations when assessing termination exposure, particularly for senior employees or those in roles where variable compensation can significantly impact overall damages.

• Senior employees without enforceable termination provisions may be entitled to large notice entitlements.
• Where an employee’s compensation is highly variable, damages may be based on comparators rather than historical averages.
• Cyclical markets matter: the timing of an employee’s termination, particularly immediately preceding an expected upswing in the market, can significantly impact the employee’s termination pay.
• Bonus- and commission-based roles deserve careful, focused analysis, as they can dramatically increase damages where termination pay is owed.

Final Thoughts

The Ontario Superior Court of Justice has provided clarity on the calculation of an employee’s bonus entitlements during the notice period in cases involving termination without cause, particularly where the industry sees large ebbs and flows in revenue and profits. Employers should be cautious in drafting employment agreements, particularly in their inclusion of enforceable termination provisions, as such bonus entitlements can materially increase an employee’s termination pay.

Contact Hasti Pourriahi or Steve Eichler in Calgary, Joël Michaud in Edmonton, or any member of our Labour + Employment Group for more information about drafting employment agreements and navigating difficult termination scenarios.

Link to decision: Warren v. Canaccord Genuity Corp., 2026 ONSC 547