In L. v. Veeva Software Systems, Inc. and Veeva Systems Inc, the Ontario Superior Court of Justice confirmed that employees may be entitled to stock options and restricted stock units (RSUs) that vest during the reasonable notice period following termination. The decision is particularly relevant for employees whose compensation includes equity, which is common in the technology sector.
The court reinforced an important principle: employers cannot rely on unclear or overly complex contractual language to deprive employees of compensation they would have received during the notice period. Where the wording is ambiguous or inconsistent with the Employment Standards Act, 2000, it will generally be interpreted in favour of the employee.
What Happened
The employee worked as a Senior Product Manager for approximately four and a half years and earned a base salary of $150,000. A substantial portion of his compensation came from stock options and RSUs, with his stock options alone previously valued at around $100,000.
He was terminated in March 2021 and offered eight weeks of notice, which he declined. The employer then stopped paying him altogether, despite the fact that his employment contract actually provided for more notice than what was offered. The employee later secured new employment within three months, although the new position did not include comparable benefits.
Termination Clause Was Not Enforceable
A key issue in the case was whether the termination clause in the employment contract was valid. The contract included a “just cause” provision that extended beyond what is permitted under the Employment Standards Act, 2000.
Because of this, the court found that the termination provisions were unenforceable. As a result, the employee was entitled to common law reasonable notice rather than the limited notice set out in the contract. This significantly increased the compensation owed.
Reasonable Notice Period
The court awarded six months of reasonable notice. In reaching this conclusion, it considered the employee’s role, age, length of service, and the availability of comparable employment. Although the employee was not in the most senior position, his role was specialized and carried meaningful responsibility.
The court did not place weight on broader economic conditions without supporting evidence and instead applied the traditional factors used to assess reasonable notice.
Stock Options and RSUs During the Notice Period
The central issue in the case was whether the employee was entitled to stock options and RSUs that would have vested during the notice period.
The court applied the framework from Matthews v. Ocean Nutrition Canada Ltd. First, it considered whether the employee would have received the compensation “but for” the termination. Second, it examined whether the contract clearly and unambiguously removed that entitlement.
The court found that the employee would have received the equity shortly after termination if he had remained employed during the notice period. It then turned to the wording of the stock plan documents.
Why the Employer’s Language Failed
The employer relied on provisions stating that equity would stop vesting once the employee was no longer “actively providing services.” However, the court found that this type of language was not sufficient to remove the employee’s entitlement.
During the notice period, employees are legally treated as if they remain employed. As a result, clauses that attempt to tie compensation strictly to “active” employment will not necessarily defeat a claim.
The court also found that the language in the agreements was ambiguous and difficult to follow. Some provisions conflicted with minimum statutory standards, while others granted broad discretion without clear limits. Taken together, this lack of clarity meant the provisions could not be relied on to deny the employee’s equity compensation.
How the Court Valued the Equity
Rather than using the value of the stock on the termination date, the court considered how the employee would have actually received and sold the equity if he had remained employed.
Based on the evidence, the employee had an established pattern of selling his holdings over time. The court applied this same pattern to determine the appropriate valuation, resulting in a significant award for lost stock options and RSUs.
Other Compensation
In addition to the equity award, the court granted six months of salary, subject to mitigation income earned from new employment, as well as compensation for lost benefits. The court declined to award additional out-of-pocket medical expenses, finding that doing so would amount to double recovery.
Key Takeaways for Employees
This decision confirms that stock options, RSUs, and other forms of incentive compensation may continue through the notice period following termination. Employees should not assume that these entitlements automatically end on their last working day.
Employers who wish to limit these rights must use clear, precise, and legally compliant language. Where the wording is ambiguous or inconsistent with employment standards legislation, courts will typically interpret it in favour of employees.
If you have been terminated and your compensation includes equity, it is important to review your severance package carefully. These amounts can be significant and are often overlooked in initial offers.
Contact Monkhouse Law Employment Lawyers
If you have been terminated and your compensation includes stock options, RSUs, or other incentive pay, it is important to ensure these amounts have been properly accounted for in your severance package.
Employers do not always include equity compensation in initial offers, even where it may be owed during the notice period. Once a severance agreement is signed, you may lose the ability to claim additional compensation.
Monkhouse Law Employment Lawyers represent non-unionized employees and can review your severance package to determine whether you are being paid what you are legally entitled to. Contact us today for a free 30-minute phone consultation.