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ONCA Overturns Decision Granting Vesting of Stocks during Common Law Notice Period

Last year, we blogged on a particularly frustrating decision of the Ontario Superior Court which held that the otherwise legally enforceable termination provisions of a Stock Award Agreement could not be enforced as the employer did not specifically bring them to the employee’s attention.

In Battiston v Microsoft Canada Inc., the plaintiff was a long-service employee of Microsoft who, in addition to his base salary, received benefits including stock awards, amounting to approximately 30% of his annual compensation. At trial, the plaintiff took the position that he was entitled to have previously granted stock awards vest during the notice period on the basis that he did not read the Stock Award Agreement and the termination provisions had not been brought to his attention by Microsoft.

The trial judge found that the Stock Award Agreement unambiguously excluded the respondent’s right to vest his stock awards after he has been terminated without cause. However, he also found that the terms are unenforceable because they are harsh and oppressive and because the respondent was not given notice – despite the fact that the evidence at trial was that the plaintiff had electronically clicked a box confirming he read and agreed to the terms of the Stock Award Agreement each year of his employment. 

On appeal, the court found that the trial judge’s conclusion that the notice provisions were not brought to the respondent’s attention failed to address the following facts:

1. For 16 years the employee expressly agreed to the terms of the agreement.
2. The employee made a conscious decision not to read the agreement despite indicating that he did read it by clicking the box confirming such.
3. By misrepresenting his assent to the appellant, the employee put himself in a better position than an employee who did not misrepresent, thereby taking advantage of his own wrong.

In light of the above, the court rejected the trial judge’s finding that the employee had not received notice of the termination provisions.

While this decision is a welcome one for employers, as a best practice, any contractual terms that are disadvantageous to an employee – for example, termination provisions – should be specifically brought to their attention before the agreement is entered into.  CCPartners can assist in reviewing, updating and drafting employment contracts. Click HERE for a list of our team members who can help you with your employment needs.

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