June 9, 2026

By Jacob Thompson

An employee dismissed without cause is entitled to reasonable notice of termination, or damages in lieu of notice of termination.

THE ISSUE

But what about an employee whose compensation package includes a discretionary bonus? Is that bonus included in calculating how much the employee is owed following termination?

THE SHORT ANSWER

The short answer is “maybe,” or “sometimes.” Or a bit less short, “it depends.”

So, the real issue is “what does it depend upon?”

THE CASE

The Ontario law on this subject is reviewed and summarized in Adelman v. IBM Canada Limited.

Each case of course turns on its own facts. Mr. Adelman, on the facts of his case, was not entitled to a bonus as part of his entitlements for pay in lieu of reasonable notice (though he was entitled to payment of a bonus for his final year of employment).

According to the trial judge:

• A bonus was not an integral part of his compensation.
• The evidence did not support the claim that he received a bonus each year.
• The evidence did not suggest that bonuses were required for IBM to stay competitive with its competitors.
• The award of bonuses was discretionary.
• Adelman had not received bonuses consistently.
• The bonuses were not a significant component of his compensation.

This reasoning applied to the ongoing right to a bonus as part of his entitlements for pay in lieu of reasonable notice. The retroactive bonus for 2022 (his final year of employment) was a different story.

Even where the bonus is discretionary, that discretion must be exercised fairly and reasonably.

The judge concluded that IBM’s treatment of Mr. Adelman’s 2022 bonus was not fair or reasonable. He did not believe their explanation as to why he was denied a bonus, when other employees dismissed in the past had received bonuses.

The importance of having the right evidence is highlighted by the judge’s reference to the absence of evidence from the executives actually involved in the decision-making process. The explanation from the witness that IBM called was simply not believed. They could not convincingly explain the notation on the bonus spreadsheet that no bonus was awarded because of the dismissal.

Dismissal after the bonus period is not a sound reason to automatically conclude that no bonus has been earned.

When the bonus is discretionary, the employer needs to put forward evidence that this discretion was exercised. A reasonable exercise of discretion requires reasons.

Mr. Adelman was awarded an amount which was the average of his two prior bonus years. The amount was also increased to reflect the usual pension contributions.

TAKEAWAYS

• An employee dismissed without cause is entitled to compensation for a bonus that might have been earned during their reasonable notice period where it is shown that the bonus was an integral part of the employee’s compensation package,
• No compensation for a potential bonus is payable if the bonus plan specifically excludes the entitlement after or upon dismissal.
• Determining whether a discretionary bonus was integral depends upon:
  • whether the employee received a bonus each year, albeit in different amounts;
  • whether the bonus was required for the employer to remain competitive with its competitors for employees;
  • whether the employer ever exercised its discretion against the employee in the past;
  • whether the past bonuses constituted a significant component of the employee’s overall compensation package.
• The entitlement to be paid bonuses retroactively for periods worked before dismissal, but not yet awarded, is a different story.
  • It depends upon the discretion being exercised fairly and reasonably.
  • If the employer cannot show this fairness and reasonableness, a court will find in favour of the employee.
• Every situation depends on its own facts.

 

WHAT WEILERS LLP CAN DO TO HELP YOU

Knowing your rights on termination can avoid messy disputes.

Weilers LLP has an 80-year history of being a leader in labour and employment law. This is part of our “proud tradition.”

Our “progressive approach” means that we stay current on the development of the law. More importantly, we know how to apply it to particular facts.

Whether you are an employer or an employee, we have the knowledge and experience to advise you on how to deal with termination without cause in as stress free manner as possible.

If you cannot resolve the terms of dismissal through negotiation, we are aim at resolving the dispute in the best, lowest cost manner possible.

If you need advice about employment law, give Weilers LLP a call. We may be the right lawyers for you.