A recent Ontario decision, Wigdor v. Facebook Canada Ltd., helps explain what happens to Restricted Share Units (RSUs) and other stock awards when an employee is let go.
In this case, the company’s termination clause didn’t hold up, so the employee was entitled to a longer, common-law notice period. Normally, that would mean the employee continues receiving whatever compensation would have come in during that notice period. But not here. The Court said the employee still lost all unvested RSUs because the equity plan clearly stated that: (i) unvested RSUs are forfeited the moment employment ends; and (ii) vesting does not continue during any type of notice period.
So even though the employee was owed more notice, they didn’t get any extra shares. The Court simply followed what the plan said.
If your equity plan clearly says that vesting stops when employment ends, the Court will usually respect that.
Why Employers Should Care
The Court made it clear that RSUs and stock awards are not treated like wages or benefits under Ontario’s Employment Standards Act. That means employers can decide whether equity continues to vest during a notice period—but only if the plan says so in clear language.
If the plan isn’t clear, a court might assume vesting continues, which can be very expensive.
What Employers Should Keep in Mind
Courts enforce equity plans that use simple, direct wording about what happens when someone’s employment ends. If your RSU or stock-option plan says vesting stops and unvested awards are forfeited, courts will usually stand by that, even if your termination clause is invalid.
Your equity plan also needs to explain everything on its own. Don’t rely on the employment contract to fill in the gaps. The equity documents must spell out exactly what happens when employment ends, who gets what, and what does not continue.
Many companies are still using older equity plans that never anticipated fights over vesting during notice periods. These outdated plans often use vague language, which creates risk for employers. And when the wording is unclear, courts tend to interpret the plan in favour of the employee.
The key is to make the plan simple, clear, and unmistakable.
Bottom Line for Employers
The Wigdor decision confirms that employers can stop RSUs and other equity from vesting during a notice period—but only if the plan documents say so clearly.
Now is an ideal time to review your RSU and stock-option plans to ensure the termination and forfeiture language is strong and up-to-date.
A final note, Wigdor is a lower-court decision and might be appealed, so it’s helpful guidance but not the last word. So, we will just have to wait and see if this decision stands the test of time.
Robin K. Mann, Associate Lawyer