If you have recently been fired, laid off, or let go, your employer may offer you a severance package based strictly on your base salary. They will often tell you that because you are no longer an “active employee,” you forfeit any upcoming bonuses, commissions, or variable pay.
Do not accept this without speaking to an employment lawyer. In the vast majority of cases, your employer is legally wrong, and you are leaving tens of thousands of dollars on the table.
The Quick Answer: Yes, your bonus must legally be included in your severance package. Under Canadian common law, your severance is meant to replace all the compensation you would have earned during your reasonable notice period. If you would have received a bonus during that time, your employer must pay it out.
On This Page:
- 1. Why Bonus is in Severance
- 2. “Active Employment” Clause
- 3. Discretionary Bonus
- 4. Provincial Rules
- 5. Get Legal Advice
What is Bonus Pay? (Types of Bonuses)
When you are fired without cause in Canada, you are legally entitled to advance warning, known as a reasonable notice period. Because most employers want you to leave immediately, they must pay you the exact amount of money you would have earned if you had worked through that entire notice period.
Depending on your age, position, and years of service, this common law notice period can last up to 24 months.
Canadian courts have repeatedly ruled that this payout must “make you whole.” It can’t just be your base salary. If your historical compensation included an annual bonus, and that bonus payout date falls anywhere within your 24-month notice period, your employer is legally required to include it in your final severance calculation.
The “Active Employment” Clause
To get out of paying bonuses during a termination, HR departments will often point to a line in your employment contract or corporate bonus policy that says:
“Employees must be actively employed on the date of the bonus payout to receive their bonus.”
They will use this clause to claim that because you were fired in November, you do not get your year-end bonus in December.
This is a common legal trap, and courts frequently strike it down. The Supreme Court of Canada has established extremely strict rules for these clauses. For an “active employment” clause to actually strip away your common law rights, the legal language must be absolutely perfect and brought to your attention when you signed it. In most cases, corporate bonus policies are poorly drafted, meaning the clause is legally unenforceable and you still get your bonus.
What if My Bonus is “Discretionary”?
Another common tactic employers use is claiming that the bonus was purely “discretionary,” meaning management can choose whether or not to give it to you.
Calling a bonus discretionary does not automatically protect the employer from paying it during a severance negotiation. If you received a similar bonus consistently over the past few years, the law views it as an integral part of your overall compensation, regardless of what label the company puts on it. Your employer can’t suddenly exercise their “discretion” to punish you just because they decided to terminate your employment.
Provincial Rules: Ontario, Alberta & BC
While common law severance rules are largely consistent across Canada, each province has its own specific baseline employment standards that also govern how bonus pay is handled during termination.
Bonus Pay and Severance in Ontario
Under the Ontario Employment Standards Act (ESA), your employer can’t alter any terms of your employment during your statutory notice period. This means if your bonus payout date falls within your 8-week ESA notice period, it must be paid out in full, unconditionally. Beyond the ESA minimums, Ontario common law frequently awards bonuses that would have been earned up to 24 months after termination.
Bonus Pay and Severance in Alberta
Similar to Ontario, the Alberta Employment Standards Code (ESC) dictates that termination pay must reflect your regular wages. However, Alberta courts have historically been very strict on employers trying to use vague corporate policies to deny bonuses during the common law reasonable notice period. If the bonus was an expected part of your income, Alberta judges routinely order employers to pay it.
Bonus Pay and Severance in British Columbia
In BC, the Employment Standards Act is clear that compensation can’t be reduced during the statutory notice period. Furthermore, BC courts closely scrutinize “bonus plans” that are suddenly introduced or altered just before a termination. If your employer tries to withhold your variable pay, our BC employment lawyers can leverage your common law rights to recover it.
Have an Employment Lawyer Review Your Offer
If you have been handed a severance package that only offers your base salary and excludes your bonus, commissions, or equity, do not sign the release. Once you sign, you forfeit your right to pursue your employer for the money you are legally owed.
The employment lawyers at Samfiru Tumarkin LLP have reviewed thousands of severance offers. We know how to expose illegal “active employment” clauses and negotiate the maximum financial package available to you under Canadian law.