Termination, Bonuses and Shares: Tightening Plan Language to Reduce Legal Risk

Why It Matters

The decision underscores the financial and litigation risk for companies with poorly drafted incentive agreements, prompting HR and legal teams to overhaul plan language to protect against costly wrongful‑dismissal claims.

Summary

An Alberta Court of King’s Bench ruling in McElgunn v. Vermilion Energy highlighted that ambiguous termination language in bonus and long‑term incentive plans can be read against employers, allowing a dismissed executive to retain her share award. Partner Adrian Elmslie warned that many Canadian employers use unilateral, take‑it‑or‑leave‑it plans drafted with U.S. templates that fail to address common‑law termination rights, creating legal exposure. He emphasized the need for precise, jurisdiction‑specific clauses and ongoing legal review as plans are renewed, because courts demand clear, unambiguous terms regarding payouts on termination.