In Khatib v GoEasy Ltd ( 2026 ONSC 3513) Justice Mathen made a number of interesting rulings on the issue of the entitlement to compensation for RSU’s and Stock Options ( SO) that vested after the termination date .

The relevant clause in the agreements was as follows:

4.1 Unless otherwise determined by the Company at any time and except as otherwise provided in a Participant’s written employment agreement with the Company, a Subsidiary or a Designated Affiliated Entity, on a Participant’s Termination Date, any RSUs credited to the Participant’s RSU Account which are not Vested RSUs shall terminate and be forfeited. In the event of termination of the employment of a Participant by an Employer for cause, all RSUs credited to the Participant’s Account shall terminate and be forfeited, whether or not such RSUs are Vested RSUs.

…

4.3 Neither designation of an employee as a Participant nor the grant of any Units to any Participant entitles any Participant to the grant, or any additional grant, as the case may be, of any Unit under the Plan. Neither the Plan nor any action taken thereunder shall interfere with the right of the Employer of a Participant to terminate a Participant’s employment at any time. Neither any period of notice, if any, nor any payment in lieu thereof, upon termination of employment, wrongful or otherwise, shall be considered as extending the period of employment for the purposes of the Plan. No cash or other compensation shall at any time be paid in respect of any Units that are forfeited or terminated hereunder, as damages or otherwise.

4.4 Participation in the Plan shall be entirely voluntary and any decision not to participate shall not affect the Participant’s employment with the Employer

There were very substantial monies tied to both RSU’s and SO that vested after the Plaintiff’s date of termination.

The Judge determined that the reasonable notice period was 8 months.

The first issue was whether the Plaintiff was entitled to compensation for those RSU’s and SO that vested within the 8 month notice period.

The Judge found that because the term ” Termination Date ” was not defined in the agreement. As such she ruled as follows

:[115]      Accordingly, I am persuaded that the lack of a definition for “Termination Date” in the grant documents creates an ambiguity over whether a termination date includes a period of notice. That ambiguity redounds to Mr. Khatib’s benefit: Paquette, at paras. 41, 46.

The Plaintiff was therefore entitled to the value of all of the RSU’s and SO that vested in the notice period, valued as of their  respective vesting dates.

The Judge then dealt with the issue of those RSU’s and SO which  vested after the 8 month notice period.

Having noted that there was no enforceable language allowing for the forfeiture of unvested RSU’s and SO, the Judge rejected the employers’ argument that it was implicit in these agreements that it only applied to employees who were either employed  or deemed to be employed when the vesting occurred . Rather the Judge said that absent language limiting the employee’s entitlement, he should be entitled to the  pro rata value of the RSU and SO. 

The second reason that the Judge awarded this pro rata share was because: “at least some employees were permitted to retain the pro-rated value of unvested stock units when they left the company. ”

However it seems that the employees who did receive pro rata value had an express provision in their employment contracts, a provision which this Plaintiff did not have.

This is how the Judge explained how to do the prorata calculation:

Assume the  vesting period is 3 years from date of the grant.

Assume the grant date is January 1,  2024.

The vesting date is therefore January 1, 2027

Assume that his termination date is April 30, 2025.

Therefore the end  of the reasonable notice period is December 31, 2025

The prorata share would be 66% as he was deemed to have been employed for 2/3 of the vesting  period

My Comments:

This is the first time that I am  aware of where an employee recovered compensation that would have only been received after the notice period .

In the leading case of Prozak et al v Bell Telephone co of Canada ( 1984 CanLII 2065) the Ontario Court of Appeal said that the plaintiff’s entitlement to commissions ended at the end of the notice period even though commissions from their original sale continued for a period far beyond that date.

One would have thought that the same principle would apply in this case.

If the Plaintiff had quit half way through the vesting period, would he then be entitled to 50% of the value ?

Just because  other employees  had different contracts that allowed this pro rata entitlement, why should this Plaintiff, who did not negotiate such a prevision , benefit from another employee’s contracts?

The Judge makes reference to the fact that ” at least some employees ” received this benefit. Presumably that means that the other employees who were terminated did not receive such a benefit.  Why was this Plaintiff put in the first group and not the second  less entitled group?

I am advised by defence counsel that they will be filing a Notice of Appeal .

If you want a copy of this case, email me at barry@barryfisher.ca

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