CHAUDHRI: Major win for executive employees at Ontario Court of Appeal
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I have spent most of my career representing executive employees that have been terminated from banks, professional firms, and major corporations. Regardless of the person, position, or industry, there’s always a common theme. Every executive’s compensation is overwhelmingly composed of various forms of incentive compensation like bonuses, commissions and long term incentives. Base salary is usually a much smaller piece of the pie.
I most often get hired because terminated executives are rarely offered termination packages that consider the true drivers of their compensation like cash bonus, long term incentives and RSUs (restricted stock units). Sometimes these packages consider salary only.
Across the board, and across every industry, employers argue that bonus plans limit a terminated employee’s entitlement to any incentive pay after their termination.
Appeals court sides with terminated employee
In Wigdor v. Facebook Canada Ltd. , a decision released recently by the court of appeal, found that Daniel Wigdor, a Facebook executive, was entitled to payment of his RSUs post termination in the amount of $4.7 million USD.
Wigdor joined Facebook Canada as Director, Research Science following Meta’s acquisition of a company he founded called Chatham. His compensation included an initial grant of 43,380 Meta Restricted Stock Units, then valued at US$7.5 million.
Wigdor was terminated by Meta in December 2023. Meta’s RSU agreements purported to stop vesting immediately. Indeed, the 2020 RSU agreement expressly stated that vesting would not continue during any contractual, statutory, regulatory or common-law notice period. Wigdor sued for wrongful dismissal damages including the RSUs that would vest over the common law notice period.
At a hearing of his case, Wigdor was awarded 10 months of reasonable notice, however the trial judge denied Wigdor’s claim for RSU vesting over the notice period. Wigdor successfully appealed.
Agreement provisions violated employment law, court ruled
The Court of Appeal held that Meta’s RSU agreement provisions violated Ontario’s Employment Standards Act (ESA).
The Court’s reasoning is particularly important for highly compensated employees. The ESA prohibits an employer from altering a term or condition of employment during the statutory notice period. The Court held that this protection applies whether an employee receives working notice or pay in lieu: the legislation is intended to leave employees in the same financial position either way.
The Court then found there could be “no real doubt” that Wigdor’s RSUs were a term or condition of his employment. They were part of his compensation, vested quarterly and were treated as employment income. The provisions purporting to terminate vesting during the statutory notice period were therefore void.
The practical significance extends well beyond RSUs.
Executive compensation divided multiple ways
Executive compensation is frequently divided among an employment agreement, annual bonus plan, equity plan, long-term incentive plan, and individual award agreements. Employers often rely on carefully drafted language in those documents to argue that compensation disappears upon termination.
Wigdor demonstrates why the analysis cannot end with the wording of the plan. The first question may be whether that wording is lawful at all.
The decision is also notable because Wigdor was a sophisticated executive who had legal counsel when his arrangements were negotiated. The Court expressly rejected the suggestion that this entitled him to less protection, cautioning against allowing an employee’s sophistication or access to independent advice to override the language and minimum standards governing termination provisions.
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Ultimately, 9,405 RSUs would have vested during Wigdor’s 10-month common-law notice period. The Court increased his damages by US$4,711,647.29.
For executives, the lesson is an important one. A termination package should never be assessed by simply multiplying monthly salary by the number of months offered.
With modern executive compensation, the much more valuable question is: what compensation would have been earned or vested had the executive remained employed throughout the proper notice period?
After Wigdor, the answer may be considerably more than the employer’s termination letter suggests.
— Have a workplace question? Maybe I can help! Email me at [email protected] and your question may be featured in a future column. The content of this article is general information only and is not legal advice.