Executive CompensationEquityRSUsStock OptionsDeferred CompensationReasonable NoticeMitigationSeverance

How Do Courts Value Equity That Would Have Vested During My Notice Period?

The entitlement fight is about whether unvested equity counts. The valuation fight is about how much, and it is where an executive package is actually won or lost. Restricted units are priced at the share price on the day each tranche would have vested, options at the spread over the exercise price, and a deferred bonus at its value under the plan. Here is the full method, the wording that changes the answer, and a worked illustration of what six extra months of notice is worth.

Written By: Priya Sharma|Reviewed By: Amir Mirza
Updated: August 2026
A man in a dark blazer stands focused on a laptop screen, reading intently.

Key takeaways

  • Calculate each tranche on its own vesting date. The number of units in that tranche multiplied by the share price on the day it would have vested, not the price on your last day, not an average, and not the price on the day you sign.
  • Treat options as the spread, not the share price. An option is worth the market price on the vesting date minus your exercise price, times the number of options. An underwater tranche is worth zero and cannot be averaged against a profitable one.
  • Never assume a tranche that vests just after your notice period is gone. In Bain v. UBS Securities Canada Inc., 2018 ONCA 190 the deferred part of a bonus earned during the notice period was recoverable even though it would have vested after the period ended.
  • Count mitigation only for the months inside the notice period. A new employer's sign-on grant that vests over four years does not offset a loss that would have crystallised in month seven, and earnings from a substantially lesser job may not be deducted at all (Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402).
  • Gather the grant agreements, the plan document and every amendment before you answer the deadline. In Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619 forfeiture amendments the employees refused to sign never became part of the contract.
In this article

✅Quick answer. On the date each tranche would have vested, at the price that day. Restricted units are valued at units multiplied by the share price on the vesting date, options at the spread between the market price and your exercise price, and a deferred bonus at its value under the plan formula. Mitigation earnings then come off, month by month.

Most of the writing on equity and severance stops at entitlement: does unvested equity count at all. If you are a senior manager or an executive, that question is usually the easy half. The employer's letter concedes the salary, prices eight weeks of it, and writes off the rest in one sentence about unvested awards being cancelled on the termination date. The money is in the second half of the argument, which nobody explains to you: once the equity is in the claim, what number goes beside it.

That second half is arithmetic, and arithmetic is negotiable in a way that principle is not. An employer that has accepted your restricted share units belong in the claim will still argue about which date prices them, whether an underwater option tranche counts, whether the deferred portion of your bonus survives, and how much of your new job comes off the top. Each of those arguments is worth six figures on a package like yours.

What is a court actually measuring when it values my equity?

Not the equity. A court is measuring what you lost by being denied working notice. The question is always the same counterfactual: if you had been left in your job for the full notice period and walked out on the last day of it, what would have come to you, and when. Everything else in the valuation follows from that single question.

The entitlement gate comes from Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26, which asks two things. First, would you, but for the termination, have been entitled to the award as part of your compensation during the reasonable notice period. Second, does the plan wording unambiguously remove or limit that common law right. Wording requiring you to be "actively employed" does not clear the second step on its own, as Paquette v. TeraGo Networks Inc., 2016 ONCA 618 held.

Once both steps are answered in your favour, the court stops asking whether and starts asking how much. That is the shift that changes how you read your own documents. Entitlement turns on the clause. Valuation turns on the vesting schedule, the price history and the calendar. There is a fuller treatment of the entitlement half in RSUs vesting during your notice period.

Which date prices a restricted share unit, and why does that date matter so much?

The vesting date, at the market price on that date. Not your termination date, not the date of the offer letter, not the date of judgment, and not a twelve month average. Each tranche is treated as a separate loss that would have crystallised on its own day, so the schedule is built tranche by tranche and the prices are pulled from the market on those specific dates.

