Ontario Court of Appeal issues welcome decision for employers on termination entitlements

November 9, 2021 | Carol S. VandenHoek, Catherine Phelps

In Battiston v Microsoft Canada Inc.,[1] the Ontario Court of Appeal enforced a stock option agreement that limited an employee’s entitlement to non-vested stock options upon termination. This decision offers some welcome news for employers navigating the thorny world of termination obligations.

The Facts

The Plaintiff, Fransic Battiston, was employed by Microsoft Canada Inc. (“Microsoft”) for 23 years. In August 2018, Microsoft terminated the Plaintiff’s employment on a without cause basis and provided him with a termination letter that offered him 23.5 months of pay in lieu of notice. The Plaintiff rejected this offer and commenced a claim for wrongful dismissal. One of the issues was the Plaintiff’s entitlement to non-vested stock options.

Each year, for sixteen years, the Plaintiff received a grant via an email from Microsoft which advised as follows:

Congratulations on your recent stock award! To accept this stock award, please go to My Rewards and complete the online acceptance process. A record will be saved indicating that you have read, understood and accepted the stock award agreement and the accompanying Plan documents. Please note that failure to read and accept the stock award and the Plan documents may prevent you from receiving shares from this stock award in the future.

As indicated, this email required the Plaintiff to go to “My Rewards” and complete the online acceptance process, which included reading, understanding and accepting the stock award agreement and the plan documents.  The stock award agreement expressly provided that the Plaintiff’s rights to any unvested stock awards would terminate upon his termination from Microsoft.

Each year, the Plaintiff clicked the box to confirm that he read, understood and accepted the stock award agreement. However, at trial, the Plaintiff testified that he had not read the agreement and did not know about the termination provisions.  The Plaintiff stated that he was under the impression he would receive the unvested stock if he was terminated by Microsoft.

The trial judge held that the termination provisions in the stock award agreement were harsh and oppressive as they precluded the Plaintiff’s right to unvested stock awards even if he was terminated without cause. Furthermore, the trial judge accepted the Plaintiff’s evidence that he was unaware of the termination provisions and that these provisions were not brought to his attention by Microsoft. The trial judge found that the email communication sent to the Plaintiff every year did not amount to reasonable measures to draw the termination provisions to the Plaintiff’s attention. Microsoft appealed this decision to the Ontario Court of Appeal.

The Court of Appeal’s Decision

The Court of Appeal overturned the trial judge’s decision, holding that the trial judge erred by finding that the Plaintiff received no notice of the stock award agreement.

The Court of Appeal held that the trial judge’s decision failed to address the following three facts:

  1. For a period of sixteen years, the Plaintiff expressly agreed to the terms of the stock award agreement;
  2. The Plaintiff made a conscious decision not to read the stock award agreement despite indicating that he did read it by clicking the box confirming that he read, understood and accepted the agreement; and
  3. By misrepresenting his assent to Microsoft, the Plaintiff put himself in a better position than an employee who did not misrepresent, thereby taking advantage of his own wrong.

On this basis, the Court of Appeal allowed the appeal and awarded Microsoft costs of the appeal.

Conclusion

In this decision, the Court of Appeal confirmed that it will enforce unambiguous language regarding employee termination entitlements. In an area of law that is quite employee-friendly, the Court of Appeal’s decision is refreshing. The Court of Appeal clearly put the onus on employees to review the terms of employee incentive plans. This decision provides comfort to Ontario employers that clear language regarding the termination of employee benefits will be enforced by the courts, and that online acceptance procedures should bind employees in these circumstances.  This is particularly important in Covid times, where online communications are the norm, rather than the exception.


[1] 2021 ONCA 727.

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