What Happens to Restricted Share Units When Your Job Ends?
If you’re an Ontario employee with Restricted Share Units (RSUs), termination can put a big chunk of your compensation at risk—often right when you can least afford it.
Here’s the uncomfortable truth: what you keep (or lose) is usually decided by the equity plan fine print—and Ontario courts are actively shaping how far employers can go with RSU forfeiture language.
This guide explains, in plain language, what typically happens to Ontario RSUs upon termination, how wrongful dismissal can affect equity compensation, and what the newest cases mean for employees.
What are RSUs, and why do they become a legal issue after termination?
RSUs are a promise to deliver shares (or a cash equivalent) later—usually only if you remain employed through a vesting schedule.
The catch: RSUs are commonly governed by separate documents, such as:
an Equity Incentive Plan
an RSU Award Agreement / Grant Notice
sometimes an offer letter or employment contract that incorporates the plan by reference
When employment ends, the dispute is usually about unvested RSUs or RSUs that were “about to vest.”
The 3 “clocks” that matter for RSUs in Ontario
RSU disputes often come down to competing definitions of “when employment ends”:
Plan “termination date” / “cessation of service”
Many plans define this as your last day actively working.ESA minimum notice period
Ontario’s Employment Standards Act, 2000 sets minimum notice/termination entitlements. You can’t sign away ESA minimums.Ontario’s plain-language guide: Termination of employment (Ontario ESA Guide)
Statute text: Employment Standards Act, 2000 (Ontario)
Common law “reasonable notice” (wrongful dismissal damages)
If your termination clause is unenforceable or you weren’t given proper notice, Ontario common law may require significantly more compensation than the ESA minimum.
Do RSUs have to keep vesting during the ESA notice period?
Not automatically.
In Wigdor v. Facebook Canada Ltd., 2025 ONSC 4861, the court held that RSUs were not treated as “wages” or “benefits” owed during the statutory notice period under the ESA, and it enforced clear forfeiture language in the RSU agreements.
Practical takeaway: if the RSU plan language is clear and enforceable, employers may successfully argue that RSUs stop vesting as of the plan-defined termination date—even if you receive ESA termination pay.
Wrongful dismissal and RSUs: can you claim RSUs that “would have vested” during reasonable notice?
Sometimes—especially where the plan doesn’t clearly and lawfully remove that entitlement.
The Supreme Court of Canada’s decision in Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26 is the key framework. In general terms, courts ask:
But for the wrongful dismissal, would the compensation have been earned during the notice period?
Does the contract clearly and unambiguously remove that entitlement?
And Ontario courts have repeatedly emphasized that vague “active employment” language is often not enough to defeat common-law damages. A frequently cited Ontario Court of Appeal decision is:
Paquette v. TeraGo Networks Inc., 2016 ONCA 618 (CanLII)
NEW: Liggett v. Veeva - why this case matters for Ontario employees with RSUs
The major reason employees should care about Liggett v. Veeva Software Systems, Inc. and Veeva Systems Inc. (Ontario Superior Court, 2025) is that it shows RSU/stock-option forfeiture clauses can fail when they’re drafted in a way that:
conflicts with ESA minimum notice rules, or
is ambiguous, discretion-heavy, or convoluted—so employees can’t clearly understand what they’re giving up.
In Liggett, the court scrutinized plan language that attempted to cut off vesting when the employee was no longer “actively providing services,” and language that tried to prevent vesting from being “extended” by statutory notice or similar periods. The decision (as reported) flagged problems including:
tying forfeiture to a “service termination” concept that can undercut ESA minimum notice;
“actively providing services” wording that echoes the concerns discussed in Matthews; and
employer discretion that adds uncertainty for employees.
Practical takeaway: Even if your employer points to RSU plan language that sounds ironclad, Liggett is a reminder that courts can invalidate equity clauses that are ESA-offside or unclear.
Common RSU termination situations (and what to check first)
1) Your RSUs vested, but haven’t been delivered yet
Look for how the plan defines “vest,” “settlement,” and whether any post-vesting forfeiture applies (often different for “cause” vs “without cause”).
2) RSUs were scheduled to vest soon after termination
This is where wrongful dismissal damages can matter most. Your potential claim often depends on Matthews plus the enforceability/clarity of the plan language.
3) RSUs that would vest far into the future
More difficult—courts usually focus on what would vest within the reasonable notice period, not years ahead.
What to do before you sign a severance package (especially if RSUs are involved)
Don’t sign a release until your equity documents are reviewed. Releases often waive RSU claims.
Collect all documents: employment contract, termination letter, RSU grant notices, plan PDFs, screenshots of vesting schedules.
Ask the employer (in writing) how they are treating your RSUs.
Have a lawyer quantify the RSU value as part of your severance strategy—RSUs are commonly overlooked in employer offers.
For more detail:
Quick tax note: RSUs can trigger employment income when delivered/settled
RSUs commonly result in employment income when shares (or cash) are delivered, and withholding can apply. If your compensation includes stock options as well, tax treatment can differ.
Useful starting points:
(Tax is fact-specific—consider getting tax advice for large equity amounts.)
The bottom line
Ontario RSU disputes are document-driven—but employees are not powerless. Between Matthews, Paquette, Wigdor, and now Liggett, courts are sending a consistent message:
If an employer wants to take away compensation you would have earned during the notice period, the language must be clear, unambiguous, and ESA-compliant.
Book now
If you’ve been terminated and your RSUs are at stake, Vanguard Law can review your severance offer and equity plan documents, explain your options in plain language, and help you pursue the compensation you’re legally entitled to.
This post is for general information only and isn’t legal advice.