Canadian Bonus Claims: Not Necessarily Average

When Canadian executives are dismissed, a common element in many claims is a request that the employee receive bonus which would have been paid during the applicable notice period. A frequent approach in these situations is for the employer to offer or ultimately agree to pay some amount on account of bonus based on the average bonus received in recent years. Indeed, many Canadian employer lawyers will often refer to the “standard approach” of reviewing the average of the preceding three years of bonus in order to determine amounts payable upon termination.

A recent Ontario decision brings this approach into question, with a finding that the focus on prior years as the comparator may not be appropriate, and there may instead need to review of what peers of the dismissed actually received during the relevant period.

In Warren v Canaccord Genuity Corp., 2026 ONCS 547, the Ontario Superior Court of Justice dealt with a claim by a Managing Director of an investment bank who had worked for the employer for 18 years. In his lawsuit, Craig Warren successfully claimed damages for the bonus which he would have received during the notice period, based on actual payouts to colleagues.

In accepting Warren’s argument, the Court endorsed a so-called “comparator” argument which focused on the amount which the dismissed executive would have earned, in the form of salary, bonuses and other compensation, during the notice period. In other words, the key question was: what would the employer have paid the terminated employee had he remained an employee during the notice period.

The employer was unsuccessful in their argument that the standard approach would apply, based on the bonuses paid in the preceding three year. The Court accepted that this would have artificially suppressed the bonus amount to be awarded since the evidence established that the bonus pool had nearly tripled over the three year period. The result was that if three-year averaging were used, Warren would have been denied his participation in what was referred to in the case as a “once-in-a-decade bull market.”

The Court proceeded to award bonus based on what had actually been awarded and paid to peers.

The reasoning in this decision relied upon two key points: 1) the pre-termination bonuses had been variable, based on business results, and therefore were not a reliable predictor of what might be awarded in future years; and 2) the employer’s own bonus plan language, which was tied to the size of the bonus pool, undercut the arguments against using the historic average.

This case highlights the importance of a close review of plan documents and relevant evidence when assessing claims by dismissed employees for compensation on account of bonus payments during the notice period. Employers should review their bonus plan documents and relevant contract language to assess this issue.