Deferred half of bonus was accrued and owed upon termination of employment
An executive was entitled to a deferred part of an accrued bonus upon his resignation, even though the conditions for its payment in an agreement had not been met, the Alberta Court of King’s Bench has ruled.
The worker joined Maverick Oilfield Services – an oilfield construction and transportation services company based in Provost, Alta. – in June 2012 to be the company’s chief executive officer (CEO). He had no written employment agreement when he started and the terms of his employment were determined in an oral agreement that was recorded in an unsigned draft contract.
In 2015, Maverick declared a bonus for its executives. The company indicated that it would pay half of the bonus immediately and the executives, including the worker, agreed to defer the other half until Maverick began to general net income. The worker’s total bonus was more than $52,000, so he received $26,442.31 as the first payment with an equal amount deferred.
In 2017, the worker signed a written employment agreement that included a clause stipulating a severance payment of $200,000 if his employment ended for any reason.
Worker resigned from employment
On May 31, 2018, the worker resigned from his employment with Maverick. Maverick’s financial position had not improved to the point where the deferred half of the bonus would be payable, but the worker pointed to the fact that other departed executives had been paid their outstanding half when they left the company.
The worker asked about payment of the deferred part of his bonus and Maverick’s owner told him, “We should have the funds to pay you out either late this week or early next week.” However, the bonus wasn’t paid.
The worker made an application for summary judgment for payment of his severance and the deferred half of his bonus. The applications judge dismissed the application for the severance payment was granted it for the deferred bonus, ordering Maverick to pay the deferred half of his bonus, $26,442.31.
Maverick appealed the decision granting payment of the deferred portion of the bonus. The worker did not appeal the dismissal of the severance payment portion of the judgment.
Conditions for bonus payment not met: employer
The company argued that the bonus agreement was to defer the bonus until Maverick generated net income, which it had not done yet. As a result, the deferred part of the bonus was not payable, said Maverick.
The court noted that a summary judgment can provide “a fair and just result” where there is no genuine issue for trial or uncertainties in the facts, and a party that resists a summary judgment must “put its best foot forward” to prove its argument.
The court found that once the bonus was declared, it was payable to each executive as part of their accrued earnings and the deferral agreement was the same for all of the executives. Given that bonus recipients who had left the company received the deferral portion of the bonus, it would be appropriate for Maverick to treat the worker the same and pay it out upon the end of his employment, said the court.
Maverick argued that paying out the deferred portion to departed employees was its discretion, but the court found no evidence to support that. Since there was a requirement for Maverick to “put its best foot forward” in resisting the summary judgment, its lack of evidence on discretion did not support its argument, the court said.
No discretion for bonus payment
The court also found that Maverick’s owner did not indicate to the worker that it was not exercising its discretion to pay the deferred portion when the worker inquired. Instead, the owner seemed to indicate that Maverick intended to pay it out, the court said.
The court also noted that the Alberta Employment Standards Code (ESC) requires an employer to pay an employee’s earnings within 10 days of the end of the pay period in which the termination occurs or 31 days after the employee’s last day of employment. Once the bonus was declared, it accrued as earnings for the recipients and the parties to the deferral agreement would not have entered into an agreement to override the ESC, the court said.
“Even if there was a residual discretion as to when the deferred portion of the bonus would be paid, that does not change the fact that the bonus had been declared and was payable to each of the recipients,” said the court. “In other words, once the bonus was declared, payment was no longer discretionary even if the timing of the payment was.”
The court determined that the application judge’s decision was correct and the worker was entitled to the deferred portion of his accrued bonus totalling $26,442.31. See Challis v. Maverick Oilfield Services Ltd., 2023 ABKB 514.
