What Happens to My Long-Term Incentive Plan Grants When I Am Dismissed Without Cause?

The letter arrives with a number in it, and the number is built from your base salary. Somewhere near the bottom sits one sentence saying that all unvested awards under the long-term incentive plan were cancelled on your termination date, and that any vested options must be exercised within thirty days. That sentence is usually worth more than everything above it combined, and it is the sentence nobody explains to you.

If you are a senior manager or an executive, your pay is not a salary with some extras attached. It is a structure: base, an annual incentive, a long-term incentive delivered over a multi-year cycle, pension or a supplemental retirement arrangement, benefits, and sometimes a transaction or retention agreement layered on top. The long-term plan is the part that compounds, the part that is hardest to replace at a new employer, and the part the first offer writes off in a single line.

Two things are true at the same time. The plan administrator will do exactly what the plan document tells it to do, on the day it says to do it. And a court deciding a wrongful dismissal claim will ask a completely different question, which is what would have come to you had you been given the working notice you were entitled to. This article is about the gap between those two things, because the gap is where a large package is won or lost.

What is a long-term incentive plan, and why does the law treat it as pay rather than a perk?

A long-term incentive plan is deferred compensation for work you have already done, delivered over a multi-year cycle. Ontario courts treat it as an integral part of your compensation rather than a gratuity, and its size is the reason. In Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619, the short and long-term incentive plans made up about 60 per cent of the executive's pay.

That proportion changes how the whole case is framed. When incentive compensation is a small annual gesture, an employer can plausibly call it a bonus. When it is the majority of what you earn, calling it discretionary describes the mechanics of how it is approved, not what it is. It is the consideration for the job. You took the role, accepted a base salary below what the total package implies, and stayed through multi-year cycles precisely because the long-term plan was going to pay.

Long-term plans arrive in several shapes, and the shape matters more than the label on the cover page.

• Restricted share units. A promise of shares or their cash value, vesting on a schedule, usually in equal annual tranches over three years. No exercise price, so the whole value is at stake.
• Performance share units. The same, except the number of units that vest is multiplied by a performance factor measured over a cycle, often three years. The multiplier is where the employer will argue uncertainty.
• Stock options. A right to buy at a fixed exercise price. Worth the spread between market price and exercise price, not the share price, and subject to a short post-termination exercise window.
• Deferred share units and notional share awards. Phantom units tracking the share price, often settled in cash after you leave. In Bain v. UBS Securities Canada Inc., 2018 ONCA 190 the deferred part of a bonus delivered as notional shares was recoverable even though it would have vested after the notice period ended.
• Multi-year cash LTIP. A cash award measured over a performance cycle with no security involved at all. Everything in this article applies to it, and the absence of shares removes the employer's favourite arguments about market risk.
• Carried interest, profit units and partnership interests. These sit closest to the line between compensation and an investment, and the line matters. In Mikelsteins v. Morrison Hershfield Limited, 2021 ONCA 155 shares the employee had bought with his own money under a shareholders' agreement were treated as shareholder rights rather than employment compensation, so the buy-back ran from the termination date.

Whatever the shape, every long-term award has four dates: the grant date, the start and end of the performance or measurement period, the vesting date, and the payout or settlement date. Nearly every argument you are about to have is an argument about which of those dates falls inside your notice period. Keep them straight and the file organises itself.

What actually happens to my grants on the day I am dismissed?

Three things happen at once, and only one of them affects your legal rights. Your portal access is closed or is about to be. Unvested awards are flagged as forfeited effective the termination date. A short exercise window opens on any vested options, commonly thirty to ninety days. None of that decides anything. It records what the administrator did while you were reading the letter.

The forfeiture entry is a bookkeeping step taken under the plan document, by people who are not deciding whether the plan document is enforceable against you. If the wording fails, the entry was simply wrong, and the remedy is damages measured by what you lost. Employers know this. It is why the covering letter tends to describe forfeiture as automatic rather than as something the employer chose to do.

