In Friel v. HUB International Limited, 2026 ONCA 313, the Ontario Court of Appeal upheld the enforceability of a forum selection clause designating the State of Delaware as the exclusive forum for resolving a dispute between a former employee in Ontario and his employer's Delaware-based parent entities over the exercise of vested share options. The decision provides important guidance for employers that structure equity incentive arrangements through related entities and reinforces the significance of clear contractual language delineating employment relationships from equity participation rights.
Background
The appellant, Declan Friel, was a former employee in Ontario of HUB International HKMB Limited ("HUB"), an insurance brokerage. HUB is a subsidiary of several Delaware-based parent entities.
Mr. Friel's employment with HUB was governed by an employment agreement that stipulated Ontario as its governing law and included a mediation-arbitration clause (the "ADR clause") for the resolution of any dispute "contemplated by or arising out of or in connection with" his employment agreement.
During his employment, Mr. Friel was granted options to purchase Class B shares in a HUB parent entity pursuant to a share option agreement (the "Option Agreement"). The Option Agreement incorporated an Equityholders Agreement that included a forum selection clause designating the Delaware Court as the exclusive forum for the resolution of any disputes.
Mr. Friel resigned from HUB in 2021—one day after his Class B options vested—to work for a competitor and attempted to exercise his vested options. The respondents sought to enforce the terms of the Equityholders Agreement, which held that resignation of employment to join a competitor entitled the respondents to repurchase the shares at cost.
Mr. Friel commenced proceedings in Ontario seeking, among other things, a declaration that the dispute was governed by the ADR clause in his employment agreement and that the forum selection clause in the Equityholders Agreement was unconscionable. The motion judge determined that the ADR clause did not apply as the issue was not "contemplated by or arising out of or in connection with" his employment and that the forum selection clause in the Equityholders Agreement was valid and enforceable, giving the Delaware Court exclusive jurisdiction. In doing so, the motion judge relied on, among other things, the language of the Equityholders Agreement and Option Agreement that clearly specified that any awards did not constitute compensation. Mr. Friel appealed.
The Court of Appeal's Decision
The Ontario Court of Appeal dismissed Mr. Friel's appeal, rejecting each of his arguments.
The Dispute Was Not "In Connection With" the Employment Agreement
Mr. Friel argued that the Option Agreement was obviously and inextricably linked with his employment, such that the dispute fell within the scope of the ADR clause. The Court of Appeal rejected this argument, finding no error in the motion judge's interpretation.
The Option Agreement unambiguously stated that the grant of options did not constitute employment compensation, was not a term or condition of employment and did not form part of Mr. Friel's employment agreement.
Mr. Friel's employment agreement also did not reference Mr. Friel's entitlement to equity beyond a separate schedule providing for a different grant of options in an entity not involved in the dispute. In the Court of Appeal's view, the motion judge had read the agreements as a whole and given effect to their clear and unambiguous language.
Unconscionability
Mr. Friel also argued that the forum selection clause was unconscionable given the inequality of bargaining power between himself and the respondents. While the respondents acknowledged an inequality of bargaining power, the Court of Appeal found that the case was distinguishable from the authorities relied upon by Mr. Friel, including Uber Technologies Inc. v. Heller and Rose v. Carnival Corporation. For example, unlike in Uber, HUB's explanation for the forum selection clause—that it sought to avoid a multiplicity of proceedings and/or inconsistent decisions related to its equity holders who resided in multiple jurisdictions—made sense and was reasonable.
The Court upheld the motion judge's finding that the bargain was not improvident and that there was no evidence the forum selection clause would put a remedy beyond Mr. Friel's reach.
Key Takeaways
The Court of Appeal's decision in Friel v. HUB offers several practical takeaways for employers structuring equity incentive arrangements:
- Clear contractual language distinguishing equity arrangements from employment compensation can be determinative. The Option Agreement's express statements that the grant of options did not constitute employment compensation and did not form part of Mr. Friel's employment agreement were central to the Court of Appeal's conclusion that the ADR clause did not apply. Employers seeking to channel equity disputes to a specific forum should ensure that the relevant agreements explicitly disclaim any employment nexus.
- Forum selection clauses in equity agreements will generally be enforced, even where there is an acknowledged inequality of bargaining power, provided the bargain is not improvident and the clause does not put a remedy out of the employee's reach. Employers should be mindful, however, that the unconscionability analysis is fact-specific and that different circumstances—particularly where the costs of litigating in a foreign forum are prohibitive—may yield a different result.
- The decision also underscores the importance of ensuring that separate agreements governing different aspects of an employee's relationship with an employer (or its related entities) are internally consistent in their dispute resolution and governing law provisions. Where, as here, the agreements pointed to different fora, the Court of Appeal was prepared to give effect to the specific forum selection clause applicable to the dispute at hand rather than defaulting to the employment-related ADR clause.
