Constructive Dismissal: Non-Discretionary Bonus and Performance Reviews
Non-discretionary bonuses are additional pay that an employer gives to their employees who have met a certain set of conditions. This type of bonus is often predetermined, meaning that the employee knows exactly what they need to do to receive it and how much they will receive.
To determine eligibility for non-discretionary bonuses, employers often conduct performance reviews. These reviews assess how well the employee is doing their job and determine if they meet the conditions set for the bonus.
Depending on the circumstances, a performance review can result in a significant pay reduction to an employee’s regular compensation and create a toxic work environment for an employee. This can be a basis for an employee to claim constructive dismissal and seek their entitlements for termination without cause.
This article will explain what a constructive dismissal is and describe how a non-discretionary bonus and performance review can result in a constructive dismissal claim. You will also learn how an employment lawyer can help.
What is a Non-discretionary Bonus?
A non-discretionary bonus refers to a type of bonus that is predetermined and guaranteed by an employer. Unlike discretionary bonuses, which are awarded at the employer’s discretion and without a set formula, non-discretionary bonuses are typically specified in an employment contract, collective bargaining agreement, or company policy.
These bonuses are often based on predetermined criteria such as performance metrics, sales targets, or other objective measures. Since non-discretionary bonuses are explicitly outlined and expected by employees, they are generally considered a part of the overall compensation package. This type of bonus is usually more predictable and provides employees with a clear understanding of the conditions they need to meet to be eligible for the bonus.
What is a Constructive Dismissal?
A constructive dismissal is a termination without cause that occurs through an employer’s actions instead of their words. They commonly occur where:
- There is a significant breach of a fundamental in an employee’s employment terms;
- An employer makes a significant change to an employee’s terms of employment without the employee’s consent; or
- The employer creates a toxic work environment that forces the employee out of the workplace.
Whether an employee is forced to resign or resigned voluntarily from their employment is what a Court seeks to determine in a case of constructive dismissal. Only employees forced out of the workplace as there was no reasonable way to continue can receive their severance entitlements.
Where an employee succeeds on a constructive dismissal claim, they would be entitled to their minimum entitlements under the Ontario Employment Standards Act, 2000 (the “ESA”) and any other applicable severance compensation they are entitled to.
If an employee waits too long to object to their employer’s mistreatment, or otherwise leaves the workplace within a reasonable time when it becomes unbearable for them, they may have a weaker claim for constructive dismissal.
When Can a Bonus and Performance Review lead to a Constructive Dismissal Claim?
One form of constructive dismissal occurs when an employee receives significantly less compensation than reasonably expected based on past practices. Significantly is the key word – which means a modest reduction to expected compensation is not typically grounds for a constructive dismissal claim.
However, non-discretionary bonuses tied largely to an employee’s performance can be an “indirect way” of reducing an employee’s expected compensation unduly. This usually occurs when an employer subjects an employee to a workplace performance review that is deceptive, unreasonable or otherwise in bad faith.
A performance review is meant to provide an employee the opportunity to improve their performance where there are problems to resolve. They generally should be clear, and concise, and provide employees with an understanding of what expectations they need to meet.
Performance reviews conducted and engaged in bad faith towards employees can amount to harassment and the creation of a toxic work environment. It is particularly mentally distressing when an employee is provided vague or outright false allegations of performance issues, no clear indicator of how to meet an employer’s expectations, and continuously harassed about their performance.
When an unreasonable and bad faith performance review results in a significant reduction to an employee’s compensation and deeply impacts their mental health, they may have grounds to sue their employer for constructive dismissal. This will always depend on the unique facts of an employee, and they should seek the advice of an employment lawyer before taking action on any suspected constructive dismissal of their employment.
- Constructive Dismissal Explained
- Can You Claim Constructive Dismissal Without Resigning?
- Constructive Dismissal: 4 Key Considerations
- Constructive Dismissal: Reducing the Employer’s Risk
How Can an Employment Lawyer Help?
Like any potential legal claim, there is no substitute for tailored and expert legal advice about your options. Whether you are an employee or an employer, consulting with an employment lawyer can be the difference between maximizing your chances of success in a legal claim and having no way to achieve your result moving forward.
An employment lawyer can help in a workplace dispute in the following ways:
- Determining your legal rights, obligations, and entitlements;
- Drafting a demand letter asserting your claim to severance and other damage, such as constructive dismissal;
- Negotiating a mutually agreeable resolution;
- Navigating the appropriate legal process; and
- Providing step-by-step legal advice to maximize the chances of achieving a desired result while minimizing legal risks.
It is especially important for employees and employers alike to consult with an employment lawyer when a potential workplace dispute may arise. Early legal advice can minimize your legal risks and maximize your case’s chances of success.
Non-discretionary bonuses tied to performance reviews are common incentive tools employers can use to maximize their employee’s productivity in the workplace.
Where an employer engages in the performance review process in bad faith, they may be reducing an employee’s compensation unduly and creating a toxic work environment. Where such circumstances arise, the employee may seek severance entitlements for constructive dismissal.
Given the legal risks involved, it is always best for both employees and employers to consult an employment lawyer where workplace disputes arise. Every case depends on its own facts, and that is especially true of claims for constructive dismissal.
Contact Achkar Law
If you have any questions about performance reviews, non-discretionary bonuses, or constructive dismissal claims, our team of experienced employment lawyers at Achkar Law can help.