The exercise window is different, and you should treat it as real. If you hold vested, in the money options, exercise them inside the window even while you dispute everything else, and keep the confirmations. Failing to exercise a valuable vested option is the one self-inflicted wound in this area that an employer can fairly raise against you, and it has nothing to do with the merits of the unvested claim. There is a fuller treatment in RSUs and stock options after termination.

Do the download today. Grant agreements, the plan document itself, vesting schedules, unit balances, exercise history, statements and any acknowledgment screens. Access to an equity portal is usually cut within days, and reconstructing a schedule afterwards means asking the other side for the evidence you need to sue them.

What is the two-part test that decides whether I get the value of those grants?

Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26 sets it out. 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. For an LTIP, step one is usually straightforward. Step two is the entire fight.

Step one flows from what a wrongful dismissal claim actually is. 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 been left in the job for the full notice period and walked out on the last day of it. So the question is not what you had banked. It is what would have landed in your hands during those months.

Step two asks whether the plan took that right away in language clear enough to do it. Here is the pattern that has emerged: clauses describing your status tend to fail, and clauses tied to an independent event tend to hold. Wording requiring you to be actively employed does not clear the bar, as Paquette v. TeraGo Networks Inc., 2016 ONCA 618 held. Wording requiring you to be an employee in good standing at the time bonuses are payable was treated as the same clause in Andros v. Colliers Macaulay Nicolls Inc., 2019 ONCA 679, which awarded a pro rata share for the year worked and for the notice period even though the payout date fell after the notice period ended.

The reason status wording fails is simple once you see it. The employer removed your active employment by dismissing you unlawfully, then points to the absence of active 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.

Which forfeiture wordings have failed, and which have held?

Find your exact wording in the table below before you respond to any offer, because the wording, not the size of the number, determines the strength of your position. The pattern is consistent: language describing a state the employer itself removed tends to fail, and language tied to a defined mechanism or an independent event tends to survive, unless it operates inside the statutory notice period.

Read the last row twice. The termination clause in your employment agreement and the forfeiture clause in your plan are two separate documents, and the first one can decide the second. If the termination clause is void, the common law notice period revives, and a revived notice period of eighteen or twenty two months sweeps in vesting dates that an eight week statutory period never reaches. More on that in is my termination clause enforceable.

What must my plan document actually say to take the right away?

Four things at once. The language must unambiguously remove the common law right, not merely describe who is eligible. It must address the notice period, not only the termination date. It must have been brought to your attention and accepted. And it must not contract out of the Employment Standards Act, 2000. A plan that misses any one of these usually leaves your right intact.

• Unambiguous removal, not eligibility language. The second question in Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26 is whether the wording unambiguously limits or removes the common law right to damages. A clause saying who participates, or when awards are normally paid, does not do that. A clause that names damages for wrongful dismissal and says they are excluded is a much harder document to fight, which is why you should look for exactly that sentence before anything else.
• It must speak to the notice period, not just the last day. This is the single most useful thing to check. Does the plan say what happens during a period of notice or pay in lieu of notice, or does it only fix a consequence on the termination date? Wording built on the termination date leaves open the argument that had proper notice been given, the termination date would have been months later.
• You must actually have agreed to it. Under ESA s. 1(3), a reference in the Act to an agreement between an employer and an employee is deemed to be a reference to an agreement in writing, and s. 1(3.1) says that requirement is satisfied if the agreement is in electronic form. Section 1(4) makes clear that an employment contract which is not a collective agreement need not be in writing at all. Clicking accept in an equity portal can therefore be a real agreement. 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. The opposite case is Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619, where forfeiture amendments the employees refused to sign never became part of the contract.
• A mid-employment change needs fresh consideration. If the forfeiture language appeared in a plan amendment three years into your employment, in exchange for nothing, that is a live issue. See new employment contract and fresh consideration.
• It cannot contract out of the ESA. Section 5(1) provides that 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 that any such contracting out or waiver is void. Section 5(2) is the mirror image: if a provision in an employment contract or another Act that directly relates to the same subject matter as an employment standard provides a greater benefit, that provision applies and the employment standard does not. So your plan can be more generous than the Act. It cannot be less.

