Ontario Court of Appeal Finds RSU Forfeiture Clauses Void Where They Ignore the ESA Notice Period

For Ontario employers, the Ontario Court of Appeal’s decision in Wigdor v. Facebook Canada Ltd., 2026 ONCA 572 offers guidance on damages for equity-based compensation and contractual terms that seek to limit such damages. The Court of Appeal’s decision in this case serves as a warning that forfeiture language in restricted stock units (“RSUs”) and other equity plans may not prevent vesting during the notice period where the entitlement is a term or condition of employment protected by the Ontario Employment Standards Act, 2000 (“ESA”).

Background

Dr. Wigdor founded Chatham Inc., a technology consulting firm, in 2011. In 2020, he sold Chatham to Meta through a share purchase transaction and became employed by Facebook Canada Ltd., Meta’s Canadian subsidiary.

Dr. Wigdor’s employment agreement included RSU grants as part of his compensation. The RSU agreements contained provisions stating that unvested RSUs would be forfeited upon termination and that the termination date would not be extended by any notice period, pay in lieu of notice, or damages—unless explicitly required by applicable legislation.

When Dr. Wigdor was terminated without cause, 9,405 RSUs would have vested during his 10-month common law notice period, valued at approximately US$4.7 million.

The Court’s Decision

The Court of Appeal held that:

• The employment agreement’s termination provisions were void because they attempted to limit Dr. Wigdor to only two weeks’ notice during his first three months, ignoring the ESA section 9 continuity of service from Chatham. This contravened the ESA.
• RSUs were a “term or condition of employment” because they were included in the employment agreement and other employment documents and plans, described by the employer as compensation, vested on a regular quarterly schedule, and treated as employment income and taxable benefits.
• The RSU forfeiture provisions violated the ESA because sections 60 and 61 require that no term or condition of employment be altered during the statutory notice period.

The Court of Appeal expressly rejected the employer’s arguments that the commercial context of the acquisition or the employee’s sophistication and access to independent legal advice should alter the analysis.

It is important to note that the Court of Appeal declined to decide whether all equity-based compensation constitutes “wages” under the ESA. Its analysis was based on the RSUs being a “term or condition of employment,” not on a broader “wages” determination. 

Key Takeaways for Employers

• Review termination clauses and equity/bonus/RSU plans together. Forfeiture-on-termination language in a standalone RSU or equity plan will not override the ESA where the compensation is a term or condition of employment. Such forfeiture provisions should account for the ESA statutory notice period. Employers should ensure that termination provisions across all compensation documents comply with the ESA when read as a whole.
• Take care in acquisition and onboarding scenarios. Where an employee’s prior service is deemed continuous under section 9 of the ESA (sale of a business), termination clauses that ignore that continuity may be void.
• Do not assume that separate plan language or savings clauses will preserve forfeiture provisions. The Court found the “unless explicitly required by applicable legislation” wording insufficient to save the forfeiture provisions in this case.

Should you have any questions about the implications of this decision for your organization’s termination provisions or equity compensation plans, please contact any member of our Labour & Employment Group.