Movie studio’s one-time bonus left out of B.C. court’s award

MGM employee had no automatic entitlement to bonus, and therefore court refused to tack it on to damages in case that outlines when a court will consider a bonus to be an integral part of compensation

Karen Zeidel started working in November 2002 as a sales representative for Metro-Goldwyn-Mayer Studios Inc. (MGM). The employment contract was partly written and partly oral. It did not stipulate terms of the termination of employment. She was paid $130,400 in 2003 which included a $700 per month car allowance and a bonus of $15,560.

In court Zeidel and MGM disputed what the bonus structure attached to her employment was, but the court concluded that whichever it was Zeidel would not have been entitled to it based on her 2003 sales performance.

She did, however, receive it as did all other senior members of the Canadian sales team in 2003, none of whom had achieved their sales targets.

Zeidel received an unfavourable appraisal from her supervisor and her employment was terminated in January 2004. She was paid two weeks' base salary as severance, having worked for MGM for 14 months at the time of termination.

Damages: How much was she entitled to?

At issue was what award Zeidel should receive in lieu of notice. She was 46, had a business degree from a college in Boston, and had 17 years' experience in the entertainment industry.

In the nine months between termination and the court hearing she had been unable to secure alternate employment but there was no suggestion she failed to act reasonably to mitigate her damages.

Zeidel argued the amount should be higher than would otherwise apply because she had been induced to leave her previous employment.

The British Columbia Supreme Court rejected that argument, pointing out that prior to working for MGM she had worked for her husband's company. From January to November 2002 she had worked for his company for 940 hours, which amounted to less than half of full-time hours.

She had not been in secure long-term employment at the time she joined MGM. The amount of work was uncertain and, in any case, she had separated from her husband in September 2003.

Not inducement

“This is not a case in which the new employer pursued the plaintiff in the face of initial reluctance,” ruled the court. The new employer had not made promises or representations of long-term employment, it added. (For more on employers who induce employees to leave secure employment and the consequences of doing so, see the Case In Point on Inducement on page 3334 of this issue.)

The court’s criteria for bonuses

The court did not include Zeidel's previous year's bonus in setting its award. The considerations for a court in deciding whether a bonus is an integral part of an employee's compensation are:

•whether it is received every year;

•whether the employer is required to pay it to remain competitive with competitive employers;

•whether the employer has ever exercised discretion in not awarding a bonus to the employee; and

•whether the bonus constituted a significant component of the overall compensation.

In this case there was no automatic entitlement to the bonus, which was only to be paid out under certain conditions. When they received the 2003 bonus the sales staff had been told it was a one-time payment.

No bonus had been paid in the three years before that. The base salary at MGM was also significantly higher than at Universal, a competitor where Zeidel had also sought work.

However the court did rule that there was a limited pool of available employers for Zeidel to find alternate employment with. It decided she was entitled to five months salary in lieu of notice (less the two weeks already paid).

This did not include an amount for any bonus or for a continuation of the car allowance. Zeidel received $40,506 less employment insurance deductions.

For more information see:

Zeidel v. Metro-Goldwyn-Mayer Studios Inc., 2004 CarswellBC 2511, BCSC 1415 (B.C. S.C.).

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