The Impact of Wrongful Dismissal on Stocks and RSU

How Does a Wrongful Dismissal Impact Stocks and RSU on Termination: Why Contract Language Matters 

Restricted stock units (“RSUs”) and other equity-based compensation (such as stock options) continue to generate uncertainty when senior employees are terminated. Two recent Ontario Superior Court decisions – Wigdor v. Facebook Canada Ltd. and Liggett v. Veeva Software Systems Inc. – reached opposite conclusions on whether employees were entitled to RSUs during the notice period. In other words, the law seems fairly undecided on the impact of wrongful dismissal on stocks and RSU.

Read together, these cases do not contradict basic employment law principles. Instead, they reinforce a consistent theme: the outcome turns on the clarity, structure, and compliance of the governing equity agreements with the Ontario Employment Standards Act, 2000.

For employees and employers alike, these decisions underscore the importance of careful drafting and informed legal advice from a Toronto employment lawyer, wrongful dismissal lawyer, or employment contract lawyer when equity compensation is involved.

The Wigdor Decision: Clear RSU Language, No Vesting after Termination

In Wigdor v. Facebook Canada Ltd., 2025 ONSC 4861, the court addressed both the enforceability of an employment contract and the treatment of RSUs following termination and the impact of wrongful dismissal on stocks and RSU.

The employee, a senior research director with highly specialized expertise, was terminated without cause. While the court found his employment contract’s termination clause unenforceable for violating the Employment Standards Act, 2000 (ESA), it reached a different conclusion regarding his RSUs.

Why the RSUs Were Forfeited in Wigdor

In Wigdor, the employer argued that the employee’s RSU entitlements were governed by Meta’s Equity Incentive Plan and a series of RSU Award Agreements. Those agreements contained express termination provisions addressing what would happen to unvested RSUs when employment ended.

The Court focused on the language stating that, if the participant’s service “Terminates for any reason,” all unvested RSUs “shall be forfeited to the Company forthwith, and all rights of Participant to such RSUs shall immediately terminate.” The agreements further clarified that the employee’s service terminated when he “ceased to provide services”, regardless of whether the termination was later found to be invalid or unlawful, and that “no vesting shall continue during any notice period,” whether statutory, contractual, or at common law.

The employee argued that these provisions violated section 61 of the Employment Standards Act, 2000, which requires employers who provide pay in lieu of notice to maintain the employee’s “terms and conditions of employment” during the statutory notice period.

The Court rejected that argument on the impact of wrongful dismissal on stocks and RSU.

It held that section 61 requires an employer to continue paying “regular wages” and to maintain benefit plan contributions, but does not extend to equity-based compensation, such as RSUs. The Court emphasized that RSUs, like stock options, are not wages and do not fall within the ESA’s definition of monetary remuneration or prescribed benefits.

As the Court explained, had the ESA intended to include stock-based compensation (such as RSU’s) within the scope of section 61, it could have done so expressly. Instead, the statutory scheme limits continuation obligations to wages and benefit plans, not contingent equity awards.

In the court’s review, because the RSU agreements clearly and unambiguously provided that vesting would not continue beyond the employee’s last day of active service (and because those provisions did not contravene the ESA), they were  valid and enforceable. As a result, the employee was not entitled to RSUs that would have vested after December 8, 2023, his final day of work.

The Liggett Decision: Ambiguous RSU Language

By contrast, in Liggett v. Veeva Software Systems Inc., the Court took a very different approach, despite seemingly similar forfeiture language in the governing equity agreements.

The employee in Liggett was a senior product manager who, like Dr. Wigdor, was terminated without cause and denied unvested equity compensation. However, the Court found the RSU and stock-option provisions unenforceable due to multiple violations of the ESA.

Key Problems Identified in Liggett

The Court found several clauses in the equity agreement to be invalid for the following reasons:

1. ESA Conflict – The provision stating that forfeiture occurs “in the event of termination of your Service” conflicted with the ESA, as the statutory notice period means employment does not legally end at the moment notice is given.

2. “Actively Providing Services” Language – The clause tying entitlements to the date an employee is “no longer actively providing services” mirrored language previously considered in Matthews v. Ocean Nutrition and was insufficient to deprive employees of rights arising during the notice period.

3. Unfettered Employer Discretion – The agreement granted the Committee “exclusive discretion” to determine when an employee was no longer providing services, including during leaves of absence, without any guiding criteria, creating ambiguity about entitlement to vesting of stock options or RSUs.

4. Overly Complex and Opaque Drafting – The contract’s structure required employees to piece together multiple provisions and substitute jurisdiction-specific clauses to understand their rights. This complexity made it difficult to determine applicable entitlements and increased the risk of misinterpretation.

Because of these issues, the Court concluded that the RSU and stock-option provisions did not clearly extinguish the employee’s rights during the notice period. As a result, the employee was awarded both notice pay and the value of equity compensation that would have vested.

Why These Cases Are Not Truly Inconsistent

At first glance, Wigdor and Liggett appear to be in tension in terms of the impact of wrongful dismissal on stocks and RSU. One enforced RSU forfeiture; the other did not. However, the reasoning in both decisions follows the same analytical path.

The key distinction lies in how the RSU agreements were drafted:

• In Wigdor, the equity agreements were internally consistent, clearly worded, and in the court’s view, did not conflict with the ESA.

• In Liggett, the equity agreements were ambiguous, discretionary, and structured in a way that risked misleading employees about their statutory and common law rights.

Ontario courts apply the same principles to equity compensation clauses as they do to termination clauses: if contractual language violates the ESA or creates ambiguity about minimum entitlements, it will not be enforced, entitling employee’s to a larger severance package in a wrongful dismissal claim or constructive dismissal claim.

The Ontario Court of Appeal is scheduled to hear the Wigdor appeal in April 2026. That decision may provide further guidance on how RSU forfeiture clauses interact with the ESA.

Until then, Wigdor and Liggett together send a clear message: outcomes in RSU disputes will be driven by precision in drafting and strict adherence to employment standards legislation.

For anyone negotiating an employment contract, managing terminations, or disputing lost equity compensation, advice from an experienced Toronto employment lawyer or wrongful dismissal lawyer remains essential.

Lessons Learned for Employees

For employees, particularly those with RSUs or stock options as a significant part of compensation, these cases highlight several important points:

• Equity compensation does not automatically vest during the notice period.

• The wording of RSU and stock-option plans is critical.

• Ambiguity often works in the employee’s favour, but clarity may not.

• Signing a release without legal advice can permanently extinguish valuable claims.

A severance package lawyer Toronto can assess whether equity compensation has been improperly withheld and whether contractual provisions are enforceable.

Lessons Learned for Employers

For employers, the lessons are equally clear:

• RSU and equity plans must be drafted with the same care as termination clauses.

• Language should be clear, direct, and free from unnecessary discretion.

• Agreements must not contradict ESA notice requirements, even indirectly.

• Overly complex or “global” templates increase legal risk in Ontario.

Both cases demonstrate that courts will scrutinize equity plans closely, particularly where they interact with statutory employment protections.

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