In Ontario, you are generally entitled to compensation for lost ‘discretionary’ bonuses during your common law notice period if the bonus was an integral part of your regular compensation. Employers cannot simply deny it by calling it discretionary. Claims are filed at the Superior Court of Justice, with a standard filing fee of $320 CAD.
For many professionals, a base salary is only a fraction of their total annual income. Performance bonuses, profit-sharing, and annual incentives are critical components of an employee’s livelihood. When a company abruptly fires a manager in Toronto, an executive in London, or a salesperson in Hamilton, the severance offer often suspiciously excludes any mention of these bonuses. The human resources department will routinely argue that because the company’s policy labels the bonus as “100% discretionary,” they owe you nothing once you are out the door.
Under Ontario employment law, however, simply slapping the word “discretionary” on a bonus plan does not give an employer the magical ability to withhold it during your severance period. 📍 Courts look at the reality of the working relationship. If you received this bonus consistently year after year, and it formed a significant part of your overall earnings, the law considers it an integral part of your compensation. Consequently, your common law severance package must reflect the wages and the bonuses you would have earned had you been given proper working notice.
Step-by-Step Process for Claiming Lost Bonuses in Ontario
Fighting for a six-figure or even a five-figure lost bonus requires careful documentation and an aggressive legal strategy. Employers will hide behind complex bonus policies, so you must dismantle their arguments step by step with the help of a local law firm.
Step 1: Compile Your Bonus History
To prove that the bonus was not truly discretionary, you need to establish a historical pattern. 📝 Gather your pay stubs, T4 slips, and direct deposit records from the last three to five years. If you can show that you reliably received a bonus every February, for instance, a judge will be highly likely to view it as a mandatory, integral part of your standard compensation package.
Step 2: Review the Fine Print of the Bonus Plan
Locate the official corporate bonus policy or the incentive clause in your employment contract. Employers often rely on “active employment” clauses, which state you must be actively working on the payout date to receive the money. Fortunately, the Supreme Court of Canada and Ontario courts have repeatedly ruled that standard “active employment” language is usually not strong enough to override your common law right to damages for lost bonuses during your notice period.
Step 3: Have an Employment Lawyer Draft a Demand
Take your documents to an Ontario employment lawyer. They will calculate your full common law notice period based on the Bardal factors (your age, tenure, and position). ✉️ The lawyer will then draft a comprehensive demand letter, adding the average historical bonus amount into the monthly severance calculation, demanding full compensation from the former employer.
Step 4: File a Lawsuit at the Superior Court of Justice
If the company refuses to pay the bonus portion of your severance, your lawyer will issue a Statement of Claim at the local Superior Court of Justice. The formal discovery process in litigation forces the company to reveal exactly how they calculated bonuses for other employees that year, making it very difficult for them to justify withholding yours.
Discretionary vs. Non-Discretionary Bonuses
| Type of Bonus | Employer’s Argument | Legal Reality in Ontario Courts |
|---|---|---|
| True Discretionary Bonus | “We only pay it if the CEO feels generous; it is not guaranteed.” | If paid randomly (e.g., once in 5 years for a specific project), it may not be included in severance. |
| Integral (Labelled Discretionary) | “The contract says it is at our absolute discretion.” | If paid consistently every year and based on a formula, it MUST be included in your severance package. |
| Non-Discretionary (Formulaic) | Often forced to admit it is owed, but tries to limit to ESA minimums. | Clearly owed. Must be paid pro-rata for the time worked and projected through the common law notice period. |
How Much Does it Cost to Sue for a Bonus?
Pursuing a high-value severance claim that includes complex bonus structures is a standard procedure for Ontario lawyers.
- Court Filing Fees: To initiate your claim at the Superior Court of Justice, the provincial government charges a standard $320 CAD filing fee (as of May 2026).
- Contingency Fees: Most employment law firms will represent you on a contingency basis, meaning they do not charge hourly fees out of pocket. Instead, they take a percentage (usually 25% to 33%) of the final settlement they win for you.
How Long Does the Process Take?
Disputes over large bonuses often involve significant back-and-forth negotiations. A well-drafted demand letter backed by recent Ontario case law might force a settlement within 3 to 6 months. However, if the employer’s legal counsel strongly believes their “active employment” clause is ironclad, the matter might require formal litigation, which can take 12 to 18 months to reach a resolution.
Frequently Asked Questions (FAQ)
What if the company had a bad financial year and paid no bonuses?
If the employer can conclusively prove through financial records that no other employees in your department received a bonus that year due to poor corporate performance, your claim for bonus damages during your notice period may be reduced or dismissed.
Are Restricted Stock Units (RSUs) treated the same as cash bonuses?
Generally, yes. If your RSUs or stock options would have vested during your common law notice period, Ontario courts typically rule that you are entitled to damages equal to the value of those lost shares, unless the grant agreement has extremely precise, legally compliant exclusionary language.
Do ESA minimums include my average bonus?
Under the Employment Standards Act (ESA), your statutory termination pay must be calculated using your ‘regular wages.’ If your bonus is purely discretionary and unpredictable, it might not count toward the basic ESA minimums, but it almost certainly applies to your larger common law severance claim.
Can they fire me right before payout day just to avoid paying the bonus?
No. Firing an employee strictly to avoid paying an earned bonus is acting in bad faith. An Ontario judge would likely award you the full bonus, your regular common law severance, and potentially additional punitive or moral damages.
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