In Liggett v. Veeva Software Systems, Inc. and Veeva Systems Inc., Ontario Superior Court Justice Des Rosiers was faced with the following RSU termination clause.
3. Vesting This option vests and becomes exercisable in accordance with the vesting schedule set forth in the Grant Notice.
In no event will this option vest or become exercisable for additional shares after your Service has terminated for any reason, as further described in Section 5 below.
5. Termination of Service
If your Service terminates for any reason, this option will expire immediately to the extent this option is unvested as of your termination date and does not vest as a result of your termination of Service.
For purposes of this option, your Service will be considered terminated as of the date you are no longer actively providing services to the Company or any Parent or Subsidiary (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are providing services or the terms of your service agreement, if any), and will not be extended by any notice period of any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where you are providing services or the terms of your service agreement, if any. Unless otherwise determined by the Company,
(i) your right to vest in this option under the Plan, if any, will terminate as of such date, and (ii) the period, if any, during which you may exercise any vested portion of this option after termination of your Service will commence on such date. The Committee shall have the exclusive discretion to determine when you are no longer actively providing services for purposes of your option grant (including whether you may still be considered to be providing services while on a leave of absence).
The judge found that this clause was invalid for the following reasons:
First, the provision “in the event of termination of your Service” violates the ESA since the date of notice is not the date of termination of the employment contract, as statutory entitlements require a minimum notice period of 1 week per year of service: s. 57.
[49] Second, the language of “the date that you are no longer actively providing services to the company” is the very clause that was discussed in Matthews and found not to deprive the employee of their right to bonus or benefits arising during the notice period.
[50] Third, Mr. Liggett also raises the discretionary nature of the entitlement as another indicia of ambiguity. In the vesting clauses applicable to the stock options and the RSUs, an additional paragraph is inserted that provides as follows: “The Committee shall have the exclusive discretion to determine when you are no longer actively providing services for the purposes of the restricted stock unit, including whether you may still be considered to be providing services while on a leave of absence.”
[51] I agree with the plaintiff that this discretionary authority, without providing guidelines for the exercise of such discretion, gives an ambiguous message to employees as to whether they are or are not entitled to the vesting of the stock options.
[52] Finally, the contract is particularly convoluted in its format and readability. To understand what is applicable, one must read a section of the contract and then replace such section with the appropriate country in which an employee works. To understand the applicable clause requires a cutting and pasting between different sections of a lengthy contract.
The Judge then succinctly summarized how Courts should view these types of clauses that purport to limit recovery of RSU’s in a termination.
[54] It is incumbent on employers to state clearly to the employees what will happen upon termination. As referenced above, language that violates the ESA voids the termination clauses because employees may be misled as to their entitlement and not recognize that they are forfeiting rights the common law gives them. I conclude that a similar approach must be used in interpreting contractual language that seeks to deprive employees of bonus or stock options to which they would have been available during the notice period.
My Comment:
I am advised by counsel that this matter is not being appealed.
This case confirms that the method of analyzing RSU clauses is no different than the method applied in examining termination clauses that do not involve equity.
This would seem to be a different approach than the one applied in Wigdor v. Facebook Canada Ltd., 2025 ONSC 4861.
The Ontario Court of Appeal is hearing the Wigdor appeal on April 23, 2026 so perhaps we will have more clarity on that issue soon.
There is no proper citation for this case, so if you like a copy email me at barry@barryfisher.ca
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