My LTIP Has a Good Leaver and a Bad Leaver Definition. Which One Am I After a Without Cause Termination?

You were dismissed without cause. Nobody accused you of anything. The letter was polite, it used the word restructuring, and it attached a number built entirely from your base salary. Then you opened the plan document, searched for the word leaver, and found two definitions that between them decide the largest number in your compensation, neither of which mentions what actually happened to you.

That is the normal experience, and it is not an accident of drafting. Leaver definitions in executive plans are written to cover the events the company can predict and control: you die, you become disabled, you retire at a defined age, you quit, or you are fired for cause. A without cause dismissal is the one event that is entirely the employer's choice, and a surprising number of plans simply do not address it, or address it in a single line at the end that sweeps every other departure into forfeiture.

This article is about what that silence is worth to you. If your unvested balance is six or seven figures, the leaver clause is not a technicality in the appendix. It is the whole negotiation.

What do good leaver and bad leaver actually mean in an executive incentive plan?

They are contractual categories, not legal ones. A good leaver keeps some or all of the unvested value in the plan. A bad leaver forfeits it, and under aggressive drafting can also lose awards that have already vested. Ontario employment law has never used those words. Your plan invented them, and your plan defines them.

The vocabulary travels. It came into Canadian plans largely through UK and global parent company documents, which is why you will see it most often in the Canadian subsidiary of a multinational, in private equity portfolio companies, and in partnership or professional services structures. Sometimes the plan uses the exact words good leaver and bad leaver. Sometimes it uses Qualifying Termination and Non Qualifying Termination, or Approved Departure, or Retirement Eligible Participant. The label does not matter. The mechanism is always the same: a list of blessed exit events, a consequence attached to each, and a default for everything else.

Here is what typically sits on each list.

• Usually good leaver events. Death. Permanent disability, as defined by the plan and often cross referenced to the long term disability policy. Retirement, usually at a defined age or an age plus service formula such as 55 and 10. A qualifying termination within a defined window after a change of control. Sometimes, but far from always, termination by the company without cause. Sometimes redundancy or elimination of the role, which is drafted separately from without cause dismissal and can produce a different result.
• Usually bad leaver events. Resignation. Termination for cause as the plan defines cause. Breach of a restrictive covenant. Breach of confidentiality or misuse of company property. Conduct the board or committee considers detrimental to the company. Sometimes joining a named competitor within a stated period after departure.
• The residual bucket. A closing line to the effect that any other cessation of employment for any reason results in immediate forfeiture of all unvested awards. This is where a without cause dismissal usually ends up, and this is the line the administrator relied on when your portal showed a zero balance.
• Committee discretion. A clause permitting the board or the compensation committee, in its sole and absolute discretion, to designate a participant a good leaver or to accelerate vesting. Employers cite this to explain why nothing was owed. It is also the clearest possible admission that the outcome was a choice rather than an automatic consequence.

The consequences attached to each category vary more than the categories do. Good leaver treatment can mean continued vesting on the original schedule, immediate pro rata vesting measured to the termination date, a performance award that stays alive until the end of the cycle and pays on actual results, or an extended option exercise window running twelve to thirty six months instead of thirty days. Bad leaver treatment can mean forfeiture of unvested awards only, forfeiture of vested but unexercised options as well, or, in purchased equity structures, a buy back of your shares at original cost or book value rather than fair market value.

Which one am I after a without cause termination?

Three answers are possible and you cannot know which without reading the definition itself. Some plans expressly list termination without cause as a good leaver event. A smaller number expressly list it alongside resignation as a bad leaver event. Most say nothing about it at all, which drops you into the residual category and produces bad leaver treatment by default rather than by design.

Go to the definitions section and read for the exact phrase. Employers use several: termination by the Company without Cause, termination other than for Cause, involuntary termination, and Qualifying Termination. If one of those phrases appears in the good leaver list, read the treatment attached to it with equal care, because a good leaver classification with a bad date attached is worth very little. That is the subject of a section below.

If the phrase does not appear anywhere, you are in the most common and the most contestable position. The plan has not addressed your situation. It has addressed death, disability, retirement, resignation and cause, then closed with a sweeping residual line. Whether that residual line is clear enough to strip a dismissed executive of compensation they would otherwise have earned is a real legal question, and the answer under Ontario law has frequently been no.

Three further things are worth checking while you are in the definitions, because each has changed real outcomes.

