Ontario court invalidates vesting language in equity compensation clause
Ontario courts may be increasingly willing to scrutinize equity compensation clauses using the same strict ESA-based analysis applied to termination clauses, rather than treating equity plans as a separate category.
A recent Ontario Superior Court decision has added a new layer to the evolving law around equity compensation on termination, and it may signal a different analytical approach than the one taken in Wigdor v. Facebook Canada Ltd., which is currently under appeal.
In Liggett v. Veeva Software Systems, Inc. and Veeva Systems Inc., Justice Des Rosiers was asked to consider whether restrictive vesting language in a stock option and restricted share unit (RSU) plan successfully disentitled an employee from equity compensation during the notice period. The court found that it did not.
The employer relied on plan language stating that unvested options and RSUs would immediately expire when the employee’s “Service” ended, defined as the date the employee was no longer actively providing services, regardless of whether the termination was later found to be unlawful.
The plan also expressly stated that vesting would not be extended by any statutory notice period, garden leave, or similar period, and gave the company broad discretion to decide when service ended.
On its face, this language appeared to be designed to close the door on any equity...
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