RSU agreements stipulated that employee forfeited all unvested units upon termination
Employers have faced increased scrutiny of their variable and equity compensation plans over the years, especially with respect to whether these aspects of an employee’s compensation can be discontinued during statutory notice periods under employment standards legislation. Whether it’s because your business is cost-conscious or risk averse, employers are honing in on their variable and equity compensation plans to ensure they are enforceable and protect their businesses interests while still complying with statutory requirements.
In one decision that may make this review more straightforward for employers, the Ontario Superior Court confirmed in Wigdor v. Facebook Canada Ltd., 2025 ONSC 4861, that restricted share units (RSUs) are not “wages” or “benefit plan contributions” under the Ontario Employment Standards Act (ESA). As such, the employer’s RSU Agreement, which required the employee to forfeit their unvested RSUs on termination, was valid and enforceable.
In Wigdor, the employee, Dr. Daniel Wigdor, was employed with Facebook Canada, a wholly-owned subsidiary of Meta. As Director, Research Science, Wigdor enjoyed a generous employment agreement that included entitlement to RSUs, which were granted when Wigdor commenced employment with Facebook and on an ongoing basis in accordance with Meta’s 2012 Equity Incentive Plan and RSU Award Agreements.
Working notice of termination
Facebook gave Wigdor notice of termination on Dec. 4, 2023, with an effective termination date of Dec. 8, 2024. At the time of termination, Wigdor’s unvested RSUs were valued to be in the millions of dollars.
Wigdor filed a claim, arguing that he was entitled to reasonable notice of termination at common law, and that the termination language in the RSU Agreements was in breach of the ESA and therefore should be given no effect.
During Wigdor’s employment, two different termination clauses applied under the RSU Agreements:
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In a 2020 RSU Agreement, RSU vesting was terminated during the ESA notice period. The termination language provided that if Wigdor’s service “terminates for any reason, all unvested RSUs shall be forfeited to the Company forthwith.” For greater clarity, the plan stated that if terminated for any reason, “all unvested RSUs shall be forfeited” on the date of termination or when they stop providing services, whichever is earlier, and that “no vesting shall continue during any notice period in relation to his/her termination.”
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2021 – 2023 RSU Agreements also provided that if an employee’s service terminated for any reason “all unvested RSUs shall be forfeited to the Company forthwith.” The agreement further provided that the date of termination of employment on which all unvested RSUs are forfeited “will not be extended by any period during which notice, pay in lieu of notice or related payments or damages are provided or required to be provided under local law (including, without limitation, statute, contract, regulatory law, and/or common or civil law).”
Termination provision unenforceable
The court found that the termination provision in Wigdor’s employment contract was unenforceable, and he was therefore entitled to 10 months’ pay in lieu of notice. However, the court found that the RSU Agreements did not breach the ESA and were therefore valid. Accordingly, Wigdor was not entitled to unvested RSUs.
Wigdor had argued that the 2020 RSU Agreement’s termination of RSU vesting during the statutory notice period was in breach of s. 61 of the ESA, which requires employers “to maintain all terms and conditions of employment during the statutory notice period.”
The court rejected this argument and contrasted the language in s. 61(a)(b), which applies to pay in lie of notice, with the language in s. 60, which applies to periods of working notice. In addition to maintaining wages and benefits, s. 60 prohibits employers from altering “any other term or condition of employment.” However, s. 61 does not have this same prohibition on altering terms or conditions during periods of pay in lieu of notice. Rather, s. 61(a)(b) requires the employer to continue to pay regular wages and make benefit plan contributions that they would have otherwise received under s. 60. The court found that, based on a plain language reading of the ESA, RSUs are not “wages” or “benefit plan contributions” and are therefore not required under a statutory period of notice in accordance with s. 61 of the ESA.
RSUs not wages or benefits that must continue for notice period: court
The court found that the same reasoning applied to the 2021-2023 RSU Agreements. However, Wigdor argued that the language in the 2021 – 2023 RSU Agreements was also invalid on two other grounds: because it was vague and ambiguous; and because it contemplated forfeiture even if the termination is later found to be unlawful. However, the court rejected both of these arguments.
While it has yet to be seen if the decision in Wigdor will be challenged by an appeal, the case can be of assistance to employers in the meantime. The court provided added clarity to the question of whether employees are entitled to unvested RSUs during statutory notice periods. Specifically, Wigdor confirms that RSUs are not “wages” or “benefit plan contributions” as referred to at s. 61 of the ESA and are therefore not required to be continued during statutory notice periods. As such, when properly drafted, RSU agreements which attempt to limit entitlement to unvested RSUs are valid and enforceable.
Emily Sheppard is an employment lawyer at Turnpenney Millne LLP in Toronto.