• Whether you meet the retirement definition independently. If the plan treats a retirement eligible participant as a good leaver, and you hit the age and service formula on your last day, you may qualify under the retirement limb even though the plan says nothing about dismissal. Executives dismissed at 54 under a 55 and 10 formula miss by months, and that is itself a point worth raising when the notice period would have carried you past the threshold. See severance if you retire versus resign.
• Whether redundancy is drafted separately. Plans sometimes treat elimination of the position more favourably than an ordinary without cause dismissal. If your role was genuinely eliminated, the characterisation in the termination letter matters. See position eliminated and redundancy severance.
• Whether the plan has been amended since your grants. Forfeiture language added by amendment part way through your employment is not automatically part of your contract. In Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619, forfeiture amendments the employees refused to sign never became part of the contract. A mid employment change in exchange for nothing also raises a consideration issue: see new employment contract and fresh consideration.

How is each part of my package treated on termination, and which parts does the leaver clause actually control?

The leaver clause controls only what the plan covers, which is usually your equity and long term incentive awards. Salary, annual bonus, pension accrual, benefits and purchased shares are each governed by a different document with a different rule. Executives lose money by assuming the leaver clause decided everything. It did not.

Read that table as a map of separate arguments. Your leaver classification may be genuinely bad on the plan's own terms while your pension accrual claim, your bonus claim and your benefits claim are unaffected by it. There is a fuller treatment of the equity side in what happens to LTIP grants on a without cause dismissal.

Does the label the plan gives me decide what I am legally owed?

No. The label decides what the administrator does. A court deciding a wrongful dismissal claim runs the two part test from Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26: first, but for the dismissal, would you 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.

Step one is usually straightforward for an executive. Your employer was entitled to end your employment without cause, but only by giving reasonable notice or paying the equivalent. Damages put you where you would have been had the contract been performed, which means had you stayed in the role through the whole notice period and left on its last day. So the question is not what had vested by your last day. It is what would have vested had you been given the notice you were owed.

Step two is where the leaver definition enters, and it enters as evidence, not as an answer. The employer must show that the language unambiguously takes away a right you would otherwise have had. A definition list that assigns consequences to death, disability and retirement, and then closes with a residual forfeiture line, is not obviously a clear statement that a dismissed employee gives up damages for wrongful dismissal. That is the argument, and it has worked repeatedly.

There is a logical problem at the heart of most bad leaver designations after a without cause dismissal, and it is worth naming plainly. The employer removed your employment by dismissing you without giving the notice the law required, then relies on the absence of employment as the reason nothing is owed. In Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619, plan wording saying there would be no bonus if the participant was terminated prior to the payout date was treated as an active employment clause that did not bar damages, and the word terminated was read to mean lawfully terminated. Applied to a leaver definition, that reasoning asks whether the plan means any departure, or a lawful one.

Which leaver wordings have failed in court, and which have held?

The pattern is consistent. Language describing a state the employer itself removed tends to fail. Language tied to a defined mechanism or an event independent of the dismissal tends to survive, unless it operates inside the statutory notice period. Find your exact wording below before you answer any offer, because the wording, not the size of the number, sets your position.

Read the last row twice. The termination clause in your employment agreement and the leaver clause in your plan are different documents, and the first can decide the second. If the termination clause is void, common law notice revives, and a revived notice period of eighteen or twenty two months reaches vesting dates that an eight week statutory period never gets near. See is my termination clause enforceable and signs a termination clause is unenforceable.

My plan says I am a good leaver, so why is the payout still small?

Because the classification and the measurement date are two separate decisions, and the plan usually gets the classification right and the date wrong. A good leaver clause that prorates your award to the Termination Date, where Termination Date is defined as the last day of active employment without regard to any notice period, gives you a fraction measured to the wrong day.

This is the quiet defeat, and it is more common than outright forfeiture at the senior level. Companies want to look reasonable. Naming a dismissed executive a good leaver looks reasonable. Measuring the pro ration to the day the pass was deactivated then produces a number barely larger than the one a bad leaver would have received, and the executive signs because the label sounded favourable.

Four measurement points in a good leaver clause are worth checking one by one.