The logic is the counterfactual. Had you worked out the notice period, the units in the tranche vesting in month seven would have become yours in month seven, valued at whatever the shares were worth that morning. A rising share price therefore helps you and a falling one does not, and neither side gets to pick a better day. Wigdor v. Facebook Canada Ltd., 2026 ONCA 572, a recent Court of Appeal decision released in August 2026, allowed recovery of restricted share units worth roughly US$4.7 million that would have vested during a ten month notice period. It is recent enough that it should not be treated as settled beyond doubt, but the scale of that figure tells you what is at stake in getting the schedule right.

The date matters because the alternative measures are much worse for you. If valuation runs from your last day, you lose every dollar of appreciation over the notice period. That is exactly what happened in Mikelsteins v. Morrison Hershfield Limited, 2021 ONCA 155, where shares the employee had bought with his own money under a shareholders' agreement were treated as shareholder rights rather than compensation, so the buy-back and the valuation ran from the termination date. Love v. Acuity Investment Management Inc., 2011 ONCA 130 went the same way on that agreement's buy-back wording. The dividing line is ownership: units granted to you as pay are compensation, shares you purchased under a shareholders' agreement are an investment, and Wigdor v. Facebook Canada Ltd., 2026 ONCA 572 distinguished Mikelsteins on precisely that basis.

One practical instruction follows. Pull the closing price for every vesting date in your schedule now, before anyone starts negotiating, and put it in a spreadsheet with the unit counts from your grant agreements. A claim built from the plan administrator's own statements is very hard to argue down. A claim built from a round number in a demand letter invites a counter-offer built from a different round number.

How are stock options valued, and what does "the spread" mean?

At the spread: the market price on the relevant date minus your exercise price, multiplied by the number of options, before tax. An option is not worth the share price. It is worth the difference between the share price and what you would have had to pay to buy the share. That single distinction is the most common error in a self-prepared executive claim, and it usually runs in the employer's favour.

Take an executive with four option tranches inside a twenty two month notice period, granted in two years at two different exercise prices.

Vesting dateOptions in trancheExercise priceMarket price on vesting dateSpread per optionValue of tranche
Month 48,000$30$42$12$96,000
Month 98,000$30$45$15$120,000
Month 148,000$52$50nil (underwater)$0
Month 218,000$52$53$1$8,000
Total32,000$224,000

Three things fall out of that table. An underwater tranche is worth nothing and you cannot average it against a profitable one, so 32,000 options are worth $224,000 rather than the headline the grant letter suggested. The month 14 tranche adds nothing to the claim even though the notice period captures it. And the month 21 tranche adds almost nothing, which matters when you are deciding what to trade for in a negotiation.

Two harder questions sit behind the arithmetic. The first is which date within the option's life to use. The vesting date spread is the conservative measure and the one to build first; an argument for a later and higher price needs real evidence about when you actually exercised options in the past, so pull your exercise history before you make it. The second is the post-termination exercise window, usually thirty, sixty or ninety days, which truncates even options that are already vested. In Kieran v. Ingram Micro Inc., 2004 CanLII 4852 (ON CA) option plan wording that unambiguously ended the options on the date services ceased, regardless of pay in lieu, was enforced and no option damages were awarded. That remains the contractual wording principle.

⚠️Do not let an in-the-money window close. If you hold vested options that are in the money and the plan gives you a short window after termination, exercise them inside the window even while you dispute everything else. Failing to exercise a profitable vested option is a mitigation argument you will be handed back later, and it is entirely avoidable.

How is a deferred bonus or a notional share award valued?

At its value under the plan formula, not at a discounted figure the employer proposes because payment was contingent. If your plan defers a fixed percentage of each year's bonus into notional units or a notional fund, the deferred portion attributable to the notice period is calculated the way the plan calculates it, and then valued the way the plan values it on the relevant date.

Bain v. UBS Securities Canada Inc., 2018 ONCA 190 is the case to know. A managing director received eighteen months of notice, and the deferred part of his bonus, held as notional shares, was recoverable even though it would have vested after the notice period ended. Plan wording referring to "employees" and a general plan disclaimer were not unambiguous enough to exclude it. The same decision holds that vacation pay is calculated on a bonus tied to production, which is a line item most executives never claim.

