Employee Bonuses And Legal Pitfalls

Introduction

Incentive compensation is increasingly an important term of employment for employers and employees. Employers are using incentive compensation to achieve a variety of business goals.

Incentive compensation for many employees now represents a much larger element of an employee's compensation than ever before. To limit and define the contractual obligation to pay incentive compensation, employers are introducing a range of written policies and terms of employment.

A number of recent noteworthy cases have identified problems related to the enforceability of some of the more common contractual terms utilized. Two back-to-back decisions of the Ontario Court of Appeal recently helped to clarify the circumstances in which a dismissed employee will be entitled to damages for the loss of the opportunity to earn incentive compensation.