• The date the fraction stops. Look for the words without regard to, in lieu of, or notwithstanding any notice period. If they appear, the clause expressly excludes the very period your damages claim is built on, and it collides directly with the statutory floor described in the next section.
• How a performance multiplier is set. Some plans pay a good leaver at target, some at actual results measured at the end of the cycle, and some at the committee's assessment as at your departure. The difference between target and a strong actual result on a large performance award is a substantial sum, and the plan will tell you which applies.
• The option exercise window. Good leaver treatment often extends the window from thirty days to twelve months or longer. If you hold vested, in the money options, this is the most time sensitive item in your entire file. Exercise inside the window while you dispute everything else, and keep the confirmations. Failing to exercise valuable vested options is the one self inflicted wound in this area.
• When the award actually settles. A good leaver award that settles on the original schedule keeps you exposed to the share price and to the company's solvency for years. That is a real risk, and it is a reason to press for a cash settlement now rather than a promise later.

More on how to put a number on the equity side in valuing equity vesting during the notice period and RSUs vesting during the notice period.

Can my employer apply bad leaver forfeiture during my statutory notice period?

For the statutory part of the notice period, there is a strong argument that it cannot. Section 60(1)(a) of the Employment Standards Act, 2000 says that during a notice period the employer shall not reduce the employee's wage rate or alter any other term or condition of employment. Cutting off vesting alters a term of employment, and s. 5(1) makes any contracting out of that standard void.

Start with s. 5, because it governs everything that follows. Subsection 5(1) provides that, subject to subsection (2), no employer or agent of an employer and no employee or agent of an employee shall contract out of or waive an employment standard and any such contracting out or waiver is void. Subsection 5(2) is the mirror image: if one or more provisions in an employment contract or in another Act that directly relate to the same subject matter as an employment standard provide a greater benefit to the employee, those provisions apply and the employment standard does not. So your plan may be more generous than the Act. It cannot be less, and the fact that you signed it changes nothing, because 5(1) voids the waiver rather than enforcing it.

Section 54 then makes notice mandatory. It provides that no employer shall terminate the employment of an employee who has been continuously employed for three months or more unless the employer (a) has given to the employee written notice of termination in accordance with section 57 or 58 and the notice has expired, or (b) has complied with section 61. Every executive dismissal clears the three month threshold, so one of those two limbs applies to you. Limb (a) is working notice; limb (b) is pay in lieu.

Section 57 sets the length of the individual notice period, and every limb is a rung on a ladder: (a) at least one week if the period of employment is less than one year; (b) at least two weeks if it is one year or more and fewer than three; (c) at least three weeks if it is three years or more and fewer than four; (d) at least four weeks if it is four years or more and fewer than five; (e) at least five weeks if it is five years or more and fewer than six; (f) at least six weeks if it is six years or more and fewer than seven; (g) at least seven weeks if it is seven years or more and fewer than eight; and (h) at least eight weeks if it is eight years or more. The ladder stops at eight weeks no matter how senior you are or how long you stayed. That ceiling is exactly why the statutory argument is a floor and not the claim.

Section 60 governs what happens during that period, and each limb is worth reading rather than summarising.

• Section 60(1)(a): the employer shall not reduce the employee's wage rate or alter any other term or condition of employment. This is the limb that matters to a leaver clause. Participation in the plan, and the continued vesting of awards already granted under it, is a term or condition of employment. Applying bad leaver forfeiture on day one of the statutory period alters it.
• Section 60(1)(b): the employer 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. Note the structure. The obligation is to pay the wages the employee is entitled to receive, and the regular work week figure is stated as a floor beneath that, not as a ceiling on it.
• Section 60(1)(c): the employer 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. Executives whose life, health and disability coverage is cancelled on the last day worked should read this limb closely.
• Section 60(2): if the employee does not have a regular work week, or is paid on a basis other than time, the employer shall pay an amount equal to the average regular wages earned per week for the weeks worked in the twelve weeks immediately preceding the day notice was given. This is the averaging route that matters when your pay is heavily variable.
• Section 60(3): if the employer fails to contribute to a benefit plan contrary to clause (1)(c), an amount equal to what it should have contributed is deemed to be unpaid wages for the purpose of section 103, which is the collection machinery.
• Section 60(4): nothing in subsection (3) precludes the employee from an entitlement he or she may have under a benefit plan. The statutory remedy sits on top of the plan's own promises; it does not replace them.

