The Ontario Court of Appeal has released an important decision addressing the treatment of restricted stock units, commonly known as RSUs, following termination of employment.
In Wigdor v. Facebook Canada Ltd., 2026 ONCA 572, the Court considered how RSU entitlements interact with the Employment Standards Act, 2000 (ESA), statutory notice, pay in lieu of notice, and employment compensation.
The decision is significant for both employers and employees, particularly in workplaces where equity-based compensation forms part of the overall compensation package.
While the Court did not decide that all equity-based compensation is “wages” under the ESA, it did find that, on the facts of this case, the employee’s RSU entitlements were part of his employment compensation and were a term or condition of employment protected during the statutory notice period.
Background: RSUs as Part of Employment Compensation
Restricted stock units are often used as part of an employee’s total compensation, especially in technology, finance, executive, and growth-stage workplaces.
Employers may take the position that unvested RSUs end immediately upon termination, particularly where the RSU agreement contains language stating that vesting stops when employment ends.
However, this case demonstrates that the analysis is not always that simple.
The Court found that the employee’s RSU entitlements were structured as part of his employment compensation. The RSUs vested automatically in consideration of ongoing employment, and RSUs that vested during employment were treated as employment income.
As a result, the Court concluded that the ESA applied to the RSU entitlements.
Working Notice and Pay in Lieu Must Produce the Same Result
One of the key issues in the case was whether an employee who receives pay in lieu of notice should receive the same statutory entitlements as an employee who works through the statutory notice period.
The Court confirmed that sections 60 and 61 of the ESA require the same calculation.
In other words, where an employee receives pay in lieu of statutory notice, the lump sum payment must be equal to what the employee would have received had they continued working through the statutory notice period.
This was important because the application judge had drawn a distinction between compensation during a working notice period and compensation where the employee receives pay in lieu of notice.
The Court of Appeal found that this was an error.
For employers, this is a critical point. An employer cannot avoid statutory notice period entitlements by providing pay in lieu rather than working notice. The monetary result must be the same.
The Contract Is Assessed at the Time It Is Made
The Court also emphasized that the validity of an employment-related contractual provision is assessed at the time the contract is entered into, not only by looking at what the employer actually did at the time of termination.
This matters because a contract may be unenforceable if, when formed, it purports to remove or reduce rights protected by the ESA.
The Court explained that if RSU termination language improperly deprives employees of vesting during the statutory notice period, that problem exists when the agreement is made. It does not depend only on whether a particular employee later receives working notice or pay in lieu of notice.
For employers, this reinforces the importance of reviewing employment agreements, incentive plans, equity agreements, and termination language before a dispute arises.
The Court Did Not Decide Whether RSUs Are “Wages”
A major point of clarification is what the Court did not decide.
The Court did not determine whether equity-based compensation, including RSUs, falls within the definition of “wages” under the ESA.
Instead, the Court decided the appeal on the basis that the RSU entitlement was a term or condition of employment under the ESA.
The Court noted that whether equity-based compensation is “wages” may be better left to a case where that issue is determinative. The answer may also be more nuanced than saying all forms of equity compensation are, or are not, wages.
This is important because employers should not assume that every equity plan will be treated the same way. The outcome may depend on how the compensation is structured, how it is documented, and whether the entitlement is tied to ongoing employment.
Saving Language Did Not Preserve the RSU Termination Clause
The RSU agreements included language that appeared to attempt to preserve statutory rights by stating that vesting would end unless continued vesting was “explicitly required by applicable legislation.”
The Court found that this saving language did not work.
The problem was that the ESA does not explicitly refer to continued vesting of RSUs during the statutory notice period. Because there was nothing “explicit” in the ESA about RSU vesting, the saving language was not engaged.
For employers, this is a major drafting lesson.
Generic saving language may not be enough. Employment agreements and compensation plans should clearly and specifically preserve ESA minimum entitlements. Relying on broad or conditional saving language can create risk.
