No vesting, no problem? Ontario Superior Court enforces RSU forfeiture on termination

In a significant decision for employers offering equity-based compensation, the Ontario Superior Court in Wigdor v. Facebook Canada Ltd.¹ upheld the forfeiture of unvested restricted stock units (RSUs) following an employee’s termination of employment. The ruling confirms that RSUs, like stock options, are not “wages” or “benefits” under Ontario’s Employment Standards Act, 2000 (ESA) and may therefore be contractually forfeited—even during the statutory notice period—if the governing agreements are clearly and unambiguously drafted.

What you need to know

• RSUs are not “wages” or “benefits” under the ESA. The Court confirmed that RSUs, like stock options, fall outside the scope of protections under section 61 of the ESA. Employers are not required under the ESA to continue RSU vesting during the statutory notice period where an employer provides pay in lieu of notice, as RSUs are not considered “wages” or “benefit plan contributions” within the meaning of the ESA.
• Clear forfeiture language is enforceable. The Court upheld RSU agreements that provided for immediate forfeiture of unvested RSUs upon termination. It found the language in the relevant agreements to be unambiguous and enforceable, rejecting arguments that such provisions were misleading or contrary to the ESA.
• “Saving language” is permissible. The Court found that language which stated that vesting would continue only if explicitly required by applicable employment standards legislation was neither misleading nor uncertain.
• Separate contracts can support enforceability. The fact that the RSU agreements were structured as standalone contracts—distinct from the employment agreement—allowed the Court to assess their enforceability independently. This separation may have helped insulate the RSU terms from the invalidity of the employment agreement’s termination clause.

Summary of the decision

Dr. Daniel Wigdor, a tenured professor and founder of Chatham Inc., a consulting firm later acquired by Meta, joined Facebook Canada in 2020 as Director of Research Science. His employment agreement expressly recognized his prior service with Chatham Inc. and its successor, Chatham Labs Inc., dating back to 2011, for the purpose of calculating minimum entitlements under the ESA. As part of his compensation, Wigdor participated in Meta’s RSU program through a series of equity award agreements. Upon his termination in December 2023, Facebook Canada offered a severance package to Wigdor that exceeded ESA minimums but made payment of the additional amounts conditional on Wigdor signing a release that would prevent him from challenging the forfeiture of unvested RSUs. Wigdor declined and brought an application seeking, among other things, the value of RSUs that would have vested during the statutory notice period.

The Court rejected Wigdor’s argument that RSUs should be treated as “wages” or “benefits” under section 61 of the ESA. It held that RSUs, like stock options, are not monetary remuneration or benefit plan contributions and therefore fall outside the scope of ESA protections during the statutory notice period where an employer provides pay in lieu of notice. The Court emphasized that section 61 of the ESA requires continuation of “benefit plan contributions”—not entitlements under equity compensation arrangements—and that the ESA’s definition of “wages” is limited to monetary compensation and certain prescribed allowances. By contrast, section 60 of the ESA—which applies when an employer provides working notice—imposes broader obligations, including a prohibition on altering any term or condition of employment. However, that section was not engaged in this case.

The Court found the forfeiture provisions in the relevant RSU agreements to be clear and enforceable, including language that provided for forfeiture even if the termination was later found to be unlawful. It rejected Wigdor’s argument that such language was misleading or void, distinguishing RSU agreements as separate contractual arrangements not governed by the same ESA constraints applicable to employment agreements. The Court also noted that the RSU terms did not attempt to contract out of any statutory rights.

While the Court upheld the RSU forfeiture, it found the termination clause in Wigdor’s employment agreement unenforceable due to a conflict with the ESA. Specifically, the clause purported to limit entitlements during the first three months of employment to two weeks’ notice—much less than the ESA minimum notice period, particularly when recognizing his prior service dating back to 2011. The Court held that this inconsistency violated the ESA and could not be cured by a general saving clause. As a result, Wigdor was awarded 10 months’ common law notice.

Practical considerations

We note that the Wigdor decision is specific to Ontario. However, the Court’s reasoning—particularly concerning the enforceability of RSU forfeiture provisions—may offer persuasive guidance in other jurisdictions. Its direct applicability will depend on the statutory framework in each province.

In light of Wigdor, employers may wish to consider the following steps to help mitigate risk and strengthen the enforceability of their equity and termination arrangements:

• Review RSU and other equity-based compensation plans to ensure that termination-related provisions—particularly those addressing forfeiture—are clearly and unambiguously drafted.
• Consider how equity awards are structured. While not legally required, maintaining equity compensation arrangements as separate instruments from employment agreements may help to preserve their enforceability, particularly where employment terms are later found to be invalid.
• Review existing termination clauses in employment agreements to ensure they are fully compliant with the ESA (or other applicable employment standards legislation).