Section 61 is the pay in lieu route, and it carries the section 60 obligations across with it. Under s. 61(1)(a), an employer may terminate without notice or with less notice if it pays 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. Under s. 61(1)(b), it must continue whatever benefit plan contributions would be required to maintain the benefits the employee would have been entitled to had employment continued through the notice period. Section 61(1.1) says that for an employee without a regular work week, or paid on a basis other than time, the twelve week look back in s. 60(2) runs to the day of termination rather than the day notice was given. Section 61(2) applies only to an employer that would otherwise have to give notice under section 58, which is the mass termination route, so it does not apply to an individual executive dismissal.

Putting those together is the whole argument. Because s. 61(1)(a) measures the lump sum by what s. 60 would have required, and because s. 60(1)(a) forbids altering any term or condition of employment during the notice period, a plan clause that stops vesting on the termination date is attempting to do inside the statutory window exactly what s. 60(1)(a) prohibits, and s. 5(1) makes that void. That is the reasoning in Wigdor v. Facebook Canada Ltd., 2026 ONCA 572, a recent Court of Appeal decision released in August 2026, where restricted share units worth roughly US$4.7 million that would have vested during a ten month notice period were recoverable and clauses ending vesting on termination were held void. The decision also held that a counsel negotiated agreement gets no lesser standard of clarity. It is recent enough that it should not be treated as settled beyond doubt, but the reasoning is directly on point for a bad leaver forfeiture.

Keep the scale honest. The statutory window is at most eight weeks of notice under s. 57(h). If your next vesting date is five months out, the ESA argument does not reach it. What reaches it is the common law notice period, which for a senior manager or executive is measured in many months. Treat the ESA as the hard floor underneath the negotiation and the common law claim as the negotiation. See the ESA and equity compensation in the statutory notice period.

My plan makes me a bad leaver if I am terminated for cause. Is the plan's cause the same as the law's?

Almost never. Plans define cause far more broadly than the common law does, often reaching poor performance, failure to meet objectives, or conduct the board considers detrimental to the company's interests. A broad contractual definition does not convert an ordinary dismissal into a cause dismissal, and even a genuine cause dismissal does not automatically strip your statutory entitlements.

At common law, cause is assessed contextually and proportionately. McKinley v. BC Tel, 2001 SCC 38 requires the misconduct to be weighed against the circumstances, so that the sanction of dismissal without notice fits what actually happened. In Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619, a cause allegation against a head of global funds failed on a single lapse with no confidentiality breach, and the notice period was set at the top of the range precisely because a cause allegation made under an ethical cloud impedes re-employment. That cuts both ways for you: an employer that brands you a bad leaver on cause grounds and cannot prove it may have increased your claim rather than reduced it.

The statutory analysis is separate and stricter still. Render v. ThyssenKrupp Elevator (Canada) Limited, 2022 ONCA 310 confirms that an employer can establish cause at common law and still owe ESA entitlements. That is because the ESA exemption is not a cause exemption. It lives in O. Reg. 288/01, s. 2(1), which prescribes the employees who are not entitled to notice of termination or termination pay under Part XV of the Act, and the list is closed. Here is the whole list, with the reason each limb fails for a dismissed executive.

• Paragraph 1: an employee hired on the basis that employment is to terminate on the expiry of a definite term or the completion of a specific task, subject to subsection (2). Executive employment is almost always indefinite. Even where a fixed term exists, s. 2(2) removes the exemption if (a) the employment terminates before the expiry of the term or completion of the task, (b) the term expires or the task is not completed more than twelve months after employment commenced, or (c) the employment continues for three months or more after the expiry or completion. See fixed term contract ended early.
• Paragraph 2: an employee on a temporary lay-off. You were dismissed, not laid off.
• Paragraph 3: an employee who has been guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer. This is the only limb in play, and it has four separate requirements. The conduct must fall within one of the three named categories. It must be wilful, meaning intentional and deliberate rather than careless, negligent or merely poor. It must not be trivial. And it must not have been condoned, so an employer that knew and did nothing for months has a problem. Missed targets, a failed strategy, a personality conflict with a new chief executive and a restructuring are none of these things.
• Paragraph 4: an employee whose contract has become impossible to perform or has been frustrated by a fortuitous or unforeseeable event. Subsection (3) removes this where the impossibility or frustration results from an illness or injury suffered by the employee, and subsection (4) confirms it does not apply where a temporary help agency or recruiter licence is refused, revoked or suspended. Neither describes a without cause dismissal.
• Paragraphs 5 and 6: an employee terminated after refusing an offer of reasonable alternative employment with the employer, or alternative employment made available through a seniority system. You were not offered another role and refused it.
• Paragraph 7: an employee on a temporary lay-off who does not return within a reasonable time after being asked. Not applicable.
• Paragraph 8: an employee whose employment is terminated during or as a result of a strike or lock-out at the place of employment. Not applicable.
• Paragraph 9: a construction employee. Not applicable to an executive role.
• Paragraph 10: revoked.
• Paragraph 11: an employee terminated on reaching the age of retirement in accordance with the employer's established practice, and only where the termination would not contravene the Human Rights Code. A dismissal dressed as retirement does not qualify, and the Code carve out is the reason. See age discrimination in the workplace.
• Paragraph 12: shipbuilding employees whose employer builds, alters or repairs a vessel over ten gross tons designed for or used in commercial navigation, to whom a legitimate supplementary unemployment benefit plan applies, and who agree to the exemption. All three subparagraphs must be satisfied, and they will not be.

