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Employment - Ancillary Termination. Wigdor v. Facebook Canada Ltd.
In Wigdor v. Facebook Canada Ltd. (Ont CA, 2026) the Ontario Court of Appeal partially allowed the employee's appeal (and dismissed the employers' cross-appeal), here where the appeal was brought against "the application judge’s order dismissing his claim for the value of Restricted Stock Units (“RSUs”) that would have vested during the common law notice period".
The court considered a benefit plan issue ['restricted stock units' (RSUs)], here where the employment contract (by reference to an RSU agreement) "purported to disentitle Dr. Wigdor to further vesting of RSUs immediately on termination":[6] However, the application judge erred in her interpretation of ss. 60 and 61 of the ESA and their application to Dr. Wigdor’s entitlement to the RSUs. Section 60(1)(a) of the ESA provides, inter alia, that an employer shall not alter any “term or condition of employment” during the period of notice of termination under the Act. Section 61(1) of the ESA, which governs pay in lieu of notice on termination, provides in (a) that an employer must, as a condition of termination without notice or with less notice than required under the ESA, pay the employee “a lump sum equal to what the employee would have been entitled to receive under section 60 had notice been given in accordance with that section.” The RSU Agreements, which were incorporated by reference into the employment agreement, purported to disentitle Dr. Wigdor to further vesting of RSUs immediately on termination. This is contrary to the obligation on employers in s. 60(1)(a) not to alter any “term or condition of employment” during the notice period. As a result, the termination provisions of the RSU Agreements, incorporated into the employment agreement, contravene the ESA and are unenforceable. Dr. Wigdor is entitled to damages for the value of the RSUs that would have vested during the 10-month common law reasonable notice period.
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B. The application judge’s decision
[18] The application judge found that the termination provisions in the employment agreement were contrary to the ESA because they purported to contract out of Dr. Wigdor’s right under s. 9 of the ESA to have his years of service with his prior employer (Chatham) recognized for the purpose of calculating his termination entitlements after the sale. As a result of that finding, the termination provisions in the employment agreement were unenforceable, and Dr. Wigdor was entitled to damages under common law principles. The application judge found that he should receive 10-months notice, less working notice, statutory pay in lieu of notice, and severance pay, as well as any mitigation income he earned during the statutory period (that being income over and above what he was earning while employed).
[19] With respect to the RSUs, Dr. Wigdor argued that Meta’s RSU Agreements, which were incorporated by reference into the employment agreement, breached ss. 60 and 61 of the ESA.
[20] The portions of ss. 60 and 61 relevant to this appeal are as follows:Requirements during notice period
60 (1) During a notice period under section 57 or 58, the employer,
(a) shall not reduce the employee’s wage rate or alter any other term or condition of employment;
(b) shall in each week pay the employee the wages the employee is entitled to receive, which in no case shall be less than his or her regular wages for a regular work week; and
(c) shall continue to make whatever benefit plan contributions would be required to be made in order to maintain the employee’s benefits under the plan until the end of the notice period.
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Pay instead of notice
61 (1) An employer may terminate the employment of an employee without notice or with less notice than is required under section 57 or 58 if the employer,
(a) pays to the employee termination pay in a lump sum equal to the amount the employee would have been entitled to receive under section 60 had notice been given in accordance with that section; and
(b) continues to make whatever benefit plan contributions would be required to be made in order to maintain the benefits to which the employee would have been entitled had he or she continued to be employed during the period of notice that he or she would otherwise have been entitled to receive. [21] Section 60(1)(a) requires that during the notice period, an employer “shall not reduce the employee’s wage rate or alter any other term or condition of employment”. Dr. Wigdor argued that the requirement in s. 60(1)(a) not to alter a term or condition of employment during the notice period is incorporated into the calculation of pay in lieu of notice under s. 61(1)(a) of the ESA because s. 61(1)(a) refers to payment of a lump sum “equal to the amount” the employee would have been entitled to receive if given working notice under s. 60.
[22] The application judge found that Dr. Wigdor was not entitled to damages for the RSUs that would have vested during the common law notice period. She held that s. 60 of the ESA only applied to working notice, while s. 61 only applied to pay in lieu of notice. Based on this interpretation of ss. 60 and 61, the application judge considered Dr. Wigdor’s entitlement to damages for the RSUs only under s. 61. She found that the RSUs did not fall within the scope of Dr. Wigdor’s entitlements under s. 61 because, in her view, unlike s. 60, s. 61 did not prohibit an employer from altering any “term or condition of employment” during the notice period. As a result, she found that the 2020 RSU Agreement did not contravene the ESA and was enforceable. The application judge also found that the 2021-2023 RSU Agreements were enforceable and did not permit ongoing vesting during the notice period.
