In more detail
What's happening? The Ontario Court of Appeal recently overturned a lower court decision in which the trial judge refused to enforce termination provisions in a Stock Award Agreement, despite the employee's electronic acceptance, because the employee claimed the termination provisions were not specifically brought to his attention. The Court of Appeal disagreed that the employer failed to provide the employee with adequate notice of the termination provisions. Instead, the Court of Appeal held the employee accountable for his decision to accept the terms of the awards for 16 years and to represent that he had read the agreements.
Effective date. The Ontario Court of Appeal released its decision in Battiston v. Microsoft Canada Inc. ("Battiston") on 18 October 2021.
What does it say? When Mr. Battiston was dismissed from Microsoft Canada Inc. and sued for wrongful dismissal, the trial judge concluded that he was entitled to damages equal to the value of restricted stock units (RSUs) that would have been vested in the 24 months following termination. The trial judge came to this conclusion even after deciding that the termination provisions in the Stock Award Agreement unambiguously precluded Mr. Battiston from continuing to vest. The trial judge's decision hinged on his finding that Microsoft had failed to draw the relevant provisions to Mr. Battiston's attention and, therefore, could not seek to enforce them. Microsoft appealed the trial decision, pointing to the express termination provisions of the Stock Award Agreement.
While Microsoft raised several issues in its appeal, the Court of Appeal only addressed the trial judge's conclusion that the termination provisions in the Stock Award Agreement were not enforceable because Mr. Battiston did not receive adequate notice of the termination provisions. The Court of Appeal pointed out that, for 16 years, Mr. Battiston electronically accepted his awards by clicking a box to confirm that he had read, understood, and accepted the terms of the applicable Stock Award Agreement (which included the termination provisions). The email advising Mr. Battiston that he had received a grant also warned employees that their failure to read and accept the Stock Award Agreement could prevent them from receiving shares subject to the award. The Court of Appeal concluded that, by making a conscious decision not to read the agreement, Mr. Battiston misrepresented his acceptance to Microsoft. The Court of Appeal would not allow Mr. Battiston to take advantage of this misrepresentation, and enforced the termination provisions in the Stock Award Agreement.
What should you do? The Court of Appeal's decision should reassure companies that employees who accept award agreements or other award terms can be held to their acceptance and that the issuing company may terminate awards in accordance with the termination provisions included in the award agreement. While it is good practice to bring termination provisions and other key terms to an employee's attention, well-drafted agreements may be able to withstand judicial scrutiny and remain enforceable even without this extra step. It is, however, crucial that the termination provisions be clear and unambiguous. It is uncertain if Mr. Battiston will seek to leave to appeal this decision to the Supreme Court of Canada.
How can we help? We would be happy to review award agreements used in Canada to ensure the termination provisions are clear and unambiguous. Further, we can assist with reviewing the acceptance procedures to determine if they are sufficient to argue that the relevant provisions have been brought to an employee's attention.
