David Matthews spent about 14 years working at Ocean Nutrition Canada and held senior leadership positions. He participated in a long term incentive plan designed to reward executives if the company was sold. After relations with his employer deteriorated, he left and alleged constructive dismissal. The company was sold during the 15 month reasonable notice period that the trial judge later found he should have received. Had he remained employed through that period, he would have received a substantial payment under the plan.
The employer relied on plan wording tying payment to employment at the time of the sale. At trial, Matthews succeeded, but the Nova Scotia Court of Appeal removed the incentive damages. The Supreme Court restored them in Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26. The Court's analysis focused on what the employee lost because proper reasonable notice hadn't been provided.
The Supreme Court explained a two stage inquiry. First, would the employee have received the bonus or benefit during the reasonable notice period had the employer performed its obligation? Second, if so, do the terms of the employment agreement or incentive plan clearly and unambiguously remove the employee's common law right to damages for losing that benefit? The language in this plan, including its active employment requirement, didn't do so.
That distinction between entitlement under the plan and damages for breach of the employment contract matters. An employee who has been wrongfully dismissed may not be asking the court to deem them actively employed on a later date. They may instead be seeking compensation for what proper notice would have allowed them to receive. The Court also discussed alleged dishonest treatment, but it didn't need to decide a separate bad faith damages claim to resolve the incentive payment issue.
For employers, the lesson is that incentive documents and termination clauses have to be considered together. Wording that looks decisive for an employee who leaves voluntarily may not clearly address damages during the common law notice period. For employees, the case shows why a lost benefit analysis starts with the actual notice period and the relevant payment conditions, not just a label applied to the plan.
Primary source: Supreme Court of Canada, Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26, https://decisions.scc-csc.ca/scc-csc/scc-csc/en/item/18496/index.do