So if your employer is asserting cause to support bad leaver treatment, it has taken on two burdens, not one. It must prove cause at common law on the McKinley standard, and it must separately prove wilful misconduct under paragraph 3 to avoid paying statutory notice and severance. Employers frequently allege the first and quietly pay the second, which tells you something about their confidence. See with cause versus without cause.

One further point about how the allegation is made. If an unfounded bad leaver designation is communicated to a board, to a parent company or across an industry, the damage to your re-employment is real. Damages for the manner of dismissal require proof of mental distress flowing from how the dismissal was carried out, and are not available simply because the dismissal was unfair: Honda Canada Inc. v. Keays, 2008 SCC 39. Where the conduct is genuinely egregious, aggravated and punitive damages are available: Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419. See bad faith dismissal damages.

What happens if the plan is ambiguous about which category I am in?

Ambiguity works in your favour twice over. The employer drafted the plan, so genuine ambiguity in it is read against the employer, a rule usually called contra proferentem. And separately, the second question in Matthews places the burden on the employer to show that the wording unambiguously removes a common law right. A clause that can reasonably be read two ways has already failed that test.

The clearest Ontario illustration of how much clarity is required is Taggart v. Canada Life Assurance Company, 2006 CanLII 53345 (ON CA). Pension accrual that would have occurred during the notice period was recoverable as damages, and the employer's two best pieces of wording were not enough to prevent it: language tying accrual to active service, and a clause saying that benefits shall not be used to increase damages. Read that second clause again. The employer had written a sentence expressly aimed at damages and it still did not carry the day. That is the bar your leaver definition has to clear, and a residual line that never mentions a dismissal is nowhere near it.

The same theme runs through the equity cases. In Bain v. UBS Securities Canada Inc., 2018 ONCA 190, wording granting awards to employees together with a disclaimer that the plan did not form part of the employment contract did not unambiguously exclude the deferred portion earned during the notice period, even though it would have vested after the notice period ended. In Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619, terminated was read to mean lawfully terminated. And seniority does not lower the standard: Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451 held that an executive's sophistication and her independent legal advice did not save a termination clause that offended the ESA, and Wigdor v. Facebook Canada Ltd., 2026 ONCA 572 held that a counsel negotiated agreement gets no lesser standard of clarity.

Be honest with yourself about the other side of the line, because it exists. Where the wording is genuinely clear, it has been enforced. In Kieran v. Ingram Micro Inc., 2004 CanLII 4852 (ON CA), stock option plans whose wording unambiguously ended the options on the date services ceased, regardless of pay in lieu, were enforced and no option damages were awarded. That is a contractual wording principle, and the statutory argument accepted in Wigdor was not made in that case. And in Battiston v. Microsoft Canada Inc., 2021 ONCA 727, an acknowledgment that the participant had read and understood the grant terms was held binding, the Court of Appeal reversing the trial decision at 2020 ONSC 4286. If your plan says in terms that a participant dismissed without cause forfeits all unvested awards and waives any claim to damages in respect of them, you have a harder file, and knowing that early is worth more than optimism.

Does my change of control language override the leaver definitions?

Often it does, and it is the first place to look if your dismissal followed a transaction. Change of control provisions usually sit in a separate article of the plan or in a stand alone agreement, and they frequently override the leaver clause entirely, converting a without cause dismissal inside a defined window into full accelerated vesting no matter what the leaver definitions say.

Four questions decide whether you are inside that protection.

