Ontario Court of Appeal holds that RSU forfeiture-on-termination clauses contravene the Employment Standards Act

21 August 2026 6 min read

At a glance

The Ontario Court of Appeal (Court) ruled in Wigdor v. Facebook Canada Ltd., 2026 ONCA 572 (Wigdor) that Restricted Stock Unit (RSU) provisions which immediately terminate vesting on dismissal may contravene Ontario's Employment Standards Act 2000 (ESA).
The Court confirmed that the ESA's prohibition on altering an employee's terms and conditions of employment during the statutory notice period applies whether an employee receives working notice or pay in lieu of notice.
RSU entitlements that form part of an employee's compensation package may constitute a 'term or condition of employment' protected under the ESA.
The Court found that contractual provisions preventing RSU vesting during statutory notice periods were unenforceable and awarded the employee approximately USD4.7 million for RSUs that would have vested during the reasonable notice period.
The decision increases the risk that equity forfeiture clauses in employment-related compensation arrangements will be found unenforceable, prompting employers to review RSU and other equity incentive plans.

In a decision with significant implications for employers offering equity-based compensation in Ontario, the Ontario Court of Appeal has ruled that RSU agreements incorporated into employment agreements, which purport to terminate vesting immediately upon termination contravene Ontario's ESA The Court's decision in Wigdor clarifies how the ESA's prohibition against altering a 'term or condition of employment' during the statutory notice period applies to equity compensation arrangements.

Background

Dr. Wigdor commenced employment with Facebook Canada on 12 September 2020, after Meta acquired his technology consulting company. As part of the deal, Meta agreed to grant Dr. Wigdor 43,380 RSUs valued at approximately USD7.5 million, vesting quarterly over four years.

Dr. Wigdor's employment agreement incorporated a letter confirming the RSU grant. The RSUs were governed by Meta’s 2012 Equity Incentive Plan (referenced in the letter incorporated as part of the employment agreement), with additional terms set out in annual RSU agreements. Critically, the RSU agreements contained forfeiture language providing that all unvested RSUs would be forfeited upon termination and all rights to RSUs 'shall immediately terminate'. Each agreement contained additional language referencing notice periods:

2020 RSU Agreement: '[N]o vesting shall continue during any notice period in relation to his / her Termination, whether specified under contract or statutorily, regulatory or common law.'
2021-2023 RSU Agreements: '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).' [Emphasis in decision.]

Facebook Canada terminated Dr. Wigdor's employment without cause on 4 December 2023, effective 8 December 2023. He was offered his minimum ESA entitlements and a supplemental package conditioned on signing a release that would have required him to accept the forfeiture of all unvested RSUs. Dr. Wigdor declined to sign and opted to pursue a claim for wrongful dismissal, including a claim for the value of RSUs that would have vested during the applicable reasonable notice period.

Lower court decision

The application Judge found that the termination provisions in Dr. Wigdor’s employment agreement contravened the ESA for failing to recognise his prior service. The termination clause was declared unenforceable, and Dr. Wigdor was awarded ten months’ reasonable notice.

With respect to the RSUs, the application judge found that the forfeiture provisions were enforceable on the basis that section 60 of the ESA (which prohibits alteration of terms and conditions of employment during the notice period) applied only to working notice, while section 61 (which governs pay in lieu of notice) operated independently and did not incorporate the same prohibition. On this basis and having concluded that RSUs were neither 'wages' nor 'benefits' under the ESA, the application judge denied Dr. Wigdor's claim for the approximately USD4.7 million in RSUs that would have vested during the notice period.

The Ontario Court of Appeal’s reversal

Writing for a unanimous panel, Justice Copeland allowed Dr. Wigdor's appeal on the RSU issue and dismissed the cross-appeal on the enforceability of the termination clause and the award of ten-months reasonable common law notice.