For the annual cash bonus itself, the damages run over the whole notice period, not just the year of termination: Singer v. Nordstrong Equipment Limited, 2018 ONCA 364, a divisional president with eleven years of service who received seventeen months. Where the bonus varies year to year, the usual approach is an average of recent actual payouts rather than target, unless target is what the plan actually promises. Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619 dealt with short and long term incentive plans worth roughly sixty per cent of the executive's pay, and wording saying no bonus was payable if the employee was terminated prior to payout was treated as an active employment clause that did not bar damages. There is more on the averaging question in how a variable bonus is calculated over the notice period.

What happens to a tranche that would have vested just after my notice period ends?

It depends on whether the award was earned during the notice period or merely paid afterwards. An award earned inside the period can be recoverable even though the vesting or payment date falls outside it. An award that would only have been granted later, for work you would only have done later, is not. Those are two different things and employers routinely blur them.

Two decisions do the work here. Bain v. UBS Securities Canada Inc., 2018 ONCA 190 recovered the deferred component earned during the notice period although it vested after the period ended. Andros v. Colliers Macaulay Nicolls Inc., 2019 ONCA 679 gave a managing director a pro rata share of the bonus for the year worked and for the notice period even though the payout date fell after the notice period ended, and held that a clause requiring the employee to be in "good standing at the time bonuses are payable" was the same thing as an active employment clause and did not bar damages.

The hard case is a genuine cliff. Four year cliff vesting that lands three months past the end of a sixteen month notice period is not a deferral of something you earned; it is a grant that would have vested on a date you never reached. Two responses are available and both are worth pressing. Argue the earning period rather than the vesting date, by showing what the grant was compensating you for. And argue the length of notice, because three extra months of notice can be worth more than the entire salary component of the claim.

This is also why the structure of a settlement matters as much as its size. Salary continuance that runs past a vesting cliff, with the equity left to vest on schedule, can be worth substantially more than a larger lump sum that cancels everything on signing. Raise it early, because the structure is usually decided before the number is. See lump sum versus salary continuance.

How much does the length of the notice period change the number?

Enough that it is the only question worth serious money. Every extra month adds a month of salary and a month of bonus, which is predictable, and it can also swallow an entire vesting date, which is not. The steps are uneven, so the value of an extra six months depends entirely on where the vesting dates fall.

Take a chief commercial officer, age 54, eleven years of service, base salary $400,000, target bonus fifty per cent ($200,000), restricted share units vesting quarterly in tranches of 3,000 units, the four option tranches in the table above, and a plan that defers thirty per cent of each annual bonus into notional units. All figures are round and illustrative.

Notice period assessed atBase salaryBonusRSU tranches capturedRSU valueOption valueDeferred bonusTotal
12 months$400,000$200,0004$522,000$216,000$60,000$1,398,000
18 months$600,000$300,0006$837,000$216,000$90,000$2,043,000
22 months$733,000$367,0007$993,000$224,000$110,000$2,427,000

Read the middle of that table rather than the ends. Moving from twelve months to eighteen adds $645,000, and only $300,000 of it is salary and bonus; the other $345,000 is two RSU tranches and one more year of deferred bonus. Moving from eighteen to twenty two adds $384,000, of which $8,000 is options, because the month 14 option tranche was underwater and the month 21 tranche was barely in the money. The same six months of notice is worth a different amount depending on which side of a vesting date it falls.

Now put the offer beside it. With eleven years of service the statutory floor is eight weeks of termination pay and eleven weeks of severance pay, which on a $400,000 base is roughly $146,000 in total. An employer offer of forty weeks of base salary with all unvested equity cancelled is about $308,000. Against an eighteen month assessment, the gap is about $1.735 million, and almost all of it is equity and deferred compensation rather than pay. How long is reasonable notice is a separate question governed by the factors in Bardal v. Globe & Mail Ltd., 1960 CanLII 294 (ON SC), with twenty four months as the practical ceiling absent exceptional circumstances (Lowndes v. Summit Ford Sales Ltd., 2006 CanLII 14 (ON CA)); see executive severance and notice and the 24 month cap.

