A $4.7 Million Lesson for Employers to Review Their Equity Compensation Terms
The Ontario Court of Appeal’s recent judgment in Wigdor v. Facebook Canada Ltd., 2026 ONCA 572 provides guidance on the treatment of employees’ equity compensation entitlements following termination. The Court found that a provision in an employee’s Restricted Stock Unit (“RSU”) agreement failed to maintain his entitlements during the minimum statutory notice period required by the Employment Standards Act, 2000 (the “ESA”). The provision was therefore unenforceable, resulting in an award of US$4.7 million in additional wrongful dismissal damages representing RSUs that would have vested over the employee’s substantially longer common law reasonable notice period.
Background: The Dispute
The employee, Dr. Daniel Wigdor, joined Facebook Canada in 2020 following Meta’s acquisition of his company, Chatham Inc. A significant portion of Dr. Wigdor’s compensation package was RSUs valued at US$7.5 million, vesting over a four-year period. Facebook Canada ultimately terminated his employment without cause in December 2023. In doing so, Facebook Canada asked Dr. Wigdor to sign a release that would have precluded him from challenging the forfeiture of his unvested RSUs. Dr. Wigdor refused to sign the release.
Following his termination, Dr. Wigdor brought a wrongful dismissal claim seeking, among other damages, the value of his RSUs that would have vested during the common law reasonable notice period. The Superior Court initially found that the termination of employment provision contained in Dr. Wigdor’s employment agreement violated the ESA and awarded him 10 months’ common law reasonable notice. However, it declined to award damages for his unvested RSUs, finding that the applicable RSU provisions were enforceable and did not violate the ESA.
The Court of Appeal ultimately reversed the lower court’s ruling regarding the unvested RSUs, while upholding the awarded common law reasonable notice period.
Sections 60 and 61 of the ESA
In reversing the lower court’s decision, the Court of Appeal held that sections 60 and 61 of the ESA must be read together. Employers are precluded by section 60(1)(a) from altering any term or condition of employment during the statutory notice period, while section 61(1)(a) requires employers to provide a lump sum payment equivalent to the amount the employee would have received under section 60. Read together, both provisions seek to ensure employees are placed in the same financial position whether they receive working notice or pay in lieu of notice.
The Court concluded that Dr. Wigdor’s unvested RSUs formed part of his employment compensation and, accordingly, constituted a protected term or condition of his employment. The forfeiture provisions contravened section 60(1)(a) of the ESA by purporting to deprive him of continued vesting during the statutory notice period, thereby altering a term or condition of his employment. The provisions were therefore void and unenforceable.
As a result, the Court found that Dr. Wigdor was entitled to US$4.7 million in damages representing the value of the RSUs that would have vested during the 10-month common law reasonable notice period. The consequences of the unenforceable provisions were thus not limited to his minimum ESA entitlements, but rather included RSUs that would have been vested throughout the common law reasonable notice period.
Prior Service Can Affect Entitlements
The decision also underscores that recognizing an employee’s prior service in one part of an employment agreement does not cure a defect found elsewhere in the agreement that fails to account for an employee’s minimum statutory entitlements. While the employment agreement expressly recognized Dr. Wigdor’s prior service with Chatham in other provisions, the termination clause contemplated that he could be terminated on two weeks’ notice during the first three (3) months of his employment with Facebook Canada.
The termination clause was therefore found to contravene section 9 of the ESA (regarding sale of a business), which required Dr. Wigdor’s prior service to be recognized for the purpose of determining his termination entitlement. The Court further made clear that neither the agreement’s general saving provision nor Dr. Wigdor’s sophistication could cure this defect.
Important Takeaways for Employers
1. Forfeiture provisions in equity and incentive plans require careful drafting. Employers should review equity compensation plans and employment agreements carefully and in tandem to ensure that their terms comply with the ESA and do not result in the forfeiture of unvested compensation during the statutory notice period.
2. General saving provisions are not sufficient. Employers should not rely on general saving language preserving statutory minimum standards to cure contractual defects elsewhere in an employment agreement. Plan terms should be given careful consideration to ensure that employees’ minimum ESA entitlements are preserved upon termination.
3. Employee sophistication cannot save an unenforceable provision. An employee’s sophistication or representation by counsel when entering into an employment agreement does not make an otherwise ESA-non-compliant provision enforceable.
The foregoing is for informational purposes only and should in no way be relied upon as legal advice. For legal advice tailored to your circumstances and business, please contact SOM LLP lawyers by email or telephone.