Introduction
This month, the Ontario Court of Appeal has released another important decision for employment law in Canada. You can check out our blog on another important decision here.
In this case, Wigdor v. Facebook Canada Ltd., 2026 ONCA 572 [Wigdor], the Ontario Court of Appeal awarded Daniel Wigdor, a former employee of Facebook Canada Ltd., more than US$4.7 million for his Restricted Share Units (“RSUs”), in addition to the 10 months of common law notice damages previously awarded by the lower court.
Wigdor reminds employers and employer counsel to be cautious with respect to statutory compliance when contracting with employees following a business transaction. Further, employers in jurisdictions where contractual entitlements continue during the minimum statutory notice period, such as Ontario, must ensure that employees continue to receive the contractual benefits during the notice period that they would have otherwise received had their employment continued, which can include ancillary benefits such as RSUs.
Lower court decision
While he was employed by Facebook, part of Dr. Wigdor’s compensation package included RSUs and his entitlement to these was set out in ancillary agreements to his employment agreement. Following the termination of his employment, Dr. Wigdor brought a claim for wrongful dismissal damages, which included lucrative RSUs that were scheduled to vest in the months following his dismissal.
Before the Ontario Superior Court of Justice, Dr. Wigdor was successful in challenging the enforceability of the termination language in his employment agreement. The issue was that the contractual language was offside a provision in the Employment Standards Act, 2000 (the “ESA”) which contemplates continuous employment in the context of a sale of a business, rendering the employment agreement void. It is worth noting that the offside language was not cured by a statutory “minimum entitlements” provision elsewhere in Dr. Wigdor’s employment contract.
In short, it was held that the termination provision in Dr. Wigdor’s employment agreement conflicted with his minimum entitlements because he was previously employed by a company that Facebook acquired and, by law, his prior service counted for the purpose of determining his statutory entitlements, including notice of termination. The employment agreement purported to contract to a lesser period of notice. The court awarded Dr. Wigdor ten months of common law reasonable notice.
However, the lower court declined to award Dr. Wigdor the value of RSUs that would have vested during the applicable statutory and common law notice periods on the bases that RSUs are not equivalent to wages or to benefit plans, and because the court ultimately determined that the forfeiture language in the applicable agreements, which dictated that Dr. Wigdor’s RSUs would stop vesting immediately upon the termination of his employment, was enforceable.
Court of Appeal decision
On appeal, the Ontario Court of Appeal overturned the lower court’s decision regarding RSUs. Because the issue engaged bonus or similar entitlements, the court was required to apply the test set out in the Supreme Court of Canada’s decision in Matthews v. Ocean Nutrition, 2020 SCC 26 [Matthews], which includes asking whether the forfeiture language at issue unambiguously altered or removed Dr. Wigdor’s common law right to reasonable notice.
The Court of Appeal determined that a common forfeiture provision in Facebook’s standard RSU agreements was unenforceable as it purportedly prevented Dr. Wigdor’s RSUs from vesting during the statutory notice period pursuant to the ESA. Section 60(1)(a) of the ESA imposes an obligation on Ontario employers not to alter any terms or conditions of employment during the notice period following termination, even where employees receive pay-in-lieu of notice. The Court of Appeal determined that the RSU Agreements were a “term or condition” of employment and therefore could not be altered during the statutory notice period.
Of note, three of the four applicable RSU agreements for 2021-2023, presumably drafted following the release of the Matthews decision, included the language “unless explicitly required by applicable legislation” as an exception or saving clause to the forfeiture provision which restricted vesting following termination of employment. Since there is nothing “explicit” in the ESA about continued vesting of RSUs during the statutory notice period, the Court reasoned, there was no basis to apply that clause. In any case, the Court noted, the forfeiture provision was ambiguous and failed for that reason.
The Court of Appeal awarded Dr. Wigdor the value of the RSUs that would have vested during the notice period, equivalent to slightly more than US$4.7 million.
What does this mean for employers?
Wigdor reminds employers about the importance of properly drafted employment agreements and highlights the possible consequences when employment agreements are found to be unenforceable. Zeroing in on the Court of Appeal’s treatment of the word “explicitly” begs the question: would the court’s decision be any different with that one word removed from the later RSU agreement documents? Employers who offer RSUs and other incentives to their employees may see this decision as another opportunity to review and refine agreement language.
Employers must also be mindful when employees are subject to the continuing employment provisions of applicable employment standards legislation. When structuring employment agreements for employees following the acquisition of another company, including ancillary agreements or benefits that may form part of employment contracts, be mindful that the provisions clearly account for the employee’s prior service. In Saskatchewan, s. 2-10 of The Saskatchewan Employment Act effectively provides that, if an employee continues to be employed at a business following a business transaction, the employee’s employment is deemed to be continuous.
Not all jurisdictions require contractual entitlements to continue during the statutory notice period – Saskatchewan’s employment legislation does not include such a requirement. However, employers in jurisdictions in which contractual entitlements must continue during statutory notice periods should be mindful of any applicable ancillary agreements or benefits that may be offside of the employer’s statutory obligations.
For up-to-date advising or assistance with employment matters, contact one of McDougall Gauley’s Labour and Employment lawyers.
Authors
