Fired Microsoft worker deserves 24 months' pay — and more

Bonuses, annual merit increases, stock awards all part of compensation for wrongfully dismissed Microsoft employee in Ontario

Fired Microsoft worker deserves 24 months' pay — and more

Microsoft Canada must pay an Ontario worker 24 months’ pay in lieu of notice plus bonuses and unvested stock awards after dismissing him for performance issues, the Ontario Superior Court of Justice has ruled.

Fransic Battiston, 55, was an employee of Microsoft Canada for almost 23 years. Initially hired in 1995 as a senior consultant, Battiston moved through various lower-level and middle-management positions, becoming the company’s business and operations manager, consulting and support in 2013. He reported to the manager of delivery operations and the position involved international operations for clients outside of Canada. Throughout his tenure, Battiston was viewed as a good performer.

Each year, Battiston received benefits, merit salary increases, cash bonuses and stock awards under Microsoft’s rewards policy, which usually added up to about 30 per cent of his total compensation. The policy stipulated that such rewards were meant to reflect an employee’s impact on team, business and customer results over the previous year. The stock award agreements vested in percentage increments each year and stipulated that an “awardee’s rights under this award agreement in any unvested [stock awards] shall terminate” in the event that the participant’s employer ceases to be Microsoft.

In January 2017, Battiston’s direct reporting line changed to the director of operations enterprise services, who was located in Germany. They had telephone meetings twice a month and quarterly performance management meetings called “connects.”

Performance issues
In Battiston’s first two connects with the director in May and September 2017, the director shared some concerns relating to his value to business partners. In particular, one business partner that represented three-quarters of Battiston’s work had provided feedback that Battiston was too passive and didn’t drive projects. The director shared some strategies for Battiston to use “to get on track for a quick turnaround.”

The next connect session came in February 2018, when the director advised Battiston that the required turnaround hadn’t happened and Battiston hadn’t used one of the strategies provided. The following month, Battiston’s role was eliminated in structural changes across Microsoft and he was placed in a new role that involved some continued responsibilities along with new ones.

Battiston had his final connect with the director relating to his business and operations manager role in June 2018. The director advised him that the impact he had delivered in the past fiscal year was “below expectations” with a “continued failure to take lead projects and drive greater results, as opposed to simply responding to specific requests.” The director didn’t provide a performance improvement plan as it didn’t feel it was appropriate given Battiston’s performance history.

In the wake of this connect and considering feedback from business partners, the director recommended that Battiston receive no bonus as he had zero impact in the 2018 fiscal year.

On Aug. 9, Microsoft Canada terminated Battiston’s employment without cause because of his job performance. The company provided him with a three-month career transition program along with an offer of almost 102 weeks’ pay, applicable incentive bonus payments at the end of the quarter and vested stock awards. The money was conditional upon Battiston signing and returning the termination letter along with a release confirming confidentiality of the offer, an obligation to not disparage Microsoft and the return of company property. In addition, any unvested stock awards were “null and void” as of Battiston’s termination.

The company added that if Battiston didn’t accept the offer, it would only provide minimum requirements under applicable employment standards legislation including RRSP contributions.

Battiston was shocked by the termination as he had never been put on a performance improvement plan or been coached on his performance. He sued for wrongful dismissal, claiming entitlement to pay in lieu of notice, his annual merit increase and cash bonus during the common law notice period, his impact bonus for the 2018 fiscal year and vesting of 1,057 stocks awarded that had yet to be vested.

The court agreed with Battiston that he was entitled to common law notice regardless of whether he signed a release or not. It found that Battiston’s age, his nearly 23 years of service with Microsoft, the lack of similar employment — Battiston applied for about 70 comparable jobs in the 14 months following his termination without receiving one interview — entitled him to 24 months’ reasonable notice.

Bonuses, stock awards part of compensation package
The court noted that it had been established in prior case law that damages for wrongful dismissal generally include all compensation and benefits that the employee would have earned during the notice period — including bonuses, merit increases and other rewards. Even if bonuses are discretionary, if they are an integral part of the employee’s compensation package, then they are part of the damages meant to make an employee whole.

The evidence showed that Battiston received a merit increase and cash bonus under the rewards policy every year from Microsoft except the last year of his employment. As a result, the court found that both were “significant parts of the total income.” In addition, there was nothing in the rewards policy that removed the entitlement to receive bonuses during the common law notice period.

Microsoft argued that since the merit increase and cash bonus were based on an employee’s impact on business results over the past year, Battiston’s entitlement for 2018 should be zero because he would not have improved his performance, based on the fact that he had failed to improve his performance after his connect sessions and could not have improved after his termination. However, the court found that the proper measure of damages for the lost opportunity to earn a merit increase and cash bonus during the notice period was “based on the average of the amounts that were awarded for such bonuses in the two-year period preceding his termination.” Using these parameters, the court determined that Battiston was entitled to damages based on a 0.7-per-cent merit increase and a cash bonus of $12,100 during the notice period.

However, the court found differently when it came to the bonus for the 2018 fiscal year. The director decided two months before Battiston’s termination to recommend that Battiston not receive a bonus because he had zero impact on the business — based on his observations and feedback from business partners. There was nothing arbitrary about his decision since the company tried to align bonuses with employees’ impacts, said the court in finding that Battiston was not entitled to a merit increase or cash bonus for 2018.

As for the stock awards, the court noted that they were “an integral part of Battiston’s compensation package” and on the surface should be part of his entitlement to damages as part of the common law notice period. The court found that the stock award agreement clearly provided that an employee’s right to vest stock awards terminated when the employee has been terminated, regardless of the reason, but in the case of termination without cause or notice, this provision was “harsh and oppressive.” Combined with the fact that Microsoft didn’t take reasonable measures to draw Battiston’s attention to this detail, it made the stock award agreement’s termination provisions unenforceable, said the court.

Microsoft was ordered to pay Battiston 24 months’ salary in lieu of reasonable notice less amounts already paid — totalling $238,306 — his annual cash bonus of $12,100 and annual merit increase of 0.7 per cent for the notice period, $8,250 in benefits and RRSP contributions during the notice period and damages for the 1,057 stock awards that had been granted but not vested before termination.

For more information, see:

  • Battiston v. Microsoft Canada Inc., 2020 ONSC 4286 (Ont. S.C.J.).

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