Every month, Kate Teves, HR consultant, recruiter and founder of The HR Pro, answers Realtors’ questions about anything and everything related to human resources. Have a question for Kate? Send her an email.

 

Question: How can I structure bonus clauses in employment contracts to avoid future conflict?

Kate: One of the many things real estate and HR have in common is that they both rely on clarity.

Whether it’s a purchase agreement or a floor plan, details are crucial. Yet when it comes to employment contracts drafted by brokerages, teams or even single agents hiring an admin assistant, bonus structures are too often written with the legal equivalent of invisible ink. 

We have even heard that they have been specifically advised by consultants not to put any tangible definitions around bonuses into contracts. While the vagueness (“It’s just a discretionary bonus, we’ll figure it out later”) may seem harmless, figuring it out later carries the risk of a lawsuit down the road.

What about the courts? They won’t provide much sympathy to brokerages or agents. In Ontario and across Canada, judges treat brokerages the same way they treat banks, tech firms, or investment companies. A vague bonus clause can easily lead to a six-figure liability.

As Sheldon Cooper from The Big Bang Theory taught us while reinforcing the dreaded roommate agreement: “Ambiguity in a contract benefits the party that did not draft it.”

 

A few examples 

 

Take Chapman v. GPM Investment Management. The executive’s contract tied his bonus to “10 per cent of pretax profit.” Simple? Not at all. 

When the company sold a piece of real estate, it tried to exclude the capital gain from “profit.” The court disagreed, ruling that without crystal-clear exclusions, “profit” meant all profit, including a big land sale. 

Costly lesson: In real estate, where profits often swing on a single deal, fuzzy bonus definitions can make or break a balance sheet.

Or look at Matthews v. Ocean Nutrition and Paquette v. TeraGo Networks, two leading cases on bonuses during termination. Both decisions hammered home the point that, unless a contract clearly says otherwise, employees can claim bonuses they “would have earned” during their reasonable notice period. 

Imagine a brokerage manager terminated in November, only to claim a year’s worth of bonus payouts tied to the next spring’s sales surge. If your clause just says “must be actively employed,” that may not be enough.

Then there’s Boyer v. Callidus, where unclear policies on bonuses and stock options left a company paying nearly $1.8 million. Swap “stock options” for “profit-sharing pools” or “branch manager bonuses” and you can see the parallel: courts will force payouts if the language doesn’t explicitly cut them off.

 

Spell out bonus clauses like a business contract

 

Brokerages are unique workplaces. Besides agents, who work on commission splits, brokerages often pay staff, office managers, marketing coordinators, deal secretaries and even senior administrators a salary plus bonuses tied to retention, profitability, recruitment targets or profit sharing. These bonuses can be, and usually are, as informal as “If we hit X deals this quarter, you’ll get $Y.”

But what happens if that employee resigns mid-quarter? Or is it terminated before payouts? Without precise contract wording, Ontario courts will likely side with the employee, awarding the bonus (and possibly tacking on additional damages).

It’s easy to picture – a brokerage promises its office manager a “growth bonus” for every new agent recruited, but doesn’t define whether the bonus is payable immediately or only after the agent survives a retention period. Cue dispute.

Another common scenario: A branch administrator is told they’ll receive a “profit-share” at year-end, but the brokerage never clarifies whether “profit” means before or after head office expenses. Enter the Chapman precedent, and a costly recalculation.

The solution isn’t complicated; it just requires care. Bonus clauses in brokerage contracts should be drafted with the same precision as an Agreement of Purchase and Sale. Spell out:

• What exactly triggers the bonus (specific KPIs, profit definitions, timelines).
• Whether the employee must be employed on the payout date.
• How disputes will be resolved.
• Concrete examples of calculations (e.g., “If office profit is $500,000, bonus pool is $50,000, divided as follows…”).

Yes, it feels tedious. But so does staging a vacant property, and we all know buyers are more likely to pay top dollar for a home that looks complete. Courts are the same: they reward employers who “stage” their contracts properly.

Write it clearly. Put it in the contract. And save the surprises for your client gift baskets, not your bottom line.