Frustration of contract is a legal concept that means the original “employment contract” as agreed to can no longer be performed due to an unforeseen circumstance that neither party has control over. Where frustration of contract is proven, the employee is not entitled to wrongful dismissal damages at common law.
Terminated – Bonus, Stock Options, LTIP
Senior Executives, Directors and Senior Managers have compensation packages that often include bonuses, stock options, and/or LTIP payments.
The Supreme Court of Canada in Matthews v. Ocean Nutrition Canada Ltd. (October 9, 2020) (which was a case out of Nova Scotia) confirmed an approach established by the Ontario Court of Appeal to determine whether the employee was entitled to damages for lost bonuses, stock options, and/or LTIP payments during the common law reasonable notice period.
The Supreme Court of Canada stated that the Courts should ask two questions in these situations:
“Would the employee have been entitled to the bonus or benefit as part of their compensation during the reasonable notice period? If so, do the terms of the employment contract or the bonus plan unambiguously take away or limit that common law right?”
Matthews v. Ocean Nutrition Canada Ltd. (October 9, 2020)
By finding that the LTIP did not unambiguously take away Matthews’ common law right to the payment, the SCC restored the trial judge’s decision, and Matthews was entitled to damages for the lost LTIP payment as part of his common law damages.
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