Matthews TestActive EmploymentVestingChange of Control
Plan Wording | Notice Period Entitlement | Unvested Awards | Releases
The two questions that decide it.
Would the award have been received during the reasonable notice period.
Does the plan language unambiguously remove that entitlement.
Wording requiring active employment has frequently been held insufficient.
A signed release ordinarily extinguishes the claim entirely.
Quick Answer
Do I lose my bonus and equity if I am dismissed in Ontario?
Not necessarily. In Matthews v Ocean Nutrition Canada Ltd., the Supreme Court of Canada set out a two part approach: whether the employee would have been entitled to the bonus or award as part of their compensation during the reasonable notice period, and whether the terms of the plan unambiguously remove or limit that common law entitlement. Language merely requiring an employee to be actively employed on a payment date has frequently been found insufficient to remove the entitlement, because a wrongfully dismissed employee would have been actively employed but for the breach.
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THE TEST
Two Questions, In Order
The starting point is that damages for wrongful dismissal put the employee in the position they would have occupied had proper notice been given. If a bonus or an equity award would have been received during that notice period, it forms part of the loss.
The Supreme Court in Matthews v Ocean Nutrition Canada Ltd. framed it as two questions. First, would the employee have been entitled to the bonus or award as part of their compensation during the reasonable notice period. Second, do the terms of the plan unambiguously remove or limit that common law right.
The order matters. Employers frequently argue the second question first, pointing to plan wording, without engaging with whether the entitlement existed at all. Establishing the entitlement is what puts the burden on the plan language to take it away.
ACTIVE EMPLOYMENT CLAUSES
The Wording That Usually Does Not Work
The most common exclusion requires the employee to be actively employed on the date of payment or vesting. On its face that appears decisive. In practice it has repeatedly been held insufficient, on the reasoning that an employee dismissed without proper notice would have been actively employed had the employer met its obligation.
To remove the entitlement the language generally needs to address the situation directly and unambiguously, including what happens on termination without cause and during any notice period, rather than relying on a general active employment condition.
This is fact specific and it turns on the exact words used. Two plans that read similarly to a non lawyer can produce opposite results, which is why the plan documents matter more here than almost anywhere else in an employment file.
EQUITY AND CHANGE OF CONTROL
Options, Units and Timing
Stock options and restricted share units raise the same questions with additional layers. Awards that would have vested during the notice period are the clearest claim. Awards vesting later require a closer look at what the plan says about termination.
Change of control provisions frequently interact with a dismissal, because senior departures often follow a transaction. Where a plan accelerates vesting on a change of control, the sequence of events and the definition used can be worth a substantial sum, and it repays reading carefully rather than assuming.
Blackout periods and insider trading restrictions can also affect what a departing executive is practically able to do with awards, and any settlement should address the mechanics rather than only the entitlement.
HOW WE WORK
What to Bring, and What to Expect
Bring the bonus plan and every equity plan document, the grant agreements, your award history, and the employment agreement that refers to them. Bring the offer and release as received, and do not sign it.
Expect the analysis to start with the plan wording rather than with the amount. Whether these claims survive is a question of construction, and it determines what the negotiation is actually about.
Expect a view on proportionality. Where the disputed amount is modest and the plan wording is genuinely tight, that is worth knowing early. Where the variable compensation dwarfs the salary, which at senior level is common, it usually justifies close attention.
Common Questions
Frequently Asked Questions
Do I lose my bonus if I am dismissed?
Not necessarily. Under the approach in Matthews v Ocean Nutrition Canada Ltd. the questions are whether you would have received it during the reasonable notice period and whether the plan unambiguously removes that entitlement.
My plan says I must be actively employed. Is that the end of it?
Often not. Such wording has frequently been held insufficient, because a wrongfully dismissed employee would have been actively employed but for the employer breach. It depends on the exact language.
What about unvested stock options and RSUs?
Awards that would have vested during the notice period are the clearest claim. Awards vesting later depend on what the plan says about termination, and any change of control provision may be relevant.
Does signing the release affect this?
Yes. A release ordinarily extinguishes these claims along with everything else, which is why the plan documents should be assessed before anything is signed.
