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In Wigdor v. Facebook Canada Ltd.,1 the Ontario Court of Appeal issued a landmark decision providing long-awaited guidance regarding the application of the Employment Standards Act, 2000 (the legislation that prescribes minimum standards of employment in Ontario, “ESA”) to certain types of equity-based employee compensation.
Background
In 2011, Dr. Wigdor founded Chatham Labs, a technology consulting firm for financial, legal and technological companies. In 2020, Meta and Dr. Wigdor negotiated a share-purchase agreement which contemplated that Chatham Labs’ employees (including Dr. Wigdor) would be terminated by Chatham Labs and begin employment with Meta or an affiliate. Dr. Wigdor subsequently commenced employment with Meta’s Canadian subsidiary, Facebook Canada, in September 2020 as a Director, Research Science.
During his employment with Facebook Canada, Dr. Wigdor received several Restricted Stock Unit (“RSU”) grants pursuant to Meta’s 2012 Equity Incentive Plan and various RSU Agreements. The RSU Agreements contained the following forfeiture provisions:
| 2020 RSU Agreement | 2021-2023 RSU Agreements |
| If Participant’s service Terminates for any reason, all unvested RSUs shall be forfeited to the Company forthwith, and all rights of Participant to such RSUs shall immediately terminate. For the avoidance of doubt, it is noted that, except as may be agreed to in the sole discretion of the Company, if Participant is Terminated by his/her employer for any reason or if Participant’s Termination is due to his/her voluntary resignation, all unvested RSUs shall be forfeited as of the date that is the earlier of: (i) the date Participant’s employment is terminated, and (ii) the date Participant is no longer actively providing services to the Company or any of its Subsidiaries (regardless of the reason for such Termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any), and no vesting shall continue during any notice period in relation to his/her Termination, whether specified under contract or statutory, regulatory or common law, including any “garden leave” or similar period. In case of any dispute as to whether Termination has occurred, the Company shall have sole discretion to determine whether such Termination has occurred and the effective date of such Termination for purposes of the Plan. [Emphasis added.] | If Participant’s service Terminates for any reason, all unvested RSUs shall be forfeited to the Company forthwith, and all rights of Participant to such RSUs shall immediately terminate. Despite any other definition of “Termination”, “Terminated” or “Termination Date” in the Plan, the Notice or the Agreement, if Participant is an Employee of the Company or a Parent, Subsidiary or Affiliate, then Participant’s service Terminates when Participant has ceased to provide services to his/her Employer, whether such cessation is initiated by Participant; by his/her Employer, with or without cause, and whether or not later found to be invalid or unlawful; by mutual agreement or by operation of law (“Termination of Employment“). For the avoidance of doubt, unless explicitly required by applicable legislation, the date on which a Termination of Employment occurs and 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). Participant will not earn or be entitled to any pro-rated vesting for that portion of time before the date on which a Termination of Employment occurs, nor will Participant be entitled to any compensation for lost vesting.
Notwithstanding the foregoing, if applicable employment standards legislation explicitly requires continued entitlement to vesting during a statutory notice period, Participant’s right to vest in the RSUs under the Plan, if any, will terminate effective as of the last day of Participant’s minimum statutory notice period. Participant will not earn or be entitled to pro-rated vesting if the vesting date falls after the end of Participant’s statutory notice period, nor will Participant be entitled to any compensation for lost vesting. [Emphasis added.] |
In 2023, Dr. Wigdor’s employment with Facebook Canada was terminated without cause. In connection with the termination, Facebook Canada asked Dr. Wigdor to sign a release which precluded him from disputing the forfeiture of his unvested RSUs.
Dr. Wigdor refused to sign Facebook Canada’s release, choosing instead to pursue an action for wrongful dismissal against his former employer.
Trial Court Decision
The trial court judge held that the termination clause in Dr. Wigdor’s employment agreement was void and unenforceable for several reasons, including because it purported to exclude his service with Chatham Labs contrary to section 9(1) of the ESA.2 Therefore, he was entitled to 10 months’ damages in lieu of common law notice.
However, regarding Dr. Wigdor’s unvested RSUs, the trial court judge found that the forfeiture provisions in the RSU Agreements were enforceable. Notably, Her Honour rejected Dr. Wigdor’s argument that the forfeiture provisions contravened ESA requirements to maintain all terms and conditions of employment (section 60) and continue benefit plan contributions (section 61) during the statutory notice period.
According to the trial court judge, Dr. Wigdor’s RSUs were neither “benefits” nor “wages” within the meaning of the ESA. Therefore, the ESA’s protections did not apply to the RSU Agreements. As such, the trial court judge declined to award damages in lieu of the 9,405 RSUs that would have vested during the common law notice period (a value of approximately US$4.7 million).
Court of Appeal Finds for Dr. Wigdor
On appeal, Dr. Wigdor argued that the trial court judge erred in finding that the obligation on employers not to alter terms or conditions of employment during the statutory notice period in the ESA did not extend to his RSU entitlements.
