'At the end of the day, it's the written representation that matters,' employment lawyer warns
An Ontario credit company was ordered to pay a retired VP almost $2 million in deferred bonuses, stock options and 24 weeks’ of unused vacation pay, because there was no written documentation of termination conditions and no employment contract.
The employee, Craig Boyer, was hired by Callidus Capital Corporation in 2009 as the company’s Vice President of underwriting and portfolio management, under what the court described as an “oral” employment agreement with the CEO at the time. Boyer remained with the company until 2016, when he retired.
Boyer participated in a deferred bonus plan as well as a stock option plan, and had accrued 24 weeks of unused vacation pay, all of which he expected payment of upon his retirement.
Boyer retired early due to constructive dismissal because of a “toxic” work environment he said Callidus management had created. However, it wasn’t this that the court took into account when awarding Boyer, it was the lack of communication on Callidus’ part.
Leave nothing up to chance in deferred bonus plans
“At the end of the day, it's the written representation that matters,” said Ioana Pantis, partner at McMillian in Toronto.
“There is a very high onus on employers to be very clear in their policies and their plans, how they draft, how they communicate and get the employee’s acknowledgement and sign off. If there's any ambiguity, there's a huge risk for an employer. It’s not always the case, but when we're dealing with large amounts of money for stock options, that's a huge risk.”
Callidus argued that Boyer was aware of company policies that said there was a “use it or lose it” policy for vacation pay, but as the court noted, there was no written evidence as such.
Callidus also argued that the Deferred Bonus Policy stated that individuals must be employed by the company to receive deferred payments, however there was also no evidence that Boyer had seen the policy or agreed to it; in fact, the court found that Callidus was aware of Boyer’s retirement plan in 2015, but did not inform him of the policy even then.
“Mr. Boyer's evidence that he was not provided with a copy of Callidus' Deferred Bonus Policy or told that he would not be paid for earned and deferred bonuses after his employment ended is not challenged. If this was a condition of Mr. Boyer's employment, it was incumbent on Callidus to inform him of such a condition and obtain his agreement,” the court wrote in its decision.
“Use it or lose it” vacation policies can add up to huge payouts
As part of the damages awarded to Boyer by the court, he received over $93,000 in accrued vacation pay.
A common mistake for employers, Pantis said, is letting vacation time carry over for long time periods, sometimes for years, resulting in litigation where an employee or group of employees can demand huge payouts of accrued vacation pay when their employment ends.
Often this happens when a company is acquired by another and the new owner is responsible for the cost, Pantis said. Or, employers can simply overlook the fact that employees may have vacation pay piling up quietly in the background.
That is why it is crucially important to clearly communicate and enforce limits on employee vacation times, she said – even if there is no “use it or lose it” policy, there should still be a limit on how much time can be carried over. One to two weeks, preferably.
“An employee, at termination, can claim all their accrued vacation banked over multiple years,” Pantis said.
“If they haven't taken vacation, and the employer hasn’t made them take it and there's no limiting language in a policy, it's something that an employer has to pay at termination. I do see that quite a bit, and it can be avoided.”
Courts usually err on the side of employees where no written agreement exists
Because of an acknowledgement of the power imbalance between employers and employees, Pantis said, courts will generally decide in favour of employees when there is no written agreement in place.
“It would have been great to have an objective assessment by somebody in human resources as to what policies are in writing, and beyond that, how is it communicated to employees to sign off on them, and are they aware of the termination entitlements under those policies and plans,” said Pantis.
“When an employer doesn't have a clear and unambiguous policy or plan about employee bonuses or stock options, or any kinds of other benefits, they open themselves up to misrepresentations by other senior employees or managers, that’s what happened in this case.”