• Did a change of control occur as the document defines it. The definition is technical and the mechanics matter. A share sale, an asset sale, an amalgamation, a majority board turnover and the acquisition of a stated percentage of voting securities are treated differently by different plans. An asset sale that transfers the business but not the shares can fall outside a definition built on voting securities.
• Is it single trigger or double trigger. Single trigger accelerates vesting on the transaction itself. Double trigger, which is now the more common design, requires both the change of control and a qualifying termination within a protected window, commonly twelve to twenty four months after closing. Check the window and check your termination date against it, because a dismissal one month outside it is treated as an ordinary departure.
• Does a resignation for good reason count as a qualifying termination. Most double trigger clauses say it does, and define good reason using language that tracks constructive dismissal: a material reduction in duties, title, compensation, or a forced relocation. That maps onto Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10, which sets out the two branches of constructive dismissal, and Farber v. Royal Trust Co., [1997] 1 SCR 846, which applies an objective standard. If you were pushed sideways after a transaction rather than dismissed, read this clause before you resign, and read constructive dismissal in Ontario before you do anything.
• Did your service carry across the transaction. Wigdor v. Facebook Canada Ltd., 2026 ONCA 572 confirmed that ESA s. 9 carries service across a sale of a business, which affects your statutory notice ladder under s. 57 and your severance eligibility under s. 64(1). See sale of business and continuity of service.

What do the clawback, the non-compete and the release do to my leaver status?

Three documents can turn a good leaver into a bad leaver after you have already gone. A clawback triggered by post employment conduct. A restrictive covenant tied to forfeiture. And the release attached to your severance offer, which is the only one of the three that ends the argument permanently.

Clawback and competition triggers are functionally restrictive covenants regardless of where they sit in the document. A forfeiture clause that takes back a vested award because you joined a competitor is restraining your ability to earn a living, and it is analysed on that footing. A covenant must be reasonable in its geographic scope, its duration and the activity it restrains: Elsley v. J.G. Collins Insurance Agencies Ltd., [1978] 2 SCR 916. And where a covenant is overbroad, courts do not rewrite it into something narrower to save it: Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6. See are non-compete agreements enforceable and non-solicitation agreements.

The release is the decisive document. A full and final release signed for the first offer will normally extinguish your claim for every unvested award in the plan, and the equity claim is usually many times the size of the enhanced salary continuance that was offered in exchange for it. Releases are set aside only in narrow circumstances. Unconscionability requires an inequality of bargaining power and an improvident bargain: Uber Technologies Inc. v. Heller, 2020 SCC 16. In Swampillai v. Royal & Sun Alliance Insurance Company of Canada, 2018 ONSC 4023, aff'd 2019 ONCA 201, a release was set aside in part. Neither is a reliable escape route for a well paid executive who signed with time to think. Read should you sign a severance offer and severance release, should I sign before you sign anything.

One more document reduces the claim without anyone signing anything: your next job. You must take reasonable steps to find comparable employment, and earnings from a new role are generally deducted from damages over the same period: Evans v. Teamsters Local Union No. 31, 2008 SCC 20. The limit matters for executives, though. Earnings from a substantially lesser job may not be deducted: Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402. A senior manager who takes contract work at a fraction of a former executive salary is not necessarily handing the former employer a credit. See the duty to mitigate.

How much is a longer notice period actually worth on a package like mine?

More than it is worth to almost anyone else, because your vesting dates are calendar events and the notice period is a calendar window. Every extra month of notice sweeps in salary and bonus at a steady rate, and then occasionally sweeps in an entire vesting tranche at once. That is why negotiations over executive packages turn on weeks.

Reasonable notice is set using the factors from Bardal v. Globe & Mail Ltd., 1960 CanLII 294 (ON SC): the character of the employment, the length of service, the age of the employee, and the availability of similar employment having regard to the employee's experience, training and qualifications. There is no formula and no two weeks per year rule. There is, however, a practical ceiling: only exceptional circumstances support a base notice period above twenty four months, and in Lowndes v. Summit Ford Sales Ltd., 2006 CanLII 14 (ON CA) a twenty eight year general manager aged fifty nine was reduced from thirty months to twenty four because he was not a senior executive in the sense the case law recognises. See the 24 month cap for executives.

