In M. v. Enthusiast Gaming Inc., 2025 ONSC 654, the Ontario Superior Court confirmed an important principle for employees receiving equity compensation: a vesting schedule does not automatically create a fixed-term contract.
If employment ends before the vesting date, unvested shares or options are generally lost unless the contract clearly says otherwise.
The Background
The plaintiff entered into an arrangement to provide consulting and financial services to the defendant company as it prepared to go public.
The compensation included shares vesting over 12, 18, and 24 months, and options vesting immediately in part, with additional portions at 12 and 24 months.
The agreement stated that shares and options were contingent on the individual being engaged with the company on each vesting date.
The relationship ended after five months. Only the first portion of options had vested by that time.
The First Claim: Vested Options
The plaintiff successfully pursued compensation for the portion of options that had already vested. The court awarded damages in lieu of issuing those options.
The Second Claim: Unvested Shares and Options
The plaintiff then sought compensation for shares and options that had not vested when the relationship ended.
The key argument was that because the vesting schedule ran for 24 months, the arrangement must have been a two-year fixed-term contract. If that were true, the plaintiff would have been entitled to compensation for the full 24-month period, including unvested equity.
The court rejected this argument.
The Court’s Key Finding
The court held that there was no evidence the parties agreed to a fixed two-year term. The vesting schedule did not guarantee continued engagement. The agreement clearly required the plaintiff to still be engaged on each vesting date.
Because the relationship ended before the 12- and 24-month vesting dates, the unvested shares and options were lost. The claim was dismissed.
Key Takeaways for Employees
1. A Vesting Schedule Is Not a Guaranteed Term
Just because equity vests over two or three years does not mean you have a two- or three-year contract. Courts will not infer a fixed term from a vesting schedule alone.
If you want guaranteed compensation for a defined period, the contract must clearly state that it is for a fixed term.
2. Vesting Conditions Are Enforced
If your agreement says equity is conditional on being employed or engaged on the vesting date, that condition will be enforced.
If employment ends before the vesting date, unvested equity will usually be forfeited.
3. Review the Stock Option Plan Terms
Many stock option plans provide that unvested options expire immediately upon termination, whether with or without cause.
Employees should review the actual stock option plan, not just a summary email, before accepting equity compensation.
4. Bring Related Claims Together
The court also raised concerns about “litigating by instalments.” Where multiple claims arise from the same facts, they should generally be brought together. Splitting claims across proceedings can increase cost and risk.
Practical Implications When Negotiating Equity
If equity is a significant part of your compensation, consider:
- Clarifying whether the agreement is fixed-term or indefinite
- Confirming what happens to unvested equity on termination
- Considering vesting acceleration if terminated without cause
- Obtaining and reviewing the full stock option plan
Equity can be valuable, but only if you understand the conditions attached to it.
Bottom Line
Equity compensation is conditional compensation. A 24-month vesting schedule is not the same as a 24-month guaranteed contract.
Unless a fixed term is clearly agreed upon, employees are typically entitled only to what has vested at the time the relationship ends.
This article provides general information and is not legal advice. Every case depends on specific facts.
Speak With an Employment Lawyer
If you were terminated and lost unvested shares or stock options, you may still have legal rights. The outcome depends on the wording of your agreement, the stock option plan, and the circumstances of your termination. Before signing any release or assuming unvested equity is lost, contact Monkhouse Law Employment Lawyers for a free 30 minute phone consultation.