Executive Summary: Key Legal and Evidentiary Issues

• The Court of Appeal for Ontario upheld a finding that Facebook Canada's termination clause violated the Employment Standards Act by failing to account for Dr. Wigdor's nine years of prior service with Chatham Inc.
   
• Sections 60 and 61 of the ESA must be read together, meaning pay in lieu of notice cannot be calculated without regard to the prohibition on altering terms of employment during the notice period.
   
• Restricted Stock Unit agreements that cut off vesting immediately upon termination contravened this prohibition and were therefore void.
   
• Dr. Wigdor's RSU entitlements qualified as a term or condition of employment despite being tied to the sale of his consulting company.
   
• Punitive damages were not warranted because the delayed payment of statutory entitlements, though troubling, did not rise to the level of harsh or malicious conduct.
   
• Damages were increased by nearly US$4.7 million to reflect RSUs that would have vested during the 10-month common law notice period.
   

Facts of the case

Dr. Daniel Wigdor, a tenured professor in the Department of Computer Science at the University of Toronto, founded Chatham Inc. in 2011 to provide technology consulting services. In 2016, he began providing services to a Meta subsidiary, and by 2018 he was managing a combined team of roughly 170 people across Chatham and Meta's "Reality Labs" group. In 2020, Meta negotiated a share-purchase agreement to acquire Chatham, contingent on Dr. Wigdor and other key personnel accepting employment with Facebook Canada. As part of that deal, Meta agreed to grant Dr. Wigdor 43,380 Restricted Stock Units ("RSUs"), then valued at US$7.5 million, vesting quarterly over four years.

Dr. Wigdor began employment with Facebook Canada on September 12, 2020, under an employment agreement signed August 27, 2020, at an initial base salary of $232,000 (later raised to $253,100.37). His RSU entitlements were governed by four separate RSU Agreements, one for each annual grant between 2020 and 2023. Facebook Canada terminated his employment by letter on December 4, 2023, effective December 8, 2023, offering him only his minimum ESA entitlements plus additional benefits contingent on signing a release. Dr. Wigdor declined to sign the release because it barred him from disputing the forfeiture of his unvested RSUs. The Respondents did not pay his statutory ESA entitlements until ten months after termination, and only after he commenced the underlying application.

Policy and legislative provisions at issue

The termination provisions in section 12.a of the employment agreement purported to allow Facebook Canada to terminate Dr. Wigdor on two weeks' notice during his first three months of employment. Dr. Wigdor argued this contravened section 9 of the ESA, which requires an employee's prior service with a predecessor employer to be recognized when a business is sold. Sections 60 and 61 of the ESA were also central to the appeal: section 60(1)(a) prohibits an employer from altering any "term or condition of employment" during a working notice period, while section 61(1)(a) requires payment of a lump sum "equal to the amount" an employee would have received under section 60 had working notice been given instead of pay in lieu.

The RSU Agreements contained forfeiture language providing that "all unvested RSUs shall be forfeited to the Company forthwith" upon termination, with the 2020 agreement stating that no vesting would continue during any notice period, and the 2021–2023 agreements stating that forfeiture would not be extended by any notice or pay-in-lieu period "unless explicitly required by applicable legislation."

Reasoning and analysis

On the cross-appeal, the Court found no palpable and overriding error in the application judge's conclusion that section 12.a of the employment agreement contravened the ESA. Reading the clause in the context of the agreement as a whole did not save it, since the Respondents' proposed interpretation would have made the three-month probationary period meaningless and rendered other provisions of the same clause unworkable.

On the RSU issue, the Court held that the application judge erred by reading sections 60 and 61 of the ESA disjunctively. Properly interpreted, section 61(1)(a) incorporates the section 60(1)(a) prohibition on altering terms or conditions of employment, so a lump sum paid in lieu of notice must be calculated as though no such alteration occurred. This reading is supported by the text, the statutory context, and the remedial purpose of the ESA, which is meant to place employees in the same financial position regardless of whether they receive working notice or pay in lieu. The Court also found that the application judge wrongly assessed ESA compliance from the vantage point of how Dr. Wigdor was actually terminated, rather than from the wording of the RSU Agreements at the time they were formed, and wrongly concluded that the RSU entitlements fell outside the ESA altogether, a conclusion inconsistent with the RSU Agreements' documented treatment of RSUs as employment compensation and taxable benefits. Both the 2020 and the 2021–2023 RSU Agreements were found to unlawfully cut off vesting during the statutory notice period and were therefore void.

On punitive damages, the Court deferred to the application judge's discretionary finding that the ten-month delay in paying statutory entitlements, while more than an innocent administrative oversight, did not amount to the harsh or malicious conduct required under Honda Canada Inc. v. Keays to justify a punitive award.

Ruling and overall outcome

The Court of Appeal dismissed the Respondents' cross-appeal, confirming that the termination clause in the employment agreement was void for contravening ESA minimum standards. It allowed Dr. Wigdor's appeal on the RSU issue, finding that the RSU Agreements were void and could not validly displace his common law entitlement to notice, but declined to disturb the denial of punitive damages. Dr. Wigdor's damages award was increased by US$4,711,647.29 to reflect the value of 9,405 RSUs that would have vested during his 10-month common law notice period, with costs of the appeal left to be resolved by the parties or, failing agreement, by further written submissions.