Bad faith at a price

When compensation is clearly earned, can an employer simply decline to pay it? In Kirchmair v. EXP Global Inc., 2025 ONSC 3103, the Ontario Superior Court answered that question with a firm “no” and awarded significant moral damages based on the employer’s conduct.

The decision highlights that where bonuses are defined and non-discretionary, they make up a core component of compensation. A failure to pay such amounts can expose employers to substantial legal risk.

The employee, a senior chemical and environmental engineer, had a compensation structure that included formula-based, non-discretionary bonuses tied to performance and payable on defined timelines. During the initial employment negotiations, the employee made it clear that these bonuses were not to be discretionary. The employer agreed and was responsible for calculating these amounts, but ultimately failed to do so, resulting in ongoing delays and, ultimately, non-payment of significant bonus entitlements.

A pattern of delay to outright withholding bonus

The evidence showed that, beginning in 2014, bonus payments were routinely delayed by approximately seven months. Senior management acknowledged that bonuses were not paid on time, often citing the company’s financial performance.

By 2016, new executives expressed concerns with the employee’s compensation structure and sought to negotiate revised terms with a less favourable bonus arrangement. At the same time, a significant earned bonus of approximately $148,000 remained unpaid.

The court found that the withholding of this bonus was intended to pressure the employee into accepting changes to his compensation.

Constructive dismissal and unpaid wages

The employment relationship subsequently deteriorated. After retaining counsel and rejecting proposed changes to his contract, the employee demanded payment of the outstanding bonuses. Instead of paying what was owed, the employer took the position that if he did not return to work by a specified date, he would be deemed to have resigned. When he did not return, the company processed his “resignation.”

The court concluded that the employee had been constructively dismissed. The employer’s conduct, including the failure to pay earned compensation and attempts to impose less favourable terms, constituted a fundamental breach of the employment agreement.

Bad-faith conduct can be costly

Where this case becomes particularly notable is in the court’s treatment of the employer’s conduct. Identifying several aspects of bad faith:

• The persistent failure to pay bonuses on time.
• The intentional withholding of an earned bonus to pressure the employee into accepting a new compensation structure.
• Attempts to build a case against the employee post-termination to reduce or avoid payment obligations.

Even without medical evidence of psychological harm, the court accepted that being denied a substantial portion of one’s compensation for years would cause significant stress.

The result: an award of $150,000 in moral damages. A figure that closely mirrors the unpaid bonus amount.

The cost of getting it wrong

The total award was substantial. In addition to the unpaid bonus, the employee received:

• 21 months of termination pay (as provided in the employment contract).
• Vacation pay on the bonus.
• $150,000 in moral damages
• Prejudgment interest spanning approximately eight years.

The total damages approached $700,000, excluding interest and costs. The court also noted that the bonus at issue had remained unpaid for nearly eight years by the time of trial, with no satisfactory explanation provided.

This case is a cautionary tale for organizations with complex, performance-based compensation. Non‑discretionary bonuses are wages and must be paid on time; they cannot later be framed as optional. Withholding earned pay is not a negotiating tactic and exposes employers to significant liability. Bad‑faith conduct can also lead to substantial moral damages. For HR and legal teams, the message is simple: failure to properly implement compensation plans may quickly escalate into costly wrongful‑dismissal litigation.

Alexa Saleski is an articling student at Turnpenney Milne LLP in Toronto.