What does the Employment Standards Act add to the number, and what does it not?

It adds a short protected window that no clause can touch, and a floor beneath the whole package. Section 60 (1) (a) of the Employment Standards Act, 2000 says that during the statutory notice period the employer "shall not reduce the employee's wage rate or alter any other term or condition of employment". Your vesting schedule is a term or condition of employment, so a clause cancelling it inside that window is void.

Section 57 sets the window. Notice must be at least one week if the period of employment is less than one year (a); two weeks at one year and under three (b); three weeks at three and under four (c); four weeks at four and under five (d); five weeks at five and under six (e); six weeks at six and under seven (f); seven weeks at seven and under eight (g); and eight weeks at eight years or more (h). An executive with eleven years falls in clause (h), and clauses (a) through (g) each fail because every one of them is capped at a service band below eight years.

Section 60 has four subsections and each does separate work. Subsection (1) (a) is the no-alteration rule quoted above. Subsection (1) (b) requires the employer in each week to pay the wages the employee is entitled to receive, which in no case shall be less than regular wages for a regular work week, so it sets a floor and not a ceiling. Subsection (1) (c) requires the employer to continue benefit plan contributions to maintain the benefits until the end of the notice period. Subsection (2) applies where there is no regular work week or the employee is paid on a basis other than time, and substitutes the average weekly regular wages over the preceding twelve worked weeks. Subsection (3) deems a missed benefit contribution to be unpaid wages for the purposes of section 103. Subsection (4) preserves any entitlement the employee has under the benefit plan itself.

Section 61 carries all of that into the lump sum, which is what actually happens to a walked-out executive. Subsection (1) (a) requires "a lump sum equal to the amount the employee would have been entitled to receive under section 60 had notice been given", so being escorted from the building changes nothing about the measure. Subsection (1) (b) requires continued benefit plan contributions for the same period. Subsection (1.1) applies the twelve week look-back to the weeks immediately before termination for employees without a regular work week. Subsection (2) deals with mass terminations under section 58 and does not apply to a single executive exit. Section 5 (1) makes any waiver of an employment standard void, and section 5 (2) lets a better contractual term prevail. Sophistication does not save an offending clause: Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451 held that an executive's seniority and independent legal advice do not rescue a termination clause that offends the Act.

Wigdor v. Facebook Canada Ltd., 2026 ONCA 572, the recent August 2026 decision, reads section 60 (1) (a) into section 61 (1) (a) and treats clauses that end vesting on termination as void for that reason. Because it is new, treat it as a strong argument rather than a closed question. The window is at most eight weeks, which sounds small until you remember what a void clause does: it revives the common law right to reasonable notice, and Machtinger v. HOJ Industries Ltd., [1992] 1 SCR 986 is the reason that revival is worth months rather than weeks. The statutory walk-through in full is in does the ESA protect equity during the statutory notice period.

Two readers should stop here. If you work for a bank, an airline, a railway, a telecom or another federally regulated employer, the Employment Standards Act, 2000 does not apply to you at all and the Canada Labour Code does, with its own unjust dismissal route (Wilson v. Atomic Energy of Canada Ltd., 2016 SCC 29); see federally regulated employee rights. If you are covered by a collective agreement, arbitration has exclusive jurisdiction over disputes arising from it and the courts are closed to you (Weber v. Ontario Hydro, [1995] 2 SCR 929); see unionized employee rights.

How is my statutory severance pay calculated, and what can the employer deduct from it?

On regular wages for a regular work week, one week per completed year plus a fraction for the months, capped at twenty six weeks. That calculation deliberately ignores your equity, which is why the statutory floor understates an executive package so badly. The more useful point is at the other end: the Act tightly limits what an employer may take off it.

