eCaseNote 2013 No. 06

Denial of Annual Bonus Could be Constructive Dismissal

Piron v. Dominion Masonry Ltd., 2013 BCCA 184


The British Columbia Court of Appeal (BCCA) recently released a decision in Piron v. Dominion Masonry Ltd., 2013 BCCA 184, where it determined that the failure of an employer to pay a large annual bonus could amount to constructive dismissal, even if the bonus was not part of the employment contract.
The Court held that while a bonus may not be part of the written employment contract, if it is a significant aspect of the remuneration of the employee it may nonetheless be seen as a term of their employment contract.

Background

Mr. James Piron (Mr. Piron) was a 19 year employee for Dominion Masonry Ltd. (Dominion) with remuneration consisting only of hourly wages until 2005. At that time he began to receive bonuses on a per project basis, ranging between $10,000 and $20,000 per year.
In 2011, Mr. Piron was informed that he would not be receiving a bonus due to tough economic conditions. After a dispute between the parties over the issue, Dominion gave Mr. Piron two choices – work for his hourly wage or find a new job.
Mr. Piron argued that the failure to pay a bonus amounted to constructive dismissal as it was a breach of the employment contract, while Dominion argued the employment contract did not guarantee a bonus. Accordingly, there was no breach of contract.

The British Columbia Supreme Court Decision

The British Columbia Supreme Court (BCSC) found that the failure to pay Mr. Piron his bonus did amount to constructive dismissal, reasoning that the bonuses were an important part of the remuneration of employees that reflected the importance of the work they were doing and was an important factor in why senior employees remained in their positions. Furthermore, the Court stated that the economic conditions at Dominion were not sufficient to unilaterally decide to not pay the bonuses. As a result of the finding, the Court awarded Mr. Piron $106,250 in lieu of notice, but ruled against awarding any damages with respect to the unpaid bonuses.

The British Columbia Court of Appeal Decision

Dominion appealed the BCSC decision while Mr. Piron cross appealed, seeking damages in relation to the unpaid bonuses. The BCCA dismissed Dominion’s appeal, but reversed the BCSC decision to not award damages for the unpaid bonuses. Instead it found that Mr. Piron’s employment contract included a right to be paid a bonus and that the contract was breached when no bonus was paid. Accordingly, the Court ordered that Dominion pay an additional $20,000 in damages to account for the unpaid bonuses.

The Effect of the Decision

In light of this decision, management will have to be aware that while an employee’s bonus is not an express term of their employment contract and may seem discretionary, a failure to pay the bonus may result in constructive dismissal and could cost a company a considerable additional amount in damages. While difficult economic conditions may seem like valid justification for withholding bonuses, the decision illustrates that it is not accepted as a valid reason to unilaterally make that determination.



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