- When an employee is dismissed without cause and given inadequate notice, the general goal of a wrongful dismissal claim is to put them, financially, roughly where they would have been…
- Courts tend to draw a distinction between: - Bonuses that are a regular, expected, and effectively predictable part of compensation — for example, one paid consistently, year after year,…
- For employees paid partly or largely on commission, the same underlying idea generally applies: a notice period is meant to reflect what the employee would likely have earned had they…
When Ontario law talks about "notice" after a dismissal, it is easy to think only in terms of base salary. But for many employees, bonus and commission income make up a significant share of total compensation — and a proper notice period calculation should usually reflect that, not just a bare salary number.
This article explains the general principles Ontario courts apply when incentive pay is part of the picture, and what tends to make the difference between a bonus being included or excluded.
The General Principle: Notice Period Damages Aim to Replace What You Would Have Earned
When an employee is dismissed without cause and given inadequate notice, the general goal of a wrongful dismissal claim is to put them, financially, roughly where they would have been had they worked through a proper notice period instead. If bonus or commission income was a normal part of what the employee would have earned during that period, leaving it out of the calculation defeats that purpose.
This is why a dismissed employee's compensation package as a whole — not just their base salary — is usually the starting point for figuring out what a fair notice period is actually worth.
Is Your Bonus "Integral" or Truly Discretionary?
Not every bonus is treated the same way. Courts tend to draw a distinction between:
- Bonuses that are a regular, expected, and effectively predictable part of compensation — for example, one paid consistently, year after year, based on largely objective criteria. These are more likely to be included in notice period damages.
- Bonuses that are genuinely discretionary — meaning the employer has real, exercised discretion over whether to pay one at all, in what amount, and has actually varied that in practice — which can be harder for an employee to claim, though not automatically excluded.
An employer calling a bonus "discretionary" in a policy document does not necessarily settle the question if, in practice, the bonus was paid consistently and calculated in a fairly predictable way.
Commission-Based Income Gets Similar Treatment
For employees paid partly or largely on commission, the same underlying idea generally applies: a notice period is meant to reflect what the employee would likely have earned had they kept working, which for a commission-based role often means looking at historical commission earnings rather than assuming a bare base salary reflects their real income.
This matters most for sales roles and similar positions where commission, not base pay, is the larger part of total compensation.
How Plan Language Can (Try to) Limit This
Employers sometimes include contract or plan language attempting to exclude bonus or commission from any notice period or termination calculation altogether, or to cap it in some way. Whether this kind of clause actually works depends heavily on how clearly it is worded, and on general principles of contract interpretation that Ontario courts apply — ambiguous or unclear language is often read in the employee's favour, and courts have shown skepticism toward clauses that seem designed purely to strip out compensation an employee would otherwise be entitled to.
This is a fact-specific and technical area, so the actual wording of your plan documents and employment contract matters far more than general assumptions about what "usually" happens.
How These Amounts Are Often Estimated
Because a dismissed employee cannot simply keep earning commission or bonus after their employment ends, courts and negotiating parties often look to a representative period of the employee's actual past earnings — rather than a single unusually good or bad year — to estimate what they would likely have earned during a proper notice period. The exact approach varies with the type of role and the pattern of past earnings.
Comparing Types of Incentive Pay
| Type of pay | How it is generally treated |
|---|---|
| Regular, formula-based bonus paid consistently | Usually included in notice period damages |
| Genuinely discretionary bonus, rarely paid or highly inconsistent | Harder to claim, though not automatically excluded |
| Commission forming a large share of income | Usually estimated from historical earnings and included |
| Bonus tied to a specific future event, like a vesting date | Depends heavily on timing and plan wording — often disputed |
What to Gather Before You Talk to a Lawyer
- [ ] Your last several years of pay stubs or T4 slips showing bonus and commission history
- [ ] Any bonus, commission, or incentive plan documents you were given
- [ ] Your employment contract, especially any clause mentioning bonus, commission, or termination
- [ ] Communications about how your bonus or commission was calculated in past years
- [ ] Any severance offer you have already received, and how it treated, or ignored, incentive pay
Frequently asked questions
My bonus varied a lot year to year — does that mean it doesn't count?
Not necessarily. Variability alone does not automatically make a bonus "discretionary" in the legal sense; what matters more is whether it was a regular, expected part of your compensation and whether the employer actually exercised meaningful discretion over whether to pay it.
What if my severance offer only mentions base salary?
That is a common gap worth challenging, especially if bonus or commission historically made up a meaningful share of your income. A lawyer can help assess whether the offer should be revised to reflect your full compensation.
Do I need to have already qualified for this year's bonus for it to count?
Not always. If the notice period you are entitled to would have run into or through the period the bonus was tied to, the analysis often looks at whether you would likely have qualified had you kept working, not just whether you had technically hit every target before your dismissal.
Does this apply to stock-based compensation too?
Similar principles can apply to equity compensation, though the analysis often involves plan-specific rules that are worth reviewing carefully alongside your employment contract.
This is a litigation question
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