One more point that senior people are often told the opposite of. Being sophisticated does not lower the standard of clarity the employer has to meet. In Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451 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. Your seniority is not a waiver.

Does the Employment Standards Act stop my employer from cancelling vesting during the notice period?

For the statutory part of the notice period, there is a strong argument that it does. 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. Cancelling vesting alters a term of employment, and section 5(1) makes any contracting out of that standard void.

Work through the provisions in order, because the chain matters. Section 54 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. Any executive dismissal clears the three month threshold, so one of those two limbs must be satisfied. Sections 57 and 58 set how long the statutory period is; section 54 makes providing it mandatory.

Section 60 then governs what happens during that period, and every limb of it 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 for an LTIP. Participation in an incentive plan, and the continued vesting of awards already granted under it, is a term or condition of employment. Cancelling it mid-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 that this is a floor, not a ceiling. The obligation is to pay the wages the employee is entitled to receive.
• 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.
• Section 60(2): if the employee does not have a regular work week, or is paid on a basis other than time, the weekly figure is the average amount of regular wages earned per week over the weeks worked in the twelve weeks immediately preceding the day notice was given. That subsection matters for executives whose 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 the benefit plan itself. The statutory remedy does not replace the plan's own promises.

Section 61 is the pay in lieu route, and it carries the section 60 obligations with it. Under s. 61(1)(a), an employer may terminate without 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 during the period of notice otherwise required. Section 61(1.1) says that for employees without a regular work week, or paid on a basis other than time, the twelve week look-back runs to the day of termination rather than the day notice was given. Section 61(2) applies only where the employer 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.

The consequence of reading s. 60(1)(a) into s. 61(1)(a) is that a lump sum has to reflect everything section 60 would have required, including the prohibition on altering a term or condition of employment. 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. It is recent enough that it should not be treated as settled beyond doubt, but the reasoning is directly on point for anyone holding unvested awards.

Keep the scale in proportion. The statutory notice period is short. The common law notice period for a senior manager or an executive is measured in many months, sometimes approaching two years, and it is the common law argument that reaches the vesting dates that matter. The ESA argument is a hard floor underneath it, not a substitute. See equity compensation and the statutory notice period.

Is my LTIP counted in ESA termination pay and severance pay?

Usually not in the statutory calculation, and that matters less than it sounds. ESA termination pay and severance pay are calculated on regular wages for a regular work week. Your long-term incentive value is recovered as common law damages instead, and that is a far larger number. The ESA is the floor; it is not the claim.

Start with the definition of wages in s. 1(1). It includes (a) monetary remuneration payable by an employer to an employee under the terms of an employment contract, oral or written, express or implied, (b) any payment required to be made under the Act, and (c) allowances for room or board under an employment contract or prescribed allowances. It then excludes (d) tips or other gratuities, (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, (f) expenses and travelling allowances, and (g) subject to subsections 60(3) or 62(2), employer contributions to a benefit plan and payments to which an employee is entitled from a benefit plan.

Limb (e) is the one employers reach for, and it has two conditions joined by and. The sum must be dependent on the discretion of the employer and it must not be related to hours, production or efficiency. Both have to be true for the exclusion to apply. A long-term incentive award calculated by a formula against company performance, business unit results, total shareholder return or an earnings metric is related to production or efficiency, so limb (e) does not exclude it even if a committee formally approves the payout. Limb (g) is a weaker fit still: the Act defines a benefit plan circularly as a benefit plan provided for an employee by or through his or her employer, and an incentive plan that pays cash, units or shares for performance is not ordinarily what that phrase describes.

