THE EMPLOYERS' EDGE
When Employment Ends, do RSUs Keep Vesting? Ontario Court of Appeal Weighs in on Wigdor v Facebook Canada
The Ontario Court of Appeal’s decision in Wigdor v Facebook Canada Ltd., 2026 ONCA 572 provides important guidance on the treatment of employee equity compensation on termination. The Court found that a provision in a Restricted Share Unit (“RSU”) Agreement that sought to stop vesting during the statutory notice period under the Employment Standards Act, 2000 (“ESA”) was contrary to the ESA and therefore unenforceable.
Ultimately, the employee recovered damages for RSUs that would have vested during the substantially longer common law reasonable notice period. The decision provides important guidance on how the ESA’s prohibition against changing a “term or condition of employment” during a statutory notice period applies to equity compensation. It also highlights the need for employers to carefully review equity plans, award agreements, and termination provisions to ensure compliance with the ESA.
Background
After Meta Platforms Inc. acquired Chatham Inc. in 2020, Chatham’s founder, Dr. Daniel Wigdor, joined Facebook Canada as its Director of Research Science. His compensation package included 43,380 RSUs, valued at approximately US$7.5 million, that were to vest over a four-year period. Facebook Canada ended Dr. Wigdor’s employment without cause in December 2023 and provided 8 weeks of pay in lieu of notice, together with 12.5 weeks of statutory severance pay under the ESA. Dr. Wigdor did not sign a proposed release that would have barred him from pursuing his claim relating to the unvested RSUs.
The RSU Agreements set out the treatment of unvested awards upon termination of employment. In particular, the 2020 Agreement provided that any RSUs that had not yet vested would be cancelled upon termination, with no further vesting during the notice period, even where the notice period was the minimum period required by the ESA. The Agreements covering 2021 through 2023 took a similar approach, although they included saving language intended to preserve rights expressly required by the applicable legislation.
The Application Judge’s Decision
The application judge found that the termination provision in Dr. Wigdor’s employment agreement was contrary to the ESA because it did not account for his previous service with Chatham Inc. As a result, the termination provisions in the employment agreement were unenforceable and Dr. Wigdor should have received 10 months of common law reasonable notice. However, the application judge rejected his claim for the RSUs that would have vested during that period. The application judge concluded that the RSUs did not qualify as “wages” or contributions to a benefit plan and therefore were not subject to the continuation requirements in section 60 of the ESA where the employer chose to provide pay in lieu of notice under section 61. Dr. Wigdor appealed this decision regarding his entitlement to the RSUs.
The Court of Appeal’s Analysis
Sections 60 and 61 Must be Read Together
The central issue on appeal was whether the application judge had erred by treating sections 60 and 61 of the ESA as distinct provisions operating independently of each other.
Section 60 governs an employer’s obligations when an employee receives working notice. It prohibits the employer from altering any other “term or condition of employment” during the statutory notice period. Section 61(1)(a), on the other hand, addresses termination where the employer chooses to provide pay in lieu of notice. It requires the employer to pay a lump sum equivalent to what the employee would have received under section 60 if working notice had been provided.
The Court of Appeal concluded that sections 60 and 61 must be interpreted together. The reference in section 61(1)(a) to the amount an employee “would have been entitled to receive” under section 60 requires consideration of the employee’s overall compensation during the statutory notice period. The purpose of these provisions is to ensure that employees are not financially disadvantaged because the employer elects to provide pay in lieu of notice rather than working notice.
RSU Entitlements Are a Term or Condition of Employment Under s 60(1)(a)
Applying this interpretation, the Court found that Dr. Wigdor’s RSUs formed part of his overall compensation and therefore constituted a protected term or condition of employment. As a result, Facebook Canada could not reduce, alter, or eliminate the vesting of those RSUs during the statutory notice period.
Forfeiture Clauses Inconsistent with the ESA Are Unenforceable
The Court found that because RSU vesting was a term of employment, the forfeiture provisions were void under section 5 of the ESA. The 2020 RSU Agreement barred vesting during the notice period, conflicting with section 60 requirements to maintain employment terms and conditions. The later Agreements’ saving clauses did not cure the offending language, and any ambiguity was interpreted in favour of the employee. In the absence of enforceable forfeiture provisions, Dr. Wigdor was awarded US$4.7 million for 9,405 RSUs that would have vested during his 10-month common law notice period.
Key Takeaways
Employers should:
- Review forfeiture provisions. Clauses that automatically cancel RSU vesting upon termination, including during the statutory notice period, may be unenforceable if they effectively contract out of the ESA.
- Ensure undisputed statutory entitlements are paid on time. Although the Court of Appeal declined to award punitive damages in this case, it strongly criticized Facebook Canada’s 10-month delay in paying statutory entitlements.
- Carefully assess incentive plan terms before terminating the employment of employees with significant equity compensation or other incentive-based entitlements.
- Recognize that saving clauses may not be enough. Generic saving clauses intended to preserve statutory minimum entitlements may not provide adequate protection. Employers should carefully assess whether the wording of their plans preserves employees’ rights under the ESA in every potential termination scenario.
- Remember that compliance must be built into the contract from the beginning. A discretionary payment offered after termination will not cure a contractual provision that may operate in violation of the ESA. Employers should ensure that termination provisions are compliant when the agreement is drafted.
Wigdor reinforces the Ontario courts’ willingness to closely scrutinize equity compensation plans and forfeiture provisions for compliance with the ESA. Employers should review RSU agreements, stock option plans, employment agreements, and termination provisions to ensure they do not inadvertently contract out of statutory minimum standards. Failure to do so may expose employers to significant liability extending beyond the statutory notice period and into the common law reasonable notice period.
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