The Court of Appeal agreed with Dr. Wigdor. Dr. Wigdor’s RSU entitlements — which were expressly incorporated as part of his employment agreement with Facebook Canada3 — constituted a “term or condition of employment” within the meaning of section 60 of the ESA. Therefore, it was not necessary for the RSUs to be considered “benefits” or “wages” for the ESA’s protections to be engaged.4
According to the Court of Appeal, both the 2020 RSU Agreement and the 2021-2023 RSU Agreements were void because they unlawfully purported to end vesting immediately upon termination (i.e., before the end of the statutory notice period):
“The RSU Agreements, which were incorporated by reference into the employment agreement, purported to disentitle Dr. Wigdor to further vesting of RSUs immediately on termination. This is contrary to the obligation on employers in s. 60(1)(a) not to alter any ‘term or condition of employment’ during the notice period. As a result, the termination provisions of the RSU Agreements, incorporated into the employment agreement, contravene the ESA and are unenforceable.”
The Court of Appeal also found that the “unless explicitly required by applicable legislation” language in the 2021-2023 RSU Agreements could not save the forfeiture provision because there is nothing “explicit” in the ESA about continued vesting of RSUs during the statutory notice period.
In the result, the Court of Appeal held that Dr. Wigdor was entitled to more than US$4.7 million in damages for the value of the RSUs that would have vested during the 10-month common law notice period.
Key Takeaways
In finding for Dr. Wigdor, the Court of Appeal placed significant weight on the fact that his RSU entitlements were expressly incorporated into his employment agreement with Facebook Canada. In this regard, Dr. Wigdor’s case is distinguishable from other appellate-level cases — including Mikelsteins v. Morrison Hershfield Limited5 — wherein the Court of Appeal held that the ESA did not apply to another type of equity-based employee compensation (i.e., share bonus awards).
Dr. Wigdor’s case is also distinguishable from past cases because, unlike stock options and share bonus awards (which generally require that employees use their own funds to purchase shares), RSUs do not require employees to pay an exercise price or purchase the shares. Rather, when RSUs vest, they automatically convert into actual shares of company stock that the employee owns outright. As succinctly explained by the Court of Appeal:
“Mikelsteins is distinguishable from the circumstances of this appeal. Mikelsteins concerned an “employee-owned engineering firm” that allowed certain employees to purchase shares in the parent corporation using their own funds. When an employee decided to purchase shares, their rights regarding the shares were determined by the terms of the shareholders agreement. This court held that receipt of shares was not employment compensation subject to the ESA for two reasons: (1) because the employee had to purchase the shares using their own funds; and (2) because the employee’s rights as a shareholder in relation to the shares, once the employee made the choice to purchase the shares, were determined under the shareholders agreement, not the employment contract […].
By contrast, as I have outlined above, in this case the RSU entitlements were a form of employment compensation that automatically vested in consideration of ongoing employment.”
Therefore, in addition to assessing whether forfeiture provisions are “absolutely clear and unambiguous” (pursuant to the legal test established by the Supreme Court in Matthews v Ocean Nutrition Canada Ltd.), courts will likely now have to ask the following questions in future cases involving equity-based employee compensation:
- Whether the compensation was incorporated by reference into the employee’s employment agreement; and
- Whether the employee was required to pay an exercise price or purchase the equity with their own funds — i.e., stock options and share bonus awards, as opposed to RSUs (and potentially other types of equity-based employee compensation, such as Performance Share Units or Restricted Token Units).
Footnotes
1 2026 ONCA 572.
2 Section 9(1) requires that a purchaser who retains a seller’s employees must recognize each such employee’s period of service with the seller for purposes of determining their minimum statutory entitlements:
“If an employer sells a business or a part of a business and the purchaser employs an employee of the seller, the employment of the employee shall be deemed not to have been terminated or severed for the purposes of this Act and his or her employment with the seller shall be deemed to have been employment with the purchaser for the purpose of any subsequent calculation of the employee’s length or period of employment.”
3 A letter enclosed with Dr. Wigdor’s employment agreement specifically stated:
“This letter is to confirm that your employer intends to recommend to the Board of Directors of Facebook, Inc. that you be granted [RSUs] by Facebook, Inc. under the terms of the 2012 Equity Incentive Plan (as amended and restated on June 20, 2016) (the ‘Plan’). Subject to the approval of Facebook, Inc. Board of Directors or committee thereof (the ‘Board’), you will be granted 43,380 RSUs under the Plan.”
The letter went on to state that that Dr. Wigdor’s entitlement to RSUs was “subject to and conditional upon […] having previously entered into a contract with [his] local employer”.
4 According to the Court of Appeal, the real error was the application trial court judge’s interpretation of sections 60 and 61. Specifically, that Her Honour read section 60 and section 61 disjunctively, finding that section 60 applied only to working notice and that section 61 did not place an obligation on employers not to alter terms or conditions of employment.
5 2019 ONCA 515.
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The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
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