Now put a number on it. Take a vice president dismissed without cause on 1 September, aged 52, with nine years of service. Base salary $300,000. Annual incentive target $150,000, paid the following February. An annual restricted share unit grant of $300,000 vesting in three equal tranches of $100,000 each on 1 March. Because three grants are outstanding, the unvested balance on the termination date is $600,000: $300,000 vesting on the first 1 March after the dismissal, $200,000 on the second, and $100,000 on the third. Benefits and pension replacement cost roughly ten per cent of base. The plan lists death, disability and retirement as good leaver events and says nothing about dismissal, so the administrator applied the residual line and zeroed the account.

Three things fall out of that table. The gap between the offer and a defensible position is about $980,000, and roughly half of it is a single calendar question rather than an argument about salary. The ESA floor, though real, protects nothing here, because no vesting date falls inside eight weeks, which is why the statutory argument helps most when a dismissal is timed just before a vest. And a notice period ending 28 February and one ending 2 March differ by two days and by $300,000. Employers know the vesting calendar when they choose a termination date. See terminated weeks before a vesting date. All figures here are round and illustrative; your own plan documents and vesting schedule drive the real number.

Does being called a bad leaver change my ESA termination pay and severance pay?

No. Statutory termination pay and severance pay are creatures of the Act, and no plan definition touches them. Section 5(1) makes any contracting out void. What can affect them is a genuine wilful misconduct finding under O. Reg. 288/01, s. 2(1) paragraph 3, and one subsection of the severance formula that quietly hurts long service executives in defined benefit pension plans.

Severance pay is separate from termination pay and stacks on top of it. Section 64(1) requires five years or more of employment plus one of two gateways. Gateway (a) is that the severance occurred because of a permanent discontinuance of all or part of the employer's business at an establishment and the employee is one of 50 or more employees whose employment relationship was severed within a six month period as a result. For a single executive dismissal that limb fails twice over: there is no permanent discontinuance and there is no group of fifty. Gateway (b) is a payroll of $2.5 million or more, and it carries the day for essentially any employer large enough to run an executive incentive plan.

Section 64(2) defines the payroll test two ways and either is sufficient: (a) the total wages earned by all of the employer's employees in the four weeks that ended with the last day of the last pay period completed prior to the severance, multiplied by 13, is $2.5 million or more; or (b) the total wages earned by all employees in the last or second-last fiscal year was $2.5 million or more. Section 64(3) excludes prescribed employees, which lives in the regulations and should be checked against your role. Section 64(4) deems a location to be an establishment where there is a permanent discontinuance at that location, the location is part of an establishment of two or more locations, and 50 or more employees are severed within six months; that subsection belongs to the group scenario and has no application to an individual dismissal. See mass termination and group layoff.

Section 65 then sets the amount, and several subsections are aimed squarely at people in your position.

• 65(1): regular wages for a regular work week multiplied by the sum of (a) completed years of employment and (b) completed months not included in those years, divided by twelve. One week per year, with the partial year in twelfths.
• 65(2): all time in the employer's employ counts, whether or not continuous and whether or not active. Leaves, disability absences and interrupted service are included.
• 65(2.1): the executive trap. Where an employee in receipt of an actuarially unreduced pension benefit has employment severed on or after November 6, 2009, the time for which the employee received service credits in calculating that benefit is excluded both from eligibility and from the calculation. A long service executive in a defined benefit plan can find statutory severance reduced to very little by this subsection alone.
• 65(3): applies only where employment was severed under clause 63(1)(e), which concerns an employee's resignation during a notice period. It does not apply to an ordinary dismissal.
• 65(4): where the employer terminates without giving the notice required under section 57 or 58, severance is calculated as if the employee had continued to be employed for a period equal to the notice that should have been given and was not. Skipping notice does not shrink the severance figure.
• 65(5): the entitlement cannot exceed twenty six weeks of regular wages for a regular work week. That hard ceiling is why the statutory number is close to irrelevant to a package like yours.
• 65(6): where there is no regular work week, or the employee is paid on a basis other than time, regular wages for a regular work week are the average over the weeks worked in the twelve weeks preceding the severance date, or the start of the lay-off in a clause 63(1)(c) or (d) case.
• 65(7): subject to subsection (8), severance pay is in addition to any other amount to which the employee is entitled under the Act or the employment contract.
• 65(8): the set-off list is closed and has exactly three items. Supplementary unemployment benefits received after severance and before severance pay becomes payable. An amount paid for loss of employment under a contractual provision if it is based upon length of employment, length of service or seniority. And severance pay previously paid under the Act, a predecessor of it, or an equivalent contractual provision.

