A Lesson On Discretion: Discretionary Bonuses Have To Be Paid Fairly

A common form of compensation for integral members of an organization is the discretionary bonus. In principle, an employer can exercise discretion over bonus payments to their employees in a manner that rewards their contributions to the business over the past fiscal year, and that keeps the employer competitive in the market. In reality, and as illustrated by Ontario's Court of Appeal in a recent decision, employers must be fair and reasonable when paying discretionary bonuses.

In Bowen v. JC Clark Ltd., 2022 ONCA 614 (CanLII), the appellants were portfolio managers of a hedge fund. The respondent acquired the hedge fund in late 2012, and the respondent hired the appellants as portfolio managers for the fund. They worked at the respondent from December 3, 2012 until July 16, 2014, when their employment was terminated on a without-cause basis. At the time of their termination the appellants were each given two weeks' salary plus $577 in lieu of notice.