RSU reality check: Ontario court confirms vesting can be excluded during statutory notice period

In a significant win for employers—particularly those granting equity—the Ontario Superior Court’s recent Wigdor decision (2025 ONSC 4051), confirms the enforceability of restricted stock unit (RSU) agreements that provide for the forfeiture of unvested RSUs upon termination, including during the statutory notice period.

For companies offering long-term, equity-only, incentive plans where the equity is not settled in cash, this case delivers much-needed clarity: properly drafted equity agreements that clearly define when vesting ceases and include strong forfeiture provisions can be enforced, even where the employee argues entitlement to continued vesting during the statutory and common law notice period.

This case is also a welcome change in a series of decisions that have generally favoured employees upon termination. It offers employers meaningful direction and confidence when structuring equity-based incentives.

The facts

Dr. Wigdor was employed by the company from September 2020, following years of consulting work. As Director, Research Science, he received a base salary of $253,100 and participated in the company’s equity program under its 2012 Equity Incentive Plan, receiving RSUs governed by separate RSU award agreements.

Upon his termination, Wigdor was offered his statutory entitlements and additional compensation, conditional on signing a release. He refused, citing a disagreement over the forfeiture of millions in unvested RSUs. One of his claims was that he was entitled to RSU vesting during the notice period, and the RSU agreements were either ambiguous or in violation of Ontario’s Employment Standards Act, 2000 (ESA).

There were two versions of relevant RSU agreements: the 2020 RSU agreement and 2021–2023 RSU agreements. The 2021-2023 RSU agreements have differently worded forfeiture provisions than the 2020 RSU agreement.

The court’s decision: RSUs fall outside the ESA's scope

The Court decisively rejected Wigdor’s arguments, upholding both the 2020 and 2021–2023 versions of the company’s RSU agreements. Each version clearly stated that unvested RSUs would be forfeited immediately upon termination, regardless of any statutory or contractual notice period.

Importantly, the Court confirmed that RSUs do not fall within the ambit of Section 61 of the ESA, which requires employers to maintain certain wages and benefits during the statutory notice period. The ESA’s definition of “wages” and “benefits” is limited to monetary remuneration and specific employer-provided benefits (such as health and dental), and not equity. As the Court noted, “had the legislature chosen to include other forms of compensation in ‘wages’ it could have adopted a more expansive definition that would include stock options and RSUs.”

Wigdor’s arguments and the Court’s findings

1. Violation of ESA Section 61   

Wigdor argued that the RSU forfeiture in the agreements breached the ESA’s requirement to maintain benefits during the statutory notice period as stipulated under Section 61. The Court disagreed, holding that RSUs are not “wages” or “benefits” as defined in the ESA. As a result, there is no statutory requirement that RSUs continue to vest during the minimum notice period.

 

2. Ambiguity in forfeiture language

Wigdor claimed the 2021–2023 RSU agreements were ambiguous because the ESA does not expressly require RSUs to vest during the statutory notice period, and that including language suggesting the legislation could require vesting imports an ambiguous term into the RSU agreements. The Court rejected this claim, finding the forfeiture language was clear and comparable to valid termination clauses limiting entitlements to ESA minimums only.

 

3. Contracting out of the ESA

Wigdor asserted that the RSU agreements unlawfully contracted out of the ESA, as the RSU agreements provided that all RSUs would be forfeited even if the termination was “later found to be… in breach of employment laws” or “later found to be invalid or unlawful.” He argued that these provisions overreach because they fail to recognize situations where employment cannot be terminated lawfully — such as during a job-protected leave of absence as was found in the frequently cited 2024 decision, Dufault v. Ignace (Township)^[1].

 

The Court noted that while there may be instances where termination could be found to be unlawful, in the context of an employment contract, those provisions are “not in play here.” As such, the Court disagreed with the assertion, citing Mikelsteins v. Morrison Hershfield Ltd.^[2], and emphasizing that equity entitlements can be governed by standalone agreements, distinct from the employment contract and not subject to the same statutory protections.

Why this case matters

This case is particularly important because it draws a clear line between RSUs and statutory entitlements to continued wages and benefits upon termination of employment. Employers are not required to allow continued vesting of RSUs during the statutory notice period, provided the governing plan and award agreements clearly define when vesting ceases.

The case also confirms that even where an employee may be entitled to common law reasonable notice due to an unenforceable termination provision in their employment agreement, the value of unvested RSUs and future grant entitlements will not be included in common law damages after the effective termination date.

The Court treated the RSU entitlements as contractually independent from employment termination entitlements, meaning that employees may receive notice under common law while still forfeiting unvested RSUs if the equity plan documents expressly provide for such forfeiture upon cessation of employment.

The decision clarifies that RSUs and very likely all equity-based incentives, unlike salary or insured benefits, are not caught by Section 61 of the ESA and do not need to be maintained during the statutory notice period. This decision did not, however, deal with an equity incentive that is settled in cash, and therefore, caution should be exercised in the drafting of forfeiture provisions in relation to Section 61 of the ESA where equity is settled in cash.

Key takeaways for employers

• Review RSU and other equity agreements to ensure that forfeiture provisions are clearly drafted and vesting is tied to active service.
• Clearly separate equity agreements from employment contracts to limit ESA exposure.
• Include express language confirming all unvested RSUs/equity are forfeited as of the termination date, regardless of any statutory, contractual, or common law notice period, unless the equity is settled in cash in which case vesting may still be required pursuant to section 61.

This decision offers valuable clarity and reaffirms that employers can control the terms of vesting and protect against unintended equity windfalls on termination.

If you need assistance with drafting or reviewing equity compensation, or if you have any other questions, please contact a member of the Employment, Labour & Equalities Group.