But judge strikes down allegations of bad faith while upholding breach of contract claim in case involving vacation pay for thousands of employees
The British Columbia Court of Appeal has upheld the certification of a national class action against Bank of Montreal that alleges the bank systematically underpaid thousands of private wealth consultants and mortgage specialists their statutory vacation and holiday pay by including these entitlements within variable compensation structures rather than paying them separately.
Justice Heather MacNaughton, writing for the unanimous three-judge panel in the Oct. 31, 2025 decision, upheld certification of the breach of contract claim while striking down allegations of bad faith.
The case affects employees across Canada from 2010 to 2018 who earned significant portions of their income through commissions and bonuses. Plaintiff Paul Cheetham, a former private wealth consultant who earned a $45,000 base salary plus variable compensation that exceeded $200,000 in some years, alleged BMO's compensation plans promised to pay statutory entitlements under the Canada Labour Code but failed to calculate them correctly.
BMO compensation plans
BMO's compensation plans for both employee groups stated that total cash compensation was "inclusive of" vacation pay and holiday pay. The plans explicitly referenced Canada Labour Code requirements, with some versions stating compensation "includes the statutory holiday pay, overtime pay and vacation pay to which you may be entitled."
Cheetham argued this created a contractual obligation to pay statutory benefits based on total compensation and not just base salary, and that BMO breached this promise by subsuming statutory pay into variable compensation without proper calculation. BMO countered that it did exactly what the contracts permitted: include statutory pay within the compensation structure.
The certification judge found the contracts incorporated Canada Labour Code requirements while simultaneously allowing inclusion of statutory pay in variable compensation, creating an issue for trial rather than a fatal flaw in the pleadings.
Competing arguments over contract terms
BMO argued the class action should not be certified because it could not have breached contracts by doing exactly what the compensation plans authorized. The bank maintained that including statutory pay within variable compensation was explicitly permitted under the employment agreements.
The certification judge rejected this argument, determining that the presence of seemingly contradictory contractual provisions did not mean the claim was bound to fail. She concluded the issue of whether BMO's methodology violated its contractual obligations to pay statutory benefits in accordance with the Canada Labour Code was a matter for determination at trial.
The Court of Appeal agreed with this approach, finding the pleadings adequately set out the contract terms and the alleged breach, even though the compensation plans both incorporated statutory pay obligations and permitted their inclusion in variable compensation.
Contract claim survives, good faith fails
The Court of Appeal upheld certification of the breach of contract claim, finding "there was some basis in fact that the Statutory Pay policy was universal and that all PWCs and MSs were treated the same with respect to it."
Justice MacNaughton noted that while individual offer letters varied, there was some evidence "all PWCs and MSs were treated the same regarding the issues of Statutory Pay; it was included in their total compensation."
However, the court struck down the breach of duty of good faith claim, finding the allegation that BMO "ought to have known" its calculations were incorrect was "an allegation of negligence, not of bad faith."