Section 64 sets eligibility. Subsection (1) requires five or more years of employment plus one of two triggers: (a) a permanent discontinuance of all or part of the business at an establishment affecting fifty or more employees within six months, or (b) an employer payroll of $2.5 million or more. A single executive termination fails (a) and almost always succeeds under (b). Subsection (2) gives two ways of proving the payroll: (a) the total wages of all employees in the four weeks ending with the last completed pay period before the severance, multiplied by thirteen, or (b) the total wages in the last or second last fiscal year. Subsection (3) says "Prescribed employees are not entitled to severance pay under this section", so confirm none of the prescribed categories applies to you. Subsection (4) deems a single location to be an establishment where part of the business is permanently discontinued there, the location is one of two or more, and fifty or more employees are severed within six months.

Section 65 then does the arithmetic, and every subsection matters to an executive. Subsection (1) multiplies regular wages for a regular work week by (a) completed years plus (b) completed months not counted in (a) divided by twelve. Subsection (2) counts all time in the employer's employ, continuous or not, active or not. Subsection (2.1) is the trap: for an employee receiving an actuarially unreduced pension benefit whose employment was severed on or after November 6, 2009, service credited toward that pension is excluded, which can materially cut a long-serving executive's statutory severance. Subsection (3) removes the period between a resignation notice and the employer's notice date in one specific situation. Subsection (4) requires the calculation to be run as if you had stayed employed through any notice period that should have been given and was not, which quietly adds weeks. Subsection (5) caps the result at twenty six weeks. Subsection (6) substitutes a twelve week average where there is no regular work week or pay is on a basis other than time.

Subsections (7) and (8) are the ones to quote back at an employer. Subsection (7) makes severance pay "in addition to any other amount to which an employee is entitled under this Act or his or her employment contract". Subsection (8) permits only three set-offs: supplementary unemployment benefits received after severance and before the severance pay is payable; an amount paid for loss of employment under a contractual provision based on length of employment, length of service or seniority; and severance pay previously paid under the Act or such a provision. Accelerated equity is none of those three, so an employer cannot credit the value of your vesting units against your statutory severance.

One definitional point is worth money. Under section 1, "wages" excludes at limb (e) "any sums paid as gifts or bonuses that are dependent on the discretion of the employer and that are not related to hours, production or efficiency", and at limb (g) employer benefit plan contributions, subject to sections 60 (3) and 62 (2). Read that backwards: a bonus that is formula driven and tied to production is not caught by limb (e), so there is a real argument that it belongs in the statutory calculation. See bonus and vacation pay in ESA termination pay.

The statutory floor is not zero unless one of the prescribed exclusions in section 2 (1) of O Reg 288/01 applies, and for a terminated executive each fails. A definite term or specific task (paragraph 1) does not describe an indefinite executive agreement, and subsection (2) restores notice anyway if employment ends early, the term runs past twelve months, or work continues three months past the term. Temporary lay-off (paragraph 2) is not a permanent termination. Wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned (paragraph 3) is a far higher bar than common law cause and is not met by performance concerns or a restructuring. Frustration or impossibility (paragraph 4) is limited by subsection (3), which excludes illness or injury, and by subsection (4), which says a refused or revoked temporary help agency or recruiter licence is not frustration. Refusing reasonable alternative employment with the employer (paragraph 5) is worth checking if you were offered another role. Refusing work through a seniority system (paragraph 6), failing to return from lay-off on recall (paragraph 7), termination during a strike or lock-out (paragraph 8), construction employment (paragraph 9), retirement at an established retirement age consistent with the Human Rights Code (paragraph 11) and shipbuilding with an agreed supplementary unemployment benefit plan (paragraph 12) do not describe an executive dismissed without cause. Paragraph 10 was revoked.

How do mitigation earnings and a new employer's sign-on equity reduce what I recover?

Dollar for dollar, but only for the months that overlap the notice period, and only for compensation that genuinely replaces what you lost. You must take reasonable steps to find comparable work, and what you actually earn from that work in the overlapping months comes off the claim. What you earn after the notice period ends does not.

Two boundaries matter for an executive. Evans v. Teamsters Local Union No. 31, 2008 SCC 20 sets the standard for reasonable steps and holds that in some circumstances a reasonable person would accept re-employment with the same employer, so an internal role offered to you cannot simply be ignored; it has to be assessed and the assessment documented. At the other end, Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402 held that earnings from a substantially lesser job may not be deducted at all, which matters if you took a smaller role to keep working.