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1. The legal framework for termination clauses and ESA compliance
[28] I begin with the legal framework in relation to termination clauses and compliance with ESA minimum standards because it is relevant to both the appeal and the cross-appeal.
[29] At common law, an employee hired for an indefinite period can be dismissed without cause, but the employer must give reasonable notice or pay in lieu of notice. The common law presumption of termination with reasonable notice can be rebutted if the employment contract clearly specifies some other period of notice: Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158, 134 O.R. (3d) 481, at paras. 15-16; Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986, at
pp. 997-98.
[30] However, in Ontario, the ESA sets minimum standards for terms of employment. Pursuant to s. 5 of the ESA, employers and employees cannot contract out of the minimum standards in the Act. Any purported contracting out is void. As a result, terms of employment contracts that provide for notice periods will only be enforceable if they comply with ESA minimum standards. Among the minimum standards set by the ESA are minimum notice periods upon termination: ss. 54-61.
[31] In the context of termination clauses, these principles have the following effect: if a termination clause does not comply with ESA minimum standards, it will be unenforceable, the common law presumption of reasonable notice for termination will not be rebutted, and the employee will be entitled to common law reasonable notice of termination: Wood, at para. 16; Machtinger, at p. 1000.
[32] The basic principles for the assessment of whether a termination clause in an employment contract complies with ESA minimum standards are well established: see Wood, at paras. 28, 43-51; Machtinger, at pp. 1002-05. Four points are of particular importance to this appeal.
[33] First, the ESA is remedial legislation, intended to protect the interests of employees. As a result, courts should favour an interpretation of the ESA that encourages employers to comply with its minimum standards over an interpretation that does not do so.
[34] Second, termination clauses should be interpreted in a way that encourages employers to draft agreements that comply with the ESA. If the only consequence for an employer of drafting a termination clause that does not comply with ESA minimum standards is an order that they comply, employers will have little incentive to draft a lawful termination clause at the start of the employment relationship.
[35] Third, a termination clause will rebut the presumption of reasonable notice only if its wording is clear. Employees are entitled to know at the beginning of their employment what their entitlement will be at the end of their employment.
[36] Fourth, the interpretation of a termination clause and whether it meets the minimum standards set out in the ESA is based on the wording of the clause. Thus, even if the employer complies with the ESA minimum standards at the time of termination, that compliance does not have the effect of remedying a termination provision that does not comply with the ESA minimum standards in a contract entered into at the beginning of the employment.
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[66] The dispute in this appeal engages the second question asked in Matthews: whether the terms of RSU Agreements that formed part of the employment contract were contrary to ss. 60 and 61 of the ESA, such that they did not validly alter/contract out of vesting entitlements during the common law reasonable notice period. Answering this question requires interpreting ss. 60 and 61 of the ESA.
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iii. Interpretation of ss. 60 and 61 of the ESA
[76] I agree with Dr. Wigdor that, properly interpreted, s. 61(1)(a) of the ESA requires that the lump sum payment to which an employee is entitled where pay is provided in lieu of working notice must be calculated on the basis that there are no alterations to the terms or conditions of employment during the statutory notice period.
[77] It is well-established that the words of a statutory provision must be read “in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”: Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27, at para. 21, quoting Professor Driedger. In the more recent formulation, the court must consider the text, context, and purpose of a legislative provision in interpreting it: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653, at paras. 117-18.
[78] As I will explain, in my view, the application judge fell into error by reading ss. 60 and 61 of the ESA disjunctively, rather than reading them together, which is required both by the text of both sections and by the general requirement that a judge engaging in statutory interpretation must consider the context of the other provisions in legislation in interpreting individual provisions.
[79] I begin with the text. For ease of reference, I reproduce the portions of ss. 60 and 61 of the ESA relevant to this appeal:Requirements during notice period
60 (1) During a notice period under section 57 or 58, the employer,
(a) shall not reduce the employee’s wage rate or alter any other term or condition of employment;
(b) shall in each week pay the employee the wages the employee is entitled to receive, which in no case shall be less than his or her regular wages for a regular work week; and
(c) shall continue to make whatever benefit plan contributions would be required to be made in order to maintain the employee’s benefits under the plan until the end of the notice period.
...