Sections 60 and 61 must be read together

The centrepiece of the decision is the Court's determination of whether the RSU agreements contravened the ESA. The Court of Appeal held that they did, finding that the application judge had erred in her interpretation of sections 60 and 61 of the ESA:

Section 60(1)(a) provides that during the statutory notice period, an employer 'shall not reduce the employee's wage rate or alter any other term or condition of employment.' [emphasis added]
Section 61(1)(a) permits an employer to provide pay in lieu of notice, but requires that the lump sum be 'equal to the amount the employee would have been entitled to receive under section 60 had notice been given in accordance with that section.'

The Court held that these provisions must be read together, not disjunctively. Properly interpreted, section 61(1)(a) expressly incorporates the protections of section 60, including the prohibition on altering any 'term or condition of employment' during the notice period. Accordingly, the lump sum payable in lieu of notice must be calculated on the basis that no terms or conditions of employment have been altered during the statutory notice period. This interpretation, the Court found, is consistent with the remedial purpose of the ESA and the legislative intent to ensure employees are in the same financial position whether terminated with working notice or pay in lieu.

RSU entitlements are a 'term or condition of employment' under s. 60(1)(a).

The Court found that Dr. Wigdor's RSU entitlements were a 'term or condition of employment' within the meaning of section 60(1)(a). The RSU grants were incorporated into the employment agreement, were part of his compensation package, were intended to compensate for continued service and aid retention, were described in Meta's own annual report as a 'share-based employee compensation plan,' and were taxed as employment income.

Applying the Matthews v. Ocean Nutrition Canada two-part test, the Court held that: (1) there was no dispute that, but for his termination, Dr. Wigdor's RSUs would have continued to vest during the notice period; and (2) the RSU Agreements did not lawfully remove that entitlement because their forfeiture-on-termination provisions contravened the ESA:

The 2020 RSU Agreement's explicit prohibition on vesting during 'any notice period […] whether specified under contract or statutorily, regulatory or common law' was directly contrary to section 60(1)(a).
The 2021–2023 RSU Agreements' saving clause ('unless explicitly required by applicable legislation') was not engaged because there is nothing 'explicit' in the ESA about continued vesting of RSUs during the notice period.

The Court also rejected the argument that the 2020 RSU grant was not employment compensation because it was connected to the corporate acquisition and therefore fell outside the ESA. Relying on its earlier decision in Groves v. UTS Consultants Inc., 2020 ONCA 630, the Court held that because the parties chose to structure the RSU entitlements as employment compensation, the ESA applied and the employer 'must live with that choice.'

As a result, Dr. Wigdor's damages were increased by USD4,711,647.29 to account for the value of the 9,405 RSUs that would have vested during the ten-month common law reasonable notice period.

Key takeaways for employers

RSU forfeiture provisions face heightened enforceability risk. Employers should review their equity compensation plans and agreements to identify language that may not comply with this decision. Any provision that purports to terminate the vesting of equity-based compensation immediately upon dismissal, including during the statutory notice period, is at risk of being found void under the ESA.
The 'separate agreement' distinction provides limited protection. The lower court had provided some relief to employers by treating RSU agreements as standalone contracts. The Court rejected that reasoning, holding that when equity forms part of an employee’s compensation, employers cannot insulate equity forfeiture terms by placing them in a separate document.
Employees are entitled to the same compensation whether their employment is terminated with working notice or with pay in lieu of notice. Employers cannot structure termination payments as pay in lieu of notice to circumvent section 60's protections. This decision confirms that the obligation not to alter any term or condition of employment during the statutory notice period applies whether the employee is given working notice or pay in lieu.
The commercial origins of the employment relationship do not exempt employers from the ESA. Employers participating in an acquisition or corporate transaction should carefully consider how equity entitlements are characterised and documented. The Court confirmed that, even where RSU entitlements arise in connection with a corporate acquisition, the ESA applies if the entitlements are structured as employment compensation. Employers cannot avoid the statute by characterising equity as part of a commercial transaction.

Employers with equity-based compensation programs operating in Ontario should proactively review their RSU agreements, stock option plans, and employment agreements to ensure compliance with this decision. For guidance on how Wigdor may affect your organisation's arrangements, please contact a member of DLA Piper's Employment group.