Ontario Court of Appeal Limits Equity Forfeiture on Termination

A recent Ontario Court of Appeal decision has significant implications for both employers who grant restricted stock units as part of their compensation packages and the executives and senior employees who receive them.

Restricted stock units, or RSUs, are a common feature of executive and senior-employee compensation and of the agreements that grant them. It is possible that you have seen (or drafted) a clause that says something like this: unvested units are forfeited immediately on termination, and vesting does not continue during any notice period.

A recent decision of the Ontario Court of Appeal, Wigdor v. Facebook Canada Ltd., 2026 ONCA 572, is an important one on this issue. The number attached to it is hard to ignore: roughly US $4.7 million in RSUs the Court found the employee was entitled to, despite a forfeiture clause that, on its face, said otherwise. For employers, that is a significant, avoidable liability. For employees, it is a reminder that a termination letter's assertion that your unvested equity is simply gone may not be the end of the story.

This bulletin focuses specifically on what the Court said about RSUs. The decision also addressed other issues, including the treatment of prior service on a business sale and the limits of "saving" language generally; those are outside the scope of what follows here.

Dr. Daniel Wigdor sold his company to Meta in 2020 and joined Facebook Canada with substantial RSU grants as part of his compensation. Upon termination, Meta took the position that his unvested units were forfeited immediately, per his RSU agreements. The case turned on a question that matters to any employee with equity compensation: can an employer cut off RSU vesting the moment someone is let go, even though the law entitles that employee to a period of notice (or pay instead of notice)?

Notice Pay and Working Notice Must Land in the Same Place

Ontario's Employment Standards Act, 2000 (the "ESA") sets out minimum notice, or pay in lieu of notice, that an employer must provide on termination. Section 60 governs entitlements during working notice and prohibits an employer from altering the employee's terms or conditions of employment during that period. Section 61 governs the lump sum owed when an employee is paid out instead. The Court held that sections 60 and 61 must be read together and must produce the same financial result: an employee paid out immediately is entitled to a lump sum "equal to" what they would have received had they worked through notice, including terms and conditions, such as continued RSU vesting, that would have applied. That matters because vesting runs on a timeline: if units were set to vest six months from now, and the employee is entitled to six months' notice, the question is whether the forfeiture clause lawfully takes those units away.

Wages vs. “Terms and Conditions of Employment”

Much of the earlier debate in this area focused on whether RSUs count as "wages" under the ESA. Employers have long argued they do not; they are equity, not salary, and courts have generally agreed RSUs and stock options fall outside the ESA's narrow definition of "wages."

The Court of Appeal in Wigdor decided the case on a different basis: RSU entitlement is a "term or condition of employment" within the meaning of section 60(1)(a) of the ESA. Because that section prohibits altering terms or conditions of employment during the statutory notice period, and because the RSU agreements were structured as part of the employee's compensation, the Court found the vesting entitlement could not simply be switched off on termination, at least not without carefully drafted, ESA-compliant language. An employee does not need to win the "wages" argument to have a strong claim to continued vesting, and employers cannot assume a plan is safe from ESA scrutiny simply because RSUs fall outside that definition.

Practical Consequences

For employers: forfeiture language that simply says vesting "stops on termination," or that tries to save itself with boilerplate like "unless otherwise required by law," is unlikely to hold up on its own. Wigdor is a US $4.7 million illustration of that exposure. This is a good time to have your equity plans, grant agreements, and termination clauses reviewed together as a single package, since their interaction determines your actual exposure, and it's far less costly to review proactively than in the middle of a dismissal claim.

For employees: a termination letter or severance offer that assumes your unvested equity simply disappears is not automatically the final word. Depending on how your plan is drafted, you may be entitled to the value of units that would have vested during your full notice period, often significantly longer than what an initial offer reflects. This is worth reviewing before you sign a release.

For assistance reviewing employment agreements, including termination provisions or incentive compensation plans, contact a member of Lerners LLP's Employment & Labour Group.