The definition of regular wages is where the statutory calculation narrows. Regular wages means wages other than overtime pay, public holiday pay, premium pay, vacation pay, domestic or sexual violence leave pay, infectious disease emergency leave pay, termination pay, severance pay, termination of assignment pay, and entitlements under a contractual provision that prevails under s. 5(2). Incentive pay is not named in that exclusion list, but the calculation is expressed as a weekly amount, and a multi-year award is not paid weekly. Where an employee has no regular work week or is paid on a basis other than time, ss. 60(2) and 65(6) supply a twelve week averaging method, which is the route through which variable pay can enter the statutory figure at all.

Now statutory severance pay, which 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 severed within a six month period as a result. For a single executive dismissal, limb (a) fails on both counts: there is no permanent discontinuance and there is no group of 50. Gateway (b) is a payroll of $2.5 million or more, and it almost always carries the day for any employer large enough to run an LTIP.

Section 64(2) defines the payroll test two ways, and either is enough: (a) total wages earned by all the employer's employees in the four weeks ending with the last completed pay period before the severance, multiplied by 13, is $2.5 million or more; or (b) 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, and those exclusions live in a regulation that 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, it is part of a multi-location establishment, and 50 or more employees are severed within six months; that subsection belongs to the group scenario and does not apply to an individual dismissal.

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

• 65(1): regular wages for a regular work week multiplied by the sum of completed years of employment plus completed months not included in those years divided by twelve. One week per year, with a partial year counted 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, time for which the employee received service credits in calculating that benefit is excluded from both eligibility and the calculation. A long-service executive in a defined benefit plan can see statutory severance reduced to nothing by this subsection.
• 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): if the employer terminates without providing the required notice, 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. Failing to give notice does not shrink the severance figure.
• 65(5): the entitlement cannot exceed twenty six weeks of regular wages for a regular work week. This is the hard ceiling that makes the statutory figure irrelevant to a large package.
• 65(6): where there is no regular work week or the employee is paid other than by time, regular wages for a regular work week are the twelve week average preceding the severance date.
• 65(7): severance pay is in addition to any other amount to which the employee is entitled under the Act or the employment contract.
• 65(8): only three set-offs are permitted, and the list is closed. 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 on length of employment, length of service or seniority; and severance pay previously paid under the Act or an equivalent contractual provision. An LTIP payout is not based on length of service, so it is not a permitted set-off against statutory severance.

That last point is practical. If an employer tells you that releasing your LTIP awards is generous enough to cover your statutory entitlements, s. 65(8) says otherwise. See termination pay versus severance pay.

Why is a long-term plan prorated differently from my annual bonus?

Because they measure different things. An annual plan has one measurement year, so a dismissal part way through produces a natural fraction of days worked. A long-term plan has a multi-year cycle that either completes or does not, so proration is an awkward fit and the plan wording tends to decide. In Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619 the trial judge prorated the annual plan.

That distinction has a direct consequence for how you argue your file. Do not let anyone apply one proration formula uniformly to every plan you participate in. Each plan is its own contract with its own measurement period, its own vesting mechanics and its own wording, and they have to be analysed one at a time. An employer that offers you a single blended fraction across the annual plan and three outstanding LTIP cycles is proposing a simplification that works in its favour.

Three patterns recur. First, a cycle that completes inside the notice period. Had you been given working notice, the cycle would have run to its end and the award would have been determined and paid, so the natural claim is the full award, calculated by the plan formula, not a fraction. Second, a cycle that completes shortly after the notice period ends. That is harder, but not hopeless: 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. The distinction is between an award earned during the period and one merely paid afterwards.

Third, a cycle running well past any plausible notice period. There the pro rata claim is the sensible one: the fraction of the performance period that falls within your employment plus your notice period, measured against the award the formula would produce. What you should resist is the assumption that the fraction is zero because the cycle had not finished. See terminated weeks before a vesting date for the near miss scenario, which is the most painful version of this problem and the one most improved by a longer notice period.

What is each part of my package worth, and how is each part treated on termination?

Build the inventory before you negotiate anything. Most first offers price one component fully, gesture at a second, and stay silent on the rest. Silence is not a concession that nothing is owed, but it becomes one if you sign a release. The table sets out the components of a typical executive package and what happens to each.

