Ex-president entitled to share in unexpected profits after he quits

Moore v. Thomas Fuller Construction Co. (1958) Ltd., 2003 CarswellOnt 4285, 29 C.C.E.L. (3d) 196 (Ont. C.A.).

Richard Moore left the job of president of Thomas Fuller Construction Co. (1958) Ltd. effective July 31, 1999. His unwritten employment contract called for him to get paid $95,000 a year plus 10 per cent of the company’s profit.

The company unexpectedly made a profit at the end of 1999 and Moore filed an action for a share of it. The trial judge ruled that where a profit-sharing program is not discretionary and is an integral part of the employment contract, then the employer must specifically inform the employee if the program is based on continued employment over a specific period of time.

The company appealed, arguing the profit sharing was calculated at the end of the year — after the time Moore had quit as president. The appeal was dismissed. The court ruled the year-end timing of the calculation was irrelevant.

This ruling was again appealed. In ruling on the latest action the Ontario Court of Appeal said the disposition of the case turns on the precise terms of Moore’s employment contract. That the essential terms of the contract were never put in writing didn’t matter, it said. What did matter is that profit-sharing was an integral part of Moore’s compensation.

The program was completely non-discretionary as it provided each employee with a fixed percentage of the company’s net profits for the year, regardless of individual performance or contribution to those profits.

The court agreed with the trial judge that the company did not tell Moore he would get no bonus if he left in the middle of the year and there was no practice or prior example that would have made that consequence clear to him. It rejected the company’s argument that the practice was clear from prior cases, and that Moore should have understood from them that if he left the company in July he couldn’t expect a bonus for that year. Those prior cases were open to interpretation and, in any event, Moore didn’t even know about some of them, ruled the court. This doesn’t amount to a palpable and overriding error, which is required for the court to overturn a previous court’s ruling.

The Court of Appeal said the trial judge was correct in ruling Moore’s employment contract provided him with a guaranteed 10 per cent of the company’s net profits for that year.

The company could have negotiated a different bonus, perhaps making it discretionary or contingent on working for the full year. As the company didn’t do so, the trial judge had reached the correct result.

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