Toronto, ON — February 25th, 2026 — With the Olympics at a close and Canada mourning the loss of that gold medal in both the men’s and women’s Olympic hockey finals, the recent decision in Adelman v IBM Canada Limited reminds us of the Court’s approach to incentive compensation during the notice period and provides a useful guideline for employers for when, inevitably, employees will go for the Gold!
Facts
The Plaintiff, Jason Adelman, worked for the Defendant employer, IBM Canada Limited, in a variety of roles over his 19-year tenure at the company. His final position was Executive Director, Development and Support, AI Ops and Observability which he held for over three years.
On January 6, 2023, IBM notified Mr. Adelman that it was terminating him without cause, effective two weeks later. At the time, he was 59 years old. His employment letter from IBM did not contain any termination provisions. Mr. Adelman sued for 24 months of notice and other damages, including bonus entitlements for the year in which he was terminated and over the 24-month notice period and for the loss of restricted stock units (RSUs) and stock options that would have vested during his notice period had IBM not improperly cancelled them upon his termination.
Analysis and Decision
Wrongful Dismissal Damages over the Notice Period
Given Mr. Adelman’s position, tenure, age, and availability of similar employment, the court awarded him 24 months notice, which included salary, pension plan contributions, and employee benefits over the period. Mr. Adelman was not successful in asserting his right to participate in the company’s employee stock purchase plan during the notice period and was not awarded any damages in this regard. However, he was awarded damages for the improper cancellation of his RSUs based on the language of the plan documents.
Is Incentive Compensation Payable Over the Notice Period?
Here the Court looked to the two-part test, discussed in the widely known Matthews decision for determining whether a wrongfully dismissed employee is entitled to damages for the loss of bonus entitlement:
- whether the bonus was an integral part of the employee’s compensation package, such that there is a common law entitlement to damages in lieu of bonus; and
- whether, if the bonus was an integral part of the employee’s compensation package, there is any language in the bonus plan that would specifically remove the employee’s common law entitlement.[1]
On the evidence, the Court was not persuaded that Mr. Adelman received a bonus each year, that the bonuses were required for IBM to stay competitive with its competitors, and that bonuses were always historically awarded. The Court accepted evidence that many IBM executives have not received bonuses in the past. Additionally, the Court found that bonuses did not constitute a significant component of Mr. Adelman’s compensation. In 2020, Mr. Adelman earned a bonus of $36,954, equivalent to 16.6% of his base salary. In 2021, he earned a bonus of $11,500, equivalent to 3.6% of his base salary. The Court found that there was no evidence as to the “frequency or quanta of any bonuses he received before he became an executive, and there was no evidence that those bonuses formed a significant portion of his pay”.[2]
The Court found that the bonus was not an integral part of Mr. Adelman’s compensation. Given this conclusion, the Court did not consider if there was any language limiting Mr. Adelman’s right to the bonus once he ceased to be actively employed by IBM.
Is Incentive Compensation Owed in the Fiscal Year Prior to Termination?
The Court accepted IBM’s evidence that the bonus program was a discretionary program. However, as stated in Bowen by the Court of Appeal, where an agreement “provides for a discretionary bonus, there is an implied term that the discretion will be exercised in a fair and reasonable manner”[3].
In the Court’s assessment, IBM’s process for determining Mr. Adelman’s bonus for 2022 was not fair or reasonable as the only reason the bonus was denied was due to the termination. The Court was persuaded by Mr. Adelman’s 2022 executive compensation statement, issued by IBM, which stated: For 2022 he separated before AIP [annual incentive program] payment date (for 2023 cycle) so he is not eligible for AIP payment. [4] The Court found that it was “clear that individuals who had separated or had a pending separation from IBM were “skips” – that is, they were “skipped” in the bonus allocation and given zero bonuses.”[5]
The Court awarded Mr. Adelman his 2022 bonus which was equivalent to the average of the bonuses he received for the two prior years.
Tips for Employers
- Total compensation over the common law notice period means every perk – from benefits/pension to car allowances to bonuses and equity. Courts will award the Gold over the entire notice period unless clear and unambiguous language provides otherwise.
- Draft enforceable Bonus Plans. Employers should ensure their bonus compensation plans are compliant with the current case law and employment standards legislation. Limiting entitlements requires clear and enforceable language in your plans.
- Remember that the company’s history of awarding incentive compensation can aid employers when deciding whether a bonus is integral to the total compensation of an employee.
- Use discretion wisely. As seen in this case, reasonable decisions matter. The decision to terminate employment prior to the date of a bonus payout may not be enough of a justification to limit the entitlement. Make sure your bonus plans have clear language on termination and HR communications are in line with the language of the applicable plans.
Employees will always shoot for their Gold, but only clear, unambiguous and enforceable language as well as company discretion being applied in a fair and reasonable manner will have them settle for Silver.
If you’d like support reviewing your incentive compensation policies or procedures, Protea LLP is ready to assist.
[1] 2026 ONSC 420 at para 25 [Adelman].
[2] Ibid at paras 28; 30; and 33.