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

On a package where incentive compensation is more than half of total pay, each additional month of notice is worth roughly double what a salary-only calculation suggests. That is the entire commercial point of the argument. Here is an illustration using round figures. Nothing in it is a prediction about your file, and none of it is a fee figure.

• Vice President, age 52, twelve completed years of service, dismissed without cause.
• Base salary $300,000 a year.
• Annual incentive at a target of 50 per cent of base, paid at or near target in each of the last five years: $150,000 a year.
• Long-term incentive: annual grants with a face value of $300,000, vesting in three equal annual tranches, so in a steady state roughly $300,000 of value vests each year.
• Employer pension and retirement contributions: $30,000 a year.
• Group benefits at replacement cost: about $12,000 a year.
• Total annual compensation: $792,000, or $66,000 a month. Incentive compensation is $450,000 of that, about 57 per cent.

Put the statutory floor beside those numbers. On twelve completed years, ESA s. 65(1) produces twelve weeks of regular wages for a regular work week, which on a $300,000 base is roughly $69,200, and s. 65(5) caps that entitlement at twenty six weeks no matter how long the service. The employer's $150,000 offer is a little over twice the statutory severance figure, and about eleven per cent of the claim. It is presented as six months, which sounds generous, and it is measured against the wrong denominator.

Now watch what notice length does. Each additional month is worth about $66,000 on these assumptions, and $37,500 of that is incentive compensation. Moving an assessment from twelve months to twenty months is worth roughly $528,000. That is why the notice argument and the LTIP argument are the same argument: a longer period does not just add salary, it sweeps in more vesting dates.

How long is reasonable is assessed on the factors from Bardal v. Globe & Mail Ltd., 1960 CanLII 294 (ON SC): the character of the employment, length of service, age, and the availability of similar employment having regard to experience, training and qualifications. Senior roles run long because the market for them is thin. Equity participation and the character of an executive role make similar employment harder to find, which is why a senior vice president with only two and a half years of service received nine months in Love v. Acuity Investment Management Inc., 2011 ONCA 130. A managing director received eighteen months in Bain v. UBS Securities Canada Inc., 2018 ONCA 190; a divisional president of eleven years, aged 51, received seventeen months in Singer v. Nordstrong Equipment Limited, 2018 ONCA 364; and in Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619 the head of global funds, aged 41 with eight years of service, received fifteen months, at the top of the range because a cause allegation made under an ethical cloud impedes re-employment.

Two limits are worth knowing. 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 59 was reduced from thirty months to twenty four because he was not a senior executive in the sense the case law recognises. Twenty four months has been awarded to older long-service employees, as in Dawe v. The Equitable Life Insurance Company of Canada, 2019 ONCA 512. If you were recruited away from secure employment, inducement lengthens notice: Egan v. Alcatel Canada Inc., 2006 CanLII 108 (ON CA) produced nine months on twenty one months of service at director level. See the 24 month cap for executives and executive severance and notice.

What if the plan says the committee has absolute discretion, or my award was discretionary?

Discretion in the plan document is not the end of the analysis. The question is not whether a committee had discretion to set the size of an award. It is whether the wording unambiguously removes your common law right to damages for compensation you would have earned during the notice period. A plan can be discretionary in operation and still be an integral part of your pay.

Your payment history does the heavy lifting here. An award paid every year for eight consecutive years, at or near target, described in your offer letter as part of total compensation and reported to you in a total rewards statement, is not a gift. It is the consideration you work for. In Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619 the incentive plans amounted to roughly 60 per cent of pay, which made the argument that they were an optional extra difficult to sustain.

The statutory definition points the same way. ESA s. 1(1) excludes from wages only those 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. Both conditions must be met. An award driven by a performance formula fails the second condition, so it is not excluded, and the discretion label does less work than the employer's letter implies. See discretionary bonuses and the notice period and your bonus when terminated.