RSUs Connected to a Commercial Transaction Can Still Be Employment Compensation
The Court also rejected the argument that the ESA did not apply because some of the RSUs were connected to a commercial transaction.
The Court found that there is nothing in the ESA indicating that it does not apply to employment relationships connected to commercial transactions.
On the facts of this case, the RSU entitlements were part of the employee’s employment compensation. The fact that they may also have been connected to a broader commercial context did not remove them from the ESA analysis.
Why Mikelsteins Was Different
The Court distinguished this case from Mikelsteins v. Morrison Hershfield Limited.
In Mikelsteins, the employee worked for an employee-owned engineering firm and had the option to purchase shares in the parent corporation using personal funds. Once the employee chose to purchase shares, the rights connected to those shares were governed by a shareholders agreement, not the employment contract.
The Court found that situation different from the RSU entitlements in Wigdor.
In Wigdor, the RSUs were not purchased by the employee using personal funds. They were part of the employee’s compensation and vested automatically in consideration of ongoing employment.
That distinction was central to the Court’s analysis.
Why This Decision Matters for Employers
This decision is an important reminder that equity-based compensation cannot be treated as separate from employment law simply because it is contained in a stock plan, RSU agreement, incentive plan, or separate document.
Employers should carefully review:
- Employment agreements
- RSU plans and award agreements
- Stock option plans
- Bonus plans
- Incentive compensation language
- Termination provisions
- Saving clauses
- ESA compliance language
Where equity compensation forms part of an employee’s total compensation, employers should be careful before assuming that unvested entitlements automatically end at termination.
The key question will often be whether the plan language clearly complies with the ESA and whether the entitlement forms part of the employee’s terms or conditions of employment.
Why This Decision Matters for Employees
For employees, this decision is a reminder that compensation may include more than base salary.
Employees who receive RSUs, stock options, bonuses, commissions, or other incentive compensation should not assume that those entitlements are automatically lost because employment has been terminated.
The enforceability of termination language may depend on the specific wording of the employment agreement, equity plan, award agreement, and applicable legislation.
Before accepting a termination package, employees should understand whether their statutory notice period, common law notice period, and compensation entitlements have been properly addressed.
Key Takeaways
The decision in Wigdor v. Facebook Canada Ltd. provides several important takeaways:
- Pay in lieu of statutory notice must place the employee in the same financial position as working notice under the ESA.
- The validity of a contractual provision is assessed at the time the contract is made.
- RSU entitlements may be protected as a term or condition of employment.
- The Court did not decide whether RSUs are “wages” under the ESA.
- Generic saving language may not be enough to preserve enforceability.
- Equity compensation connected to a commercial transaction may still be subject to the ESA if it is part of employment compensation.
- Not all share or equity arrangements are the same. The facts and documents matter.
Final Thoughts
The Ontario Court of Appeal’s decision in Wigdor v. Facebook Canada Ltd. is an important development in the law of employment compensation, RSUs, and termination entitlements.
For employers, the decision reinforces the need to review equity compensation plans and termination language carefully. RSU and incentive compensation agreements should not be treated as separate from employment law obligations.
For employees, the decision highlights the importance of reviewing all elements of compensation before agreeing to a termination package.
How Minken Employment Lawyers (Est. 1990) Can Help
Minken Employment Lawyers (Est. 1990) regularly advises employers and employees on employment agreements, termination clauses, RSUs, bonuses, incentive compensation, severance packages, wrongful dismissal claims, and ESA compliance.
Whether you are an employer whose terminated employee is challenging a termination package on the basis of RSUs, bonuses, incentive compensation, or an executive employee who did not receive full compensation in a termination package, we can help.
Contact Minken Employment Lawyers (Est. 1990) today for a confidential consultation at 905-477-7011 or contact@minken.com to connect with our team.
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Please note that this article is for informational purposes only and does not constitute legal advice or opinion.
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