Are executives entitled to variable compensation after being terminated?

▤ Summary

Mr. Manastersky sought, among other things, compensation equal to the value of the variable income he historically earned under the Plan when it was in existence during the reasonable notice period. The majority decision took a strict legal interpretation of the applicable agreements relating to the Plan and concluded: “I do not see how RBCDS’ termination of the [Plan] in accordance with its terms, which were known and agreed to by Mr. Manastersky, could amount to conduct by an employer that evinces an intention to no longer be bound by the employment contract.” In short, the majority concluded Mr. Manastersky signed an agreement stating the employer could terminate the Plan at any time and the court decided to enforce this clear and unambiguous contractual language. The dissenting judge took a contextual approach and concluded that, although the income Mr. Manastersky earned under the Plan was discretionary, it was an integral part of his compensation and the employer was required to continue paying him comparable variable compensation if it decided to terminate the Plan. Instead of taking a strict literal interpretation of the relevant Plan documents, the dissenting judge looked at real world business realities. The trial judge noted: “Over the course of his 13 years of employment with RBC, the respondent’s CIP share represented well over 50% of his total annual earnings” and concluded that “the provision that allowed RBC to unilaterally discontinue the Plan, a particular mechanism of part of the compensation, does not contain clear language that has the effect of removing the employee’s right to receive compensation in an amount equivalent to what he would have earned through that mechanism during the period of reasonable notice.”

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$1M to $5M