Ontario Court of Appeal Releases Judgment on RSU Forfeiture Clauses: Wigdor v. Facebook Canada Ltd.

Overview

The Ontario Court of Appeal recently released its judgment in Wigdor v. Facebook Canada Ltd. (the Superior Court’s 2025 decision was discussed in our earlier bulletin). The Court found that restricted stock unit (RSU) agreement provisions that purport to terminate vesting during the statutory notice period contravene Ontario’s Employment Standards Act, 2000 (ESA) and will be unenforceable. Although the decision turned on its specific facts, it carries broader implications for employers that offer equity-based compensation, particularly those relying on standard forfeiture-on-termination provisions in their grant agreements and plans.

Background

Facebook Canada hired Dr. Daniel Wigdor as Director of Research Science in 2020 in connection with the acquisition of the company that he founded, Chatham Inc. As part of the acquisition, Dr. Wigdor entered into an employment contract with Facebook Canada, which provided for a base salary, benefits and a grant of 43,380 RSUs valued at approximately US$7.5-million, vesting quarterly over four years. The RSUs were governed by Meta’s Equity Incentive Plan, with additional terms set out in RSU agreements. There were four RSU agreements, one for each grant in 2020, 2021, 2022 and 2023. The employment contract incorporated the RSU agreements by reference. Dr. Wigdor was later terminated without cause in December 2023.

Upon termination, Facebook Canada offered Dr. Wigdor his minimum ESA entitlements and additional contractual payments contingent on a signed release. The release required Dr. Wigdor to waive his rights to dispute the forfeiture of his unvested RSUs. He declined to sign and commenced a claim. At first instance, the trial judge found the employment contract’s termination clause to be invalid under the ESA because it purported to allow termination on two weeks’ notice during a probationary period, notwithstanding that the ESA required recognition of Dr. Wigdor’s nine years of prior service with Chatham in the notice calculation. The judge awarded 10 months of common law reasonable notice but denied damages for the approximately US$4.7-million in RSUs that would have vested during the notice period, finding that the RSU agreements complied with the ESA. 

The Court of Appeal’s Decision

Termination Clause Validity

The Court of Appeal upheld the trial judge’s finding that the termination clause in the employment contract contravened the ESA and was therefore unenforceable. As Dr. Wigdor had nine years of service with Chatham Inc. prior to the acquisition, Facebook Canada was required to recognize this service for ESA purposes as part of the continuity of employment provisions under the ESA. Despite that fact, the termination clause purported to permit Facebook Canada to terminate Dr. Wigdor with two weeks’ notice during his first three months of employment with Facebook Canada. Dr. Wigdor’s entitlement was greater than two weeks under the ESA due to his deemed nine years of service, and the clause violated the ESA’s minimum standards. The provision was accordingly void and did not rebut the common law presumption of reasonable notice.

RSU Entitlements During the Notice Period

The central issue on appeal was whether the RSU agreements, which required forfeiture of all unvested RSUs immediately upon termination, contravened the ESA and were therefore unenforceable. This analysis turned on the interaction between section 60 of the ESA, which governs working notice and prohibits altering “any term or condition of employment” during the notice period, and section 61 of the ESA, which governs pay in lieu of notice. While the lower court had read those two sections as independent provisions, the Court of Appeal held this was an error and that the two sections must be read together. The text of section 61(1)(a), which entitles an employee to “a lump sum equal to the amount the employee would have been entitled to receive under section 60 had notice been given,” was found to expressly incorporate the protections of section 60, including the prohibition on altering terms or conditions of employment.

Applying this interpretation, the Court found that RSU vesting was a “term or condition of employment” under section 60(1)(a). The RSU entitlements were outlined in the employment contract, characterized by the respondents’ own affiant as employment compensation and taxed as employment income. Both the 2020 and 2021–2023 RSU agreements provided for the forfeiture of ongoing RSU vesting upon termination, which was an alteration to a term or condition of employment during the statutory notice period, contrary to the ESA. As a result, the termination provisions in the RSU agreements were void under section 5(1) of the ESA. 

The Court also rejected the trial judge’s alternative finding that the RSU agreements were separate from the employment contract and not subject to the ESA at all.

The Court further rejected the argument that the savings provision in the 2021–2023 RSU agreements assisted. The savings provision stated that forfeiture upon termination would apply “unless explicitly required by applicable legislation.” The Court found this provision did not assist the respondents because there is nothing “explicit” in the ESA about continued RSU vesting during the statutory notice period. 

Given that the Court held that common law reasonable principles applied to Dr. Wigdor’s entitlements, the Court awarded damages by US$4.7-million, representing the value of the RSUs that would have vested during the 10-month reasonable notice period. 

Equity-Based Compensation and “Wages”

The Court declined to address the intervenor’s argument that equity-based compensation did not constitute “wages” under the ESA, noting that the appeal could be resolved on the basis that RSU vesting is a “term or condition of employment.” The Court observed that the question of whether equity-based compensation falls within the definition of “wages” under the ESA is better left to a future case where the answer is determinative. The Court noted that the answer may be “more nuanced than a blanket determination that all forms of equity-based compensation are or are not ‘wages’ under the ESA.”

Key Takeaways for Employers

The Court’s decision turned on the specific language of the RSU agreements in question, which purported to cease vesting immediately upon termination, unless explicitly required by applicable legislation. While the decision raises important considerations for employers, the extent of its application will depend on the wording and structure of the applicable equity plan and agreement. With the Court’s decision in Baker v. Van Dolder’s Home Team Inc. and Li v. Wayfair Canada ULC, with careful drafting of agreements and plans, employers can potentially avoid the outcome in this case.

In light of this decision, employers offering RSUs, stock options, or other equity-based compensation should review their plan documents, agreements and individual employment agreements to assess potential ESA compliance risks and determine whether revisions are warranted. 

For more information, please contact any member of our Employment & Labour group.