Ontario Court of Appeal Addresses Validity of Forfeiture Provisions in Equity Compensation Agreements on Termination of Employment

The Court of Appeal for Ontario (‘ONCA’) recently released its decision in Wigdor v. Facebook Canada Ltd., 2026 ONCA 572 (‘Wigdor’) on August 7, 2026. 

This case involved a wrongful dismissal matter in which the Appellant, Dr. Daniel Wigdor, successfully appealed the application judge’s decision to dismiss his claim for the value of Restricted Stock Units (‘RSU’) that would have vested during his common law notice period.

The RSU Agreements, which were incorporated by reference into his employment agreement, would have disentitled Dr. Wigdor to further vesting of his RSUs immediately upon termination. 

The Respondent employer, Facebook Canada Ltd., a subsidiary of Meta Platforms Inc., (“Facebook”) had also cross-appealed the judge’s finding that the termination provisions of the employment agreement violated Ontario’s Employment Standards Act, 2000 (‘ESA’), and order of damages equal to 10-months’ notice. 

Earlier Decisions 

A number of decisions were considered by ONCA in its analysis. These included Matthews v. Ocean Nutrition, 2020 SCC 26 (‘Matthews’) in which the Supreme Court of Canada (‘SCC’) considered the issue of whether a terminated employee is entitled to damages for a bonus or similar entitlement that would have been payable during the common law reasonable notice period. 

In Matthews the SCC set out two questions to ask in determining this issue:

1. But for the termination, would the employee have been entitled to the bonus during the reasonable notice period?
2. If so, does the wording of the bonus plan unambiguously alter or remove the employee’s common law right to reasonable notice?

ONCA similarly considered its earlier decisions of Paquette v. TeraGo Networks Inc., 2016 ONCA 618 (‘Paquette’) and Taggart v. Canada Life Assurance Company (2006), 2006 CanLII 53345 (‘Taggart’). 

Application to Wigdor

ONCA noted that the appeal engaged the second question in Matthews. However, it further considered whether the forfeiture terms of the RSU Agreements that were incorporated in Dr. Wigdor’s employment contract altered Dr. Wigdor’s vesting entitlements during his statutory notice period in such a way that they were inconsistent with sections 60 and 61 of the ESA. 

Section 60(1)(a) of the ESA requires that an employer not alter any “term or condition of employment” during a notice period under the Act, and section 61(1) requires that an employer pay an employee a lump sum equivalent to what they would have been entitled to receive under section 60 had notice been given in accordance with that section.

Read together, these provisions require that a lump sum payment, which an employee is entitled to where pay is provided in lieu of working notice, be calculated on the basis that there are no alterations to the terms or conditions of employment during the statutory notice period. 

The forfeiture provisions of the RSU Agreements contravened the ESA because they purported to alter a term or condition of employment during the ESA notice period by depriving employees who had been terminated of ongoing vesting of RSUs during that period. 

As a result, the provisions of the RSU Agreements relating to termination were invalid and unenforceable and did not remove an employee’s common law rights in this regard. There was no dispute that had it not been for his termination, the RSUs in question would have vested during Dr. Wigdor’s common law notice period. 

ONCA held that Dr. Wigdor was entitled to damages equal to the value of the RSUs that would have vested during his 10-month common law notice period, which was of significant value, approaching $5 million USD. 

Importantly, the Court declined to consider whether equity-based compensation falls within the definition of “wages” in the ESA, noting that the appeal was based on the argument that Dr. Wigdor’s entitlement to the RSUs constituted a “term or condition of employment” within the meaning of subsection 60(1)(a) of the ESA. That question remains outstanding. 

Insight

This decision reinforces the importance of ensuring that employment agreements and related contracts are reviewed regularly. 

Taking a proactive approach will help ensure these contracts are valid and consistent with the ESA, which requires that all terms and conditions of employment are fully maintained during the applicable ESA notice period. The alternative can be costly, as discovered by Facebook following this appeal. 

Wigdor wasn’t the only decision related to employment termination that ONCA addressed this summer. ONCA also clarified the law surrounding termination clauses through their highly anticipated decision in Baker v Van Dolder’s Home Team Inc., 2025 ONSC 952 (and companion decision of Li v Wayfair). 

You can read more about that decision in Karin Pagé’s article in the Ottawa Business Journal, Court of Appeal addresses broken law surrounding termination clauses.  

Our Employment Lawyers Can Help

If you have questions about employment agreement termination provisions, the Employment Law Group at Perley-Robertson, Hill & McDougall LLP/s.r.l. will be pleased to assist.