Does mitigation, or a new employer's sign-on grant, reduce my LTIP claim?

It can, but much less than the first letter assumes. Only compensation that actually accrues to you during the notice period is credited against the claim, and your obligation is to take reasonable steps to find comparable work, not any work. Evans v. Teamsters Local Union No. 31, 2008 SCC 20 sets the standard of reasonableness, including whether you should accept re-employment with the same employer.

Apply that to a make whole grant from a new employer. A sign-on award of $400,000 in units vesting over four years does not erase a $500,000 loss that would have crystallised in month seven of your notice period. It should be credited only at the value of the portion that actually vests inside the notice period, on the date it vests. Employers routinely present the headline figure instead, and the difference is six figures.

Two further points. Earnings from a substantially lesser job may not be deducted at all: Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402. And the executive market is slow by nature, which is the same reason the notice period is long in the first place. Keep a mitigation log from week one, with dates, roles, recruiters and outcomes, including any internal role you were offered and your reasons for accepting or declining it. See the duty to mitigate.

What should I look for in my own documents before I answer the offer?

Nine specific things, and each of them changes a number. Read them in this order, with the plan document open beside the grant agreement, because the grant agreement alone will not tell you what the plan says. Employers frequently send participants the grant summary and never the plan text.

• The definition of termination date or cessation of employment. Does the plan define it as the last day actively at work, the date notice was given, or the end of any notice period? A plan that ties forfeiture to the last day actively at work is describing the very act the employer performed unlawfully, which is the weakness at the centre of Paquette v. TeraGo Networks Inc., 2016 ONCA 618.
• The vesting schedule. Cliff vesting or graded vesting, and on what dates. Write out every tranche with its date and size, and extend the list twenty four months past your termination date so no assessment of notice can surprise you. A cliff sitting two months past the employer's proposed notice period is the single most valuable fact in your file.
• Performance conditions and the multiplier. How the payout factor is calculated, who certifies it, and what it has been in each of the last five cycles. A documented history of payouts at or above target converts an argument about speculation into arithmetic.
• Change of control language. Is acceleration triggered by the transaction alone (single trigger) or by a transaction plus a qualifying termination (double trigger)? If a deal closes or is announced inside your notice period, the counterfactual is accelerated vesting of the whole schedule rather than a quarterly drip. This is often the largest number in the file and it is invisible unless you look for it.
• Good leaver and bad leaver definitions. Who makes the designation, on what standard, and is it reviewable. Many plans preserve the full vesting schedule for a good leaver, and many define retirement eligibility by age plus service thresholds a senior executive may already have crossed. Being designated a good leaver can be worth more than the entire cash component of the offer, and the designation is negotiable.
• Clawbacks and forfeiture for competition. A clawback triggered by competing or soliciting rides on the restrictive covenant it refers to. A court will not rewrite an overbroad covenant to save it: Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6. Reasonableness is measured against the employer's proprietary interest: Elsley v. J.G. Collins Insurance Agencies Ltd., [1978] 2 SCR 916. An unenforceable covenant usually takes the clawback with it.
• The amendment clause. Does the plan let the employer amend unilaterally, and was the forfeiture language in the version you accepted or one circulated later? In Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619 amendments the employees refused to sign never became part of the contract.
• The termination clause in your employment agreement. One offside limb voids the termination provisions as a whole: Waksdale v. Swegon North America Inc., 2020 ONCA 391. A no notice for just cause clause is void and takes the scheme with it, and sophistication and independent legal advice do not save it: Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451. Dufault v. Ignace (Township), 2024 ONSC 1029 reasoned at paragraphs 19 to 22 that language permitting dismissal at any time in the employer's sole discretion overstates the employer's rights, since the Act prohibits termination in certain circumstances; that is Superior Court reasoning and should not be treated as settled appellate law. If the clause falls, common law notice revives: Machtinger v. HOJ Industries Ltd., [1992] 1 SCR 986.
• The release. A general release ends the LTIP claim permanently, including tranches you have not yet identified and any change of control acceleration that might have been triggered. 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 last resort, never a plan. See should I sign the release.

