Forfeiture Clause Upheld, Punitive Damages Denied: Favourable Takeaways for Employers

Written By Carl Cunningham, Katelyn Weller, David Cassin and Madison Stemmler

The Ontario Superior Court of Justice’s recent decision in Wigdor v Facebook Canada Ltd, 2025 ONSC 4051 provides helpful clarity for employers on two key issues: the enforceability of restricted stock unit (RSU) forfeiture provisions, and the legal threshold for awarding punitive damages in employment disputes.

Background

Daniel Wigdor commenced employment with Facebook in September 2020, following several years during which he worked as a consultant to Facebook. During his employment, Mr. Wigdor was granted a number of RSUs, which were governed by separate RSU Award Agreements. The Award Agreements provided that any unvested RSUs would be forfeited on termination. At the time of his termination, Mr. Wigdor’s RSUs were valued in the millions of dollars.

Mr. Wigdor was terminated, without cause, in December 2023 and was offered a severance package in excess of his minimum entitlements under the Employment Standards Act, 2000 (ESA)—but only if he signed a release which included a waiver of his rights to challenge the forfeiture of his unvested RSUs on termination. He did not sign the release and commenced an Application seeking an order declaring that the termination provision in his employment agreement was not enforceable and that he was entitled to the unvested RSUs. Mr. Wigdor also sought an award of punitive damages resulting from Facebook’s failure to pay his minimum statutory entitlements for about 10 months (and only after the Application was commenced).

RSU’s Are Not Wages

In upholding the forfeiture provisions in the Award Agreements, the Court confirmed that RSUs are not “wages” or “benefits” under the ESA and therefore the forfeiture provisions in the Award Agreements, which did not permit for continued vesting following termination (including over any statutory notice period), were valid and enforceable.

This finding was based on an important distinction between two provisions of the ESA:

• Section 60: which prohibits an employer from altering any term or condition of employment during the working notice period; and
• Section 61: which requires an employer to make a lump sum payment equivalent to the amount that an employee would have received under section 60 (i.e., based on regular wages) and continue to make benefit plan contributions during the statutory notice period.

Since Mr. Wigdor was terminated effective immediately, and the RSUs are not “wages” or “benefits” under the ESA, the forfeiture provisions in the Award Agreements complied with Section 61 of the ESA.

Importantly, the Court also noted that entitlement to the RSUs were governed by separate agreements and could not be treated the same as rights under an employment agreement. As a result, Mr. Wigdor’s contractual entitlements to the RSUs on termination were independent of any relief he may be entitled to under his Employment Agreement, the ESA, or at common law.

Delay In Paying Statutory Minimums Does Not Warrant Punitive Damages

The Court also declined to award punitive damages against Facebook, despite it having terminated Mr. Wigdor’s benefits prior to the end of the statutory notice period and having delayed paying his ESA termination pay and severance pay (which amounted to almost C$100,000) for ten months, until after the Application was commenced.

While the Court found Facebook’s explanation for the delay as an “administrative error” to be “inadequate” and “vague,” it ultimately concluded that the company’s conduct did not meet the high threshold for punitive damages, which requires “harsh” or “malicious” conduct on the part of the employer.

Key Takeaways

• RSUs May be Validly Forfeited on Termination: When clearly drafted, standalone RSU award agreements can extinguish entitlement to unvested RSUs upon termination of employment.Due to variances in minimum employment standards legislation, just like with employment agreements, it is a good idea for employers to have equity or incentive award agreements reviewed on a periodic basis to ensure termination and forfeiture related language is clear, unambiguous and reflects current best practices in the Province(s) in which the employer operates.
• High Threshold for Punitive Damages: The Court declined to award punitive damages despite Facebook’s violations of the ESA (and despite not having provided any compelling explanation for this behaviour), confirming that punitive damages are reserved for particularly egregious behaviour on the part of employers. That notwithstanding, employers are encouraged to always provide an employee with all of their statutory and contractual minimum entitlements in order to minimize the risk of employment agreement enforceability concerns or incurring enhanced damages.

If you have any questions about this decision, or if we can help advise your business on similar or other employment-related issues, please contact one of the authors, or another member of the Bennett Jones Employment Services group, for more information.

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