How long is the notice period for this purpose?
The same reasonable notice period assessed on the Bardal factors. The longer the notice period, the more awards fall within it.
Start My Enquiry
Bonus and Equity on Termination | Ontario | Lexaltico LLP
Our lawyers assess variable compensation claims before a release is signed. Call, email, or arrange a consultation. Bring your plan documents and grant history.
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Senior and executive employment
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Where we refer a matter to another firm, including through LexKonnect, we comply with Rule 3.6-6.1 of the Law Society of Ontario’s Rules of Professional Conduct. Any referral fee is set out in the Law Society’s standard referral agreement, signed by you before the referral proceeds, and no fee is payable to us unless and until the receiving firm has been paid for its work. You are never obliged to accept a referral and are free to retain any firm you choose. No referral arrangement affects the independent professional judgment of any lawyer at this firm.
Limitation Periods
Failure to commence proceedings within applicable limitation periods may permanently bar your claim. In Ontario, the general limitation period is two (2) years from discovery under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. Seek legal advice promptly.
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Do not send confidential or sensitive information through this website or by email until we have
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We aim to reply within 2 business days. Contacting us does not guarantee a reply within any
particular period, does not oblige the firm to act, and does not stop, extend or satisfy
any limitation period, filing date or court deadline.
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Our line is answered 24 hours a day, every day of the year. Outside office hours calls are taken
by our intake service, who record your details and pass them to the firm. A lawyer responds during
the next business day, or sooner if the matter is urgent. Answering the telephone is not the same
as giving legal advice, and no relationship arises from that call.
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Law Society of Ontario
Lexaltico LLP is regulated by the Law Society of Ontario under the
Law Society Act, R.S.O. 1990, c. L.8. All lawyers practising in
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Immigration consulting is provided by Regulated Canadian Immigration Consultants
in good standing with the College of Immigration and Citizenship Consultants under the
College of Immigration and Citizenship Consultants Act, S.C. 2019, c. 29,
s. 292.
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Not everyone at the firm is a lawyer.
Licensed paralegals in Ontario may act only within the scope the Law Society
permits, which does not include most family, estate or criminal matters.
Immigration consultants are regulated by the College, not by a law society,
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We serve clients in thirteen languages. Every page of this website is written and published in
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you book and we will arrange one.
Fees
The initial assessment
The no-obligation initial assessment is a brief introductory
conversation. It does not include a review of your documents and does not constitute
legal advice.
The firm charges a fee for substantive consultations, including in civil litigation,
criminal defence and immigration matters. The firm may waive that fee at its discretion.
Any fee is disclosed in advance and credited in full toward your account if you retain the
firm.
Referral fees
Where we refer a matter to another firm, including through LexKonnect, we comply with Rule 3.6-6.1 of the Law Society of Ontario’s Rules of Professional Conduct. Any referral fee is set out in the Law Society’s standard referral agreement, signed by you before the referral proceeds, and no fee is payable to us unless and until the receiving firm has been paid for its work. You are never obliged to accept a referral and are free to retain any firm you choose. No referral arrangement affects the independent professional judgment of any lawyer at this firm.
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Calculators and estimators
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account for the terms of your contract, statutory exceptions, or the discretion a court will
apply. Do not make a decision on a number produced by a calculator.
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under the law as it stood at the time. Past results do not predict or guarantee the result of any
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describes one person’s experience of one matter. They are not a promise, a
prediction or a guarantee about any other matter.
Links to other websites
This site links to regulators, courts, government sources, professional associations and social
platforms, all operated by others. We do not control them, we are not responsible for
their content or accuracy, and a link is not an endorsement.
Other notices
Limitation periods
Failure to start a proceeding within the applicable limitation period may permanently bar
your claim. In Ontario the general period is two years from discovery
under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.
Shorter periods apply to many claims. Seek advice promptly. Nothing on this website extends a
limitation period.
Accessibility
We aim to meet the Accessibility for Ontarians with Disabilities Act
and WCAG 2.1 Level AA. If any part of this site prevents you from reaching us, telephone
+1 416 333 6200 or write to
hello@lexaltico.com and we will provide the information
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