What should I do in the next two weeks?

Work in this order. The first three items are time sensitive because they depend on access and windows that close, and the rest are analysis you can do calmly once the evidence is safely in your possession.

1. 1.Download everything from the equity and plan administrator portals today: the plan document, every grant agreement, vesting schedules, unit balances, exercise history, statements and any acknowledgment screens you clicked. Access usually ends on or shortly after the termination date.
2. 2.Exercise any vested, in the money options inside the post-termination window, even while you dispute everything else, and keep the confirmations.
3. 3.Ask in writing for an extension of the offer deadline. Deadlines on severance offers are negotiating pressure and are routinely extended when counsel asks. See does a severance offer expire.
4. 4.Build the tranche schedule. One row per tranche: vesting date, units or dollars, exercise price where applicable, the performance multiplier, and the price on that date. Extend it twenty four months past your termination date.
5. 5.Read the change of control, good leaver, retirement eligibility and clawback clauses before you respond to anything, and find out whether a transaction is pending or has been announced.
6. 6.Check the termination clause in your employment agreement against the whole scheme, including any just cause limb, because if it falls the entire notice period expands and more tranches come into range.
7. 7.Start a mitigation log from week one, recording dates, roles, recruiters and outcomes, and note any internal role you were offered with your reasons for accepting or declining it.
8. 8.Do not sign the release until the incentive numbers are agreed and written into the settlement tranche by tranche, with the tax characterisation stated, rather than folded into one undifferentiated figure.

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

The documents decide the outcome, so gather them before the first conversation. Most of them live somewhere you 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, promotion letter and offer letter, including the original one that got you in the door.
• The long-term incentive plan document itself, not just the grant summary, plus every amendment and every acknowledgment you signed or clicked.
• Every outstanding grant agreement with its vesting schedule and performance conditions, and the administrator statements showing balances and exercise history.
• The annual incentive plan text, with target percentages and the actual payout history for the last three to five years.
• The pension plan text, any supplemental executive retirement arrangement, and your most recent statement, particularly if you are receiving or eligible for an actuarially unreduced pension.
• The benefits booklet and the long-term disability policy, so continuation and replacement cost can be valued.
• Any change of control, retention or transaction agreement, and any restrictive covenant, clawback or compensation recovery policy.
• The termination letter, the proposed release, the Record of Employment, and anything describing the reason for the decision.
• Your last three years of total rewards statements and T4s, which establish what your compensation actually was rather than what the offer says it was.

• What exact words does the plan use about termination, and does it say anything about a period of notice or pay in lieu of notice, or only about the termination date?
• Which tranches would vest in the next twenty four months, and what is each worth under the plan formula?
• Does any performance cycle complete inside a plausible notice period, and what has the payout multiplier been for the last five cycles?
• Is the deferred portion of my incentive earned during the notice period, and can it be recovered even though it settles afterwards?
• Does the plan accelerate on a change of control, on a single or double trigger, and is a transaction pending or announced?
• Am I a good leaver under the definitions, or do I meet a retirement eligibility threshold, who decides that, and can the designation be negotiated into the settlement?
• Is the termination clause in my employment agreement enforceable, and if it is not, what notice period does the common law analysis support?
• How will the settlement be characterised for tax, and can any part be paid into an RRSP or structured to preserve better treatment? See is severance taxable.
• What is the deadline, and will the employer extend it in writing while the schedule is verified?

If the long-term plan is the majority of your compensation, the sentence in the letter that cancels it is the most expensive sentence you will read this year, and it is usually the least examined. A severance package review will tell you what your grants are actually worth before you answer the deadline. This article is general information about Ontario law. It is not legal advice about your situation.

About the Author

Daniel Carter

Legal Writer, Mirza Law

Daniel Carter is a legal writer at Mirza Law in Toronto. He writes about layoffs, employment contracts, and the steps to take before you sign anything from your employer.

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