The sign-on grant is where most executives lose money without noticing. A new employer often issues a make-whole restricted share unit grant to replace what you forfeited. The employer you are negotiating with will point at the headline grant value and ask for a credit. Resist the headline. The right treatment is to credit only the portion that actually vests inside the notice period, valued on the date it vests, because a grant vesting over four years does not replace a loss that would have crystallised in month seven. The principle behind that is the same one in Egan v. Alcatel Canada Inc., 2006 CanLII 108 (ON CA), where an employer that cancelled disability coverage had to pay the benefits that would have been payable, grossed up for tax, but not stacked on top of salary for the same months. You are made whole once for a given month, not twice, and not less than once. Keep a dated log of every application, interview and offer; see the duty to mitigate.

What wording in my own plan changes the number, and what have courts done with it?

The specific words decide the outcome, and near-identical phrases have produced opposite results. Pull the plan document, the grant agreement, every amendment and the acknowledgement you clicked, and compare the wording against what courts have actually done with it.

Wording in the plan or grantWhat the employer says it doesWhat courts have done
"Must be actively employed on the vesting date"Cancels everything unvested on the last dayNot enough on its own to remove the common law right to damages: Paquette v. TeraGo Networks Inc., 2016 ONCA 618
"In good standing at the time bonuses are payable"Same effect, dressed differentlyTreated as identical to an active employment clause and did not bar damages: Andros v. Colliers Macaulay Nicolls Inc., 2019 ONCA 679
"No bonus is payable if terminated prior to the payout date"Wipes out short and long term incentive plansAn active employment clause that did not bar damages, and terminated was read to mean lawfully terminated: Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619
A general plan disclaimer plus references to "employees"Deferred notional shares disappear on exitNot unambiguous enough to exclude the deferred portion earned during notice: Bain v. UBS Securities Canada Inc., 2018 ONCA 190
Pension accrual on "active service" plus benefits "shall not be used to increase damages"No pension accrual over the notice periodNot clear enough to remove the common law right: Taggart v. Canada Life Assurance Company, 2006 CanLII 53345 (ON CA)
Options end on the date services cease, regardless of pay in lieuAll options cancelled on the last dayEnforced on that wording and no option damages awarded: Kieran v. Ingram Micro Inc., 2004 CanLII 4852 (ON CA). Wording that ends vesting inside the statutory notice period is now attacked under section 60 on the reasoning in Wigdor v. Facebook Canada Ltd., 2026 ONCA 572, an argument not made in Kieran
Shareholders' agreement buy-back priced at the termination date for shares you purchasedValuation runs from your last day and the share bonus stopsEnforced, because purchased shares are shareholder rights rather than compensation: Mikelsteins v. Morrison Hershfield Limited, 2021 ONCA 155
Grant terms you expressly acknowledged reading and understandingYou agreed to forfeiture, so it bindsEnforced in Battiston v. Microsoft Canada Inc., 2021 ONCA 727, where the Court of Appeal reversed the trial decision at 2020 ONSC 4286
A forfeiture amendment circulated but never signedThe current plan version governsAmendments the employees refused to sign never became part of the contract: Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619
"The greater of the ESA minimum or two months" in a termination clauseCaps the entire packageVoid where the alternatives dropped severance and benefits: Andros v. Colliers Macaulay Nicolls Inc., 2019 ONCA 679; an invalid clause revives common law notice: Machtinger v. HOJ Industries Ltd., [1992] 1 SCR 986

The pattern is consistent. Clauses that describe your status (actively employed, in good standing, in active service) tend to fail, because they describe a state the employer itself removed by dismissing you. Clauses that describe a mechanism tied to an event (a buy-back priced at a stated date, options expiring on a stated date) tend to hold, unless they operate inside the statutory notice window. More on clause drafting in is my termination clause enforceable.

What do change of control, good leaver and clawback clauses do to the valuation?

They can double the number or halve it, and they operate before the ordinary valuation rules do. Each one asks a factual question about what would have happened during the notice period, so each has to be answered before the schedule is priced. Read all four in your own documents before you respond to any offer.