That last subsection has a practical use. If an employer offers to release your unvested awards and calls that generous enough to satisfy your statutory entitlements, s. 65(8) answers it: an incentive award is not based upon length of employment, length of service or seniority, so it is not one of the three permitted set-offs against statutory severance pay. See termination pay versus severance pay.

What should I do now, in what order?

Preserve the documents before your access closes, protect any vested in the money options inside their exercise window, and do not sign the release. Everything else can wait a few days. Those three items cannot, because each of them is irreversible and each of them is worth more than the deadline pressure the offer letter is applying to you.

1. 1.Download everything from the equity portal today, including the plan document, every grant agreement, every amendment, the vesting schedule, current balances, exercise history and any electronic acknowledgment screens you clicked. Access is usually cut within days of the termination date.
2. 2.Find and read the leaver definitions themselves, then search the plan for the exact phrase without Cause and for the defined term Termination Date. Note whether the definition of Termination Date excludes any period of notice.
3. 3.If you hold vested, in the money options, calculate the exercise window and diarise it. Exercise inside the window while you dispute the rest, and keep the confirmations.
4. 4.Pull your employment agreement and read the termination clause with equal care, because if it is void the common law notice period revives and your equity claim grows with it.
5. 5.Build the vesting calendar. List every unvested tranche with its date and value, then mark where a six month, a twelve month and an eighteen month notice period would each end. That single page is your negotiating position.
6. 6.Do not sign the release, and do not agree to the good leaver or bad leaver characterisation in writing. Acknowledging receipt of the letter is fine; agreeing to the classification is not.
7. 7.Keep every communication about why you were dismissed, particularly anything suggesting cause, performance or conduct, and note who else was told.
8. 8.Start a mitigation file and keep it current: applications, recruiter contacts, interviews and outcomes. You will be asked for it, and a poorly kept file costs money.
9. 9.Get the package reviewed before you respond, because the leaver clause and the termination clause interact and the interaction is where the value is. You can start with a severance package review.

Which documents should I gather, and what should I ask?

Gather the documents first, because most of the questions below cannot be answered without them, and the answers determine whether your file is worth six figures or seven. Work through this list in one sitting while you still have access to company systems, and save everything to a personal device.

• The long term incentive plan document itself, in the version in force when each grant was made, plus every amendment and restatement. Version matters, because the plan you signed under is not always the plan the administrator applied.
• Every individual grant agreement and award notice, with grant dates, tranche values, vesting dates, performance periods and exercise prices.
• Your full vesting schedule and current unit or option balances, exported rather than screenshotted, plus exercise and settlement history.
• The employment agreement and every subsequent offer, promotion letter or amendment, including any you signed at a change of control or on an internal transfer.
• The change of control agreement or plan article, if a transaction happened or was announced during your employment.
• The annual incentive plan document, which is often separate from the long term plan and often has different status wording.
• Pension and supplemental retirement plan statements, including the accrual formula, your service credit and whether any pension benefit is actuarially unreduced, which matters under ESA s. 65(2.1).
• The benefits booklet and the long term disability policy, including any conversion or continuation rights on termination. See benefits after termination.
• Any clawback policy, non-competition, non-solicitation or confidentiality agreement, including ones embedded in the plan rather than signed separately.
• The termination letter, the offer, the proposed release and your record of employment, plus any board or committee resolution you were shown.

Then ask these questions, of your own advisers first and of the employer second. The wording of the questions matters, because vague questions get vague answers and vague answers get treated as agreement.

• Which specific provision of the plan was applied to my awards, by section number, and who made the determination?
• Was I classified as a good leaver, a bad leaver, or under a residual provision, and on what date was that determination made?
• Does the plan define Termination Date by reference to active employment, and does it expressly exclude any period of notice?
• Did the committee consider exercising its discretion to designate me a good leaver, and if so, what was the basis for declining?
• Is the company asserting cause in any form, and if so, is it asserting wilful misconduct under O. Reg. 288/01, s. 2(1) paragraph 3?
• What is the exact expiry date of the exercise window on my vested options, and will the company confirm that in writing?
• Is my termination clause enforceable, and if it is not, what is my common law notice range on the Bardal factors?
• Which vesting dates fall inside a realistic notice period, and what is each tranche worth at current value?
• What does the release actually extinguish, and does it cover the equity claim, the pension accrual claim and any disability claim?
• Does the proposed structure create a tax problem, given that equity settlement and severance are taxed differently? See is severance taxable.

About the Author

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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