Pay instead of notice
61 (1) An employer may terminate the employment of an employee without notice or with less notice than is required under section 57 or 58 if the employer,
(a) pays to the employee termination pay in a lump sum equal to the amount the employee would have been entitled to receive under section 60 had notice been given in accordance with that section; and
(b) continues to make whatever benefit plan contributions would be required to be made in order to maintain the benefits to which the employee would have been entitled had he or she continued to be employed during the period of notice that he or she would otherwise have been entitled to receive. [Emphasis added.] [80] Section 61(1)(a) defines the lump sum payment to which an employee is entitled if termination is without notice or is with less notice than required under ss. 57 or 58 of the ESA.[3] Section 61(1)(a) clearly defines the amount of the payment in lieu of notice as: “a lump sum equal to the amount the employee would have been entitled to receive under section 60 had notice been given in accordance with that section” (emphasis added). The text of s. 61(1)(a) is clear that the lump sum must be “equal to” the amount the employee would have been entitled to had they been given working notice under s. 60.
[81] Three things are apparent from the text. First, it incorporates by reference the content of s. 60. This includes the obligation in s. 60(1)(a) that an employer shall not “alter any term or condition of employment” during the statutory notice period. In other words, the calculation of the amount payable under s. 61(1)(a) when pay in lieu of notice is given, must be done on the basis that there are no alterations in the terms or conditions of employment during the statutory notice period.
[82] Second, the language in s. 61(1)(a) of a lump sum “equal to” the amount that the employee would have been entitled to had they been given working notice under s. 60 signals that the ss. 60 and 61 are to be read together. Taken together, ss. 60 and 61 are intended to place the employee in the same financial position whether they are given working notice or pay in lieu of notice. I return to this issue in examining the purpose of the ESA, and of ss. 60 and 61, in particular.
[83] Third, the use of the general word “amount” in s. 61(1)(a) – “a lump sum equal to the amount” the employee would have been entitled to had working notice been given – supports the conclusion that the entitlement to a lump sum is not limited to regular wages, but includes any compensation the employee would have been entitled to if they had been given working notice rather than pay in lieu of notice.
[84] Turning to context – and this flows from the text – ss. 60 and 61 of the ESA must be read together. Section 61(1)(a) specifically incorporates the entitlements for working notice under s. 60(1)(a) into the determination of the amount of pay in lieu of notice. Quite apart from the clarity of the text of s. 61(1)(a) expressly incorporating the entitlements under s. 60, the principles of statutory interpretation require that ss. 60 and 61 be read together because they both address employee entitlements on termination: Ruth Sullivan, The Construction of Statutes, 7th ed. (Toronto: LexisNexis, 2022) (online), at § 13.02. The context of reading ss. 60 and 61 together supports that the entitlement to pay in lieu of notice in s. 61(1)(a) incorporates the obligation in s. 60(1)(a) that an employer may not alter terms or conditions of employment during the statutory notice period.
[85] Finally, the purpose of the ESA in general, and of ss. 60 and 61 in particular, supports interpreting the language in s. 61(1)(a) of “a lump sum equal to the amount the employee would have been entitled to receive under section 60 had notice been given in accordance with that section” as meaning the amount the employee would have been entitled to during the notice period in the absence of alterations to terms or conditions of employment.
[86] As already mentioned, the ESA is remedial legislation intended to protect the interests of employees by requiring employers to comply with certain minimum employment standards: Wood, at para. 28; Machtinger, at pp. 1002-03.
[87] Read together – including the specific incorporation in s. 61(1)(a) of the amount the employee would have been entitled to under s. 60 had working notice been given – ss. 60 and 61 are intended to create a harmonious scheme to ensure that employees are entitled to the same financial compensation whether their employment is terminated with working notice or with pay in lieu of notice. In other words, one of the purposes of the provisions is to ensure that employees are not worse off under either mode of termination. This conclusion is supported by decisions of the Superior Court, which, in my view, correctly interpret the interplay between ss. 60 and 61 of the ESA: Wilds v. 195612 Ontario Inc., 2024 ONSC 3452, at para. 63(a); Groves v. UTS Consultants Inc., 2019 ONSC 5605, at
paras. 56-57; aff’d 2020 ONCA 630; Sandhu v. Solutions 2 go Inc., 2012 ONSC 2073, at para. 35.[4]
[88] In summary, an employee’s entitlement under s. 61(1)(a) where pay is given in lieu of notice to “a lump sum equal to the amount the employee would have been entitled to receive under section 60 had notice been given in accordance with that section” means that the lump sum payment must be based on terms and conditions of employment not being altered during the statutory notice period.
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