  • Change of control acceleration. Find out whether acceleration is triggered by the transaction alone (single trigger) or by the transaction plus a qualifying termination (double trigger). If a transaction closes or is announced inside your notice period, the counterfactual is accelerated vesting of the whole schedule, not the quarterly drip, and the difference is often the largest single number in the file.
  • Good leaver and bad leaver definitions. Look for who makes the designation, on what standard, and whether it is reviewable. Many plans preserve the full vesting schedule for a good leaver, and many define retirement eligibility by age and service thresholds that a senior executive may already have crossed. Being designated a good leaver can be worth more than the entire cash component of the offer.
  • Clawbacks and forfeiture for competition. A clawback triggered by competing or soliciting rides on the restrictive covenant, and a court will not narrow an overbroad covenant to save it (Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6). Reasonableness is judged against the employer's proprietary interest (Elsley v. J.G. Collins Insurance Agencies Ltd., [1978] 2 SCR 916), so an unenforceable covenant usually takes the clawback with it.
  • The release. A general release signs away the equity claim permanently, including tranches you have not yet identified. Releases are occasionally set aside (Swampillai v. Royal & Sun Alliance Insurance Company of Canada, 2018 ONSC 4023, aff'd 2019 ONCA 201; Uber Technologies Inc. v. Heller, 2020 SCC 16), but that is a remedy of last resort and never a plan. See should I sign the release.

What about tax, currency, blackout periods and private company shares?

These are the four places a correctly calculated claim quietly leaks value between the spreadsheet and your bank account. None of them changes whether you are owed the money. All of them change how much of it you keep, and each has to be raised while the settlement is being structured rather than after.

  • Tax characterisation. Damages for lost equity are generally paid as a taxable amount on termination rather than through the treatment the vested award itself would have attracted, so an identical gross figure can leave you materially worse off. Courts have grossed up an award where the substitute payment carried a different tax result than the benefit it replaced: Egan v. Alcatel Canada Inc., 2006 CanLII 108 (ON CA). Ask for the characterisation in writing and get accounting advice before signing; see is severance taxable.
  • Currency. If the plan is a United States parent plan denominated in US dollars, fix the conversion date in the demand and in the settlement document. An unstated conversion date is a free option for whoever pays last.
  • Blackout periods and trading windows. If you could not lawfully have sold on a given vesting date, expect an argument that the price should be measured somewhere else. Keep the trading window calendar and your own trading history, because they answer the argument in one page.
  • Private company shares. With no public price, you are arguing about the board approved fair market value, the price in the most recent financing round, or an independent valuation. Preserve every valuation notice, cap table statement and financing announcement you have ever received, and expect a liquidity discount argument you will need to meet with evidence.

What should I do in the next two weeks?

Build the number before you argue about it. An executive who arrives with a tranche by tranche schedule, sourced from the plan administrator and the market, negotiates from a completely different position than one who asks for more. Work through these in order.

  1. 1.Download everything from the plan administrator portal today, before access is cut off: grant agreements, vesting schedules, unit balances, exercise history and statements. Access usually ends on or shortly after the termination date.
  2. 2.Build the schedule. One row per tranche, with the vesting date, the units or options, the exercise price where applicable, and the closing share price on that date. Extend it out to twenty four months past your termination date, so no assessment of notice can surprise you.
  3. 3.Exercise any vested, in the money options inside the post-termination window, even while you dispute everything else, and keep the confirmations.
  4. 4.Read the change of control, good leaver and clawback clauses before you respond to anything, and check whether a transaction is pending.
  5. 5.Ask for a written extension of the offer deadline. Deadlines on severance offers are negotiating pressure and are routinely extended when counsel asks.
  6. 6.Start the mitigation log now, with dates, roles and outcomes, and record any internal role you were offered along with your reasons for accepting or declining it.
  7. 7.Do not sign the release until the equity number is agreed and written into the settlement in tranches, not as a single undifferentiated figure.

Which documents do I need, and what questions should I ask?

