Equity compensation agreements separate from statutory termination entitlements
In Wigdor v. Facebook Canada Ltd., the Ontario Superior Court found vesting restrictions contained in equity-based compensation plans - in this case, Restricted Stock Unit (RSU) plans - to be enforceable, despite finding a separate termination clause to be unenforceable. This ruling has significant implications for Ontario employers, clarifying critical distinctions between equity-based compensation and standard employment entitlements under the Employment Standards Act, 2000 (ESA).
In 2020, Meta Platforms Inc. acquired Chatham Labs Inc., a technology consulting firm founded by the plaintiff, Daniel Wigdor. As part of the acquisition, Wigdor’s consulting relationship - spanning nearly a decade with Meta’s subsidiaries - came to an end and he became an employee of Facebook Canada, Meta’s Canadian subsidiary. Wigdor’s employment contract with Facebook Canada explicitly recognized his prior years of service, but solely for the purpose of determining his minimum statutory entitlements under the ESA.
Nevertheless, Wigdor’s employment contract included a clause that purported to limit his termination entitlements within the first three months of employment to just two weeks’ notice or pay in lieu thereof. The clause directly conflicted with Facebook Canada’s obligation under the ESA to recognize Wigdor’s service with Chatham (which was deemed a predecessor of Meta/Facebook Canada under the ESA). Wigdor’s near decade of prior service would have warranted greater notice of termination. His employment contract contained additional language limiting his separation entitlements after three months of service to the ESA minimums.
Separately from his employment contract, Wigdor was granted RSUs under a 2020 RSU agreement and RSU agreements for 2021–2023. Each RSU agreement contained clear and robust language that provided for the immediate forfeiture of all unvested RSUs upon termination of employment.
RSU agreements forfeited entitlement upon termination
The 2020 RSU agreement stated that if a “Participant’s service Terminates for any reason, all unvested RSUs shall be forfeited to the Company forthwith.” It also stated that: “all unvested RSUs shall be forfeited as of the date that is the earlier of: (i) the date Participant’s employment is terminated, and (ii) the date Participant is no longer actively providing services to the Company or any of its Subsidiaries… and no vesting shall continue during any notice period in relation to his/her Termination, whether specified under contract or statutory, regulatory or common law […].”
The 2021-2023 RSU agreements included the following forfeiture clause:
“If Participant’s service Terminates for any reason, all unvested RSUs shall be forfeited to the Company forthwith […]. If Participant is an Employee of the Company or a Parent, Subsidiary or Affiliate, then Participant's service Terminates when Participant has ceased to provide services to his/her Employer, whether such cessation is initiated by Participant; by his/her Employer, with or without cause, and whether or not later found to be invalid or unlawful….”
The forfeiture clauses also included a provision that explicitly excluded vesting during any statutory period of notice of termination.
Facebook Canada dismissed Wigdor in December 2023 and, relying on the terms of his employment contract, satisfied only his minimum ESA notice and severance pay entitlements. Wigdor sued for wrongful dismissal, arguing that the above-described conflict between the termination clause in his employment contract and the ESA rendered his termination clause unlawful and unenforceable. He also argued that the illegality could not be remedied by generic saving language found in the contract.
Termination clause dispute
The company asserted that its termination clause, which limited notice in Wigdor’s first three months of service to two weeks, complied with the ESA in light of the employment contract’s explicit reference to his prior service.
Wigdor further claimed that the immediate forfeiture of millions of dollars in unvested RSUs upon termination was unlawful. Wigdor argued that the RSU forfeiture breached the ESA because, in his view, s. 61 of the ESA required continued participation in equity compensation during the statutory notice period. Facebook Canada disagreed, arguing that s. 61 of the ESA requires only payment of statutory wages and the continuation of benefit plan contributions - not the vesting or payout of equity awards such as RSUs.
The court found that the termination clause in Wigdor’s employment contract was unenforceable because it conflicted with the ESA. Despite broad contractual language promising compliance with the ESA, the court, relying on Rossman v. Canadian Solar Inc., 2019 ONCA 992 and other appellate authority, held that such language does not “cure” a specific provision that violates the ESA. As a result, Wigdor was found entitled to 10 months of common law reasonable notice in light of his senior position, specialized skills, and the limited number of comparable roles in the market.
However, the court rejected Wigdor’s position on his RSU entitlement. The court held that s. 60 of the ESA requires an employer to refrain from reducing a dismissed employee’s wage rate or altering the employee’s term or condition of employment, which applies only when an employee has received working notice of termination. On the other hand, s. 61 - which governs an employee’s entitlements when dismissed without statutory notice - obliges employers to pay a lump sum calculated based on what an employee would have received under s. 60 had the employee received notice. Section 61 further requires employers to continue only “benefit plan contributions.”
Statutory wage entitlement excludes stock options
Wigdor was dismissed without notice, so s. 61 applied to his circumstances. Relying on North v. Metaswitch Networks Corporation, 2017 ONCA 790, and considering what Wigdor would have received under s. 60 had he received working notice of termination, the court held that the definition of “wages” found in s. 60 does not include RSUs or stock options, but is limited to monetary remuneration, prescribed allowances, or payments required by the ESA. The Ontario legislature could have chosen to include equity-based compensation in the statutory definition but did not do so, the court said.
The court then turned to the language of the RSU agreements, observing that the 2020 and 2021–2023 RSU agreements stated that all unvested RSUs would be forfeited immediately upon termination of employment, and included language specifying that vesting does not continue during notice periods, regardless of whether such periods are contractual, statutory, or common law. The court found that this language was clear, unambiguous, and compliant with s. 61 of the ESA.
Finally, the court concluded that the enforceability of the RSU agreements was not affected by the invalidity of the employment contract’s termination clause. The court distinguished between compensation entitlements under a contract of employment and those arising from separate equity compensation agreements, finding that the latter, if clear, remain enforceable as independent contracts. Unfortunately, except to refer to the Ontario Court of Appeal’s decision in Mikelsteins v. Morrison Hershfield Limited, 2019 ONCA 515, the court did not elaborate on this distinction.
Wigdor confirms that ESA compliance in termination clauses is essential - saving language will not rescue a provision that falls below the statutory minimums. The court also made clear that unambiguous, standalone RSU forfeiture provisions that are consistent with ESA rights and obligations can be enforceable even if a related termination clause in an employment contract is void. Employers should review both employment and equity agreements for clarity and statutory compliance.
Rich Appiah is the founder and principal of Appiah Law, an employment and labour law firm in Toronto. Behnam Nadimfard is an associate lawyer at Appiah Law.