The documents decide the valuation, so gather them before the first conversation. Almost every one of them lives somewhere you will lose access to on your termination date, which is why the order of operations matters more than it should.

  • The executive employment agreement and every amendment, side letter and offer letter, including the original one that got you in the door.
  • The equity plan document itself, not just the grant agreement, plus every amendment and any acknowledgement you signed or clicked.
  • Every grant agreement with its vesting schedule, and the plan administrator statements showing unit balances and exercise history.
  • The bonus plan, including deferral rules, payout dates, target and actual payout history for the last three to five years.
  • The pension plan text and your most recent statement, particularly if you are receiving or eligible for an unreduced pension.
  • The benefits booklet, so that continuation and replacement cost can be valued; benefits are valued at replacement cost over the notice period without proof of actual loss (Singer v. Nordstrong Equipment Limited, 2018 ONCA 364).
  • The termination letter, the proposed release, and anything describing the reason for the decision.
  • Any change of control, retention or transaction agreement, and any restrictive covenant or clawback policy.
  • What exact wording does the plan use about termination, and does it say what happens during a notice period as opposed to on the termination date?
  • Which tranches vest in the next twenty four months, and what is each worth at today's price and at the price on its vesting date?
  • Is the deferred portion of my bonus earned during the notice period, and can it be recovered even though it vests afterwards?
  • Does the plan accelerate on a change of control, on a single or a double trigger, and is a transaction pending?
  • Am I a good leaver under the definitions, who decides that, and can the designation be negotiated as part of the settlement?
  • How will the settlement be characterised for tax, and can any part be paid into an RRSP or structured to preserve better treatment?
  • If I am offered another role internally, how does accepting or declining it affect mitigation?
  • What is the deadline, and will it be extended in writing while the schedule is verified?

If the equity in your package runs to six or seven figures, the difference between a well-built schedule and a round number is not a rounding error, and the employer's first offer is rarely built on either. A severance package review will tell you what the schedule is actually worth before you answer the deadline. This article is general information about Ontario law. It is not legal advice about your situation.

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Frequently asked questions

Is my equity valued at the share price on my termination date or on the vesting date?

On the vesting date, at the market price that day, tranche by tranche. The measure is what would have landed in your hands had you been given working notice, and a tranche vesting in month seven would have become yours in month seven at that day's price. Termination date valuation is the exception, and it applies where a shareholders' agreement prices a buy-back at that date for shares you purchased with your own money, as in Mikelsteins v. Morrison Hershfield Limited, 2021 ONCA 155.

How are stock options valued if the share price fell after I was terminated?

At the spread, which is the market price on the vesting date minus your exercise price, multiplied by the number of options. If the market price is below your exercise price the tranche is underwater and worth nothing, and you cannot average it against a profitable tranche. Vested options are a separate question: if they are in the money, exercise them inside the post-termination window in the plan, because failing to do so will be raised as a mitigation issue.

Can I recover a tranche that would have vested a month after my notice period ended?

Sometimes, and the distinction is whether the award was earned during the notice period rather than merely paid afterwards. In Bain v. UBS Securities Canada Inc., 2018 ONCA 190 the deferred part of a bonus earned during the notice period was recoverable even though it would have vested after the period ended, and in Andros v. Colliers Macaulay Nicolls Inc., 2019 ONCA 679 a pro rata bonus was recoverable although the payout date fell outside the notice period. A genuine cliff you never reached is harder, which is why the length of notice is worth arguing to the month.

My new employer gave me a sign-on grant to replace what I forfeited. Does it wipe out my claim?

No, and you should resist the headline number. Only compensation that actually accrues to you during the notice period is deducted, so a make-whole grant vesting over four years should be credited at the value of the portion vesting inside the notice period, on the date it vests. Earnings from a substantially lesser job may not be deducted at all: Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402.

About the Author
Priya Sharma

Priya Sharma

Legal Writer, Mirza Law

Priya Sharma is a legal writer at Mirza Law in Toronto. She writes about wrongful dismissal, workplace rights, and what Ontario employees can do when they are treated unfairly.

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