Case In Point
Ontario Superior Court Awards Damages for Equity Incentive Compensation Vesting After Notice Period
Date: July 8, 2026
In Khatib v. GoEasy Ltd, 2026 ONSC 3513, the Ontario Superior Court of Justice awarded a terminated executive damages, on a pro rata basis, in respect of equity awards that would not have vested within the reasonable notice period. If upheld on appeal, the decision could broaden damages exposure for equity-based compensation. The decision also highlights the risk of relying on unclear or improperly implemented forfeiture provisions.
Background
The plaintiff began employment with GoEasy Ltd. (GoEasy) a financial services company based in Mississauga, Ontario, as a Senior Vice-President on May 16, 2016, after being approached by its executive recruiter while he was employed elsewhere. He was dismissed without cause on October 21, 2019, after approximately three and a half years of service. His employment agreement (EA) provided for a base salary, participation in GoEasy’s Short-Term Incentive Plan (STIP) with an annual target of 40% of base salary, and participation in its Long-Term Incentive Plan (LTIP), with annual grants valued at 40% of his base salary, plus an initial off-cycle equity grant.
Plaintiff’s Position
The plaintiff alleged that GoEasy induced him to leave his previous employer and sought damages based on a 12-month notice period. He claimed wrongful dismissal damages, including compensation for loss of benefits, STIP payments (including pro rata compensation through the notice period), LTIP entitlements, a tax gross-up, and bad faith, punitive and/or moral damages.
Decision
Notice Period
The Court rejected the plaintiff’s inducement argument and awarded eight months’ reasonable notice. The Court relied largely on the character of the plaintiff’s employment, noting his fiduciary responsibilities and important role within the company, while recognizing that he was not among the company’s most senior leaders.
STIP Entitlements
The Court held that the plaintiff’s STIP compensation formed an integral part of his remuneration and that no contractual terms ousted his entitlement to STIP damages during the notice period. Notably, there was no evidence that the plaintiff had received the applicable STIP plan documents. As a result, GoEasy could not rely upon forfeiture provisions contained in those documents.
The Court awarded STIP damages on a pro rata basis through the notice period, finding that “the EA between the parties does not prohibit pro-rata bonuses.”
LTIP Entitlements
During his employment, the plaintiff received seven LTIP grants. All but two would have vested after the expiry of the eight-month notice period.
Although the plaintiff’s EA provided for annual grants equivalent to 40% of his base salary, vesting after three years, each grant was governed by a separate agreement. The Court found those agreements applicable notwithstanding inconsistencies with the EA. The agreements provided for forfeiture of unvested units on the participant’s “Termination Date,” a term that was not defined in any of the parties’ contractual documents. The Court found this ambiguity had to be resolved in the plaintiff’s favour and awarded damages in lieu of LTIP units that would have vested within the reasonable notice period on this basis.
The Court then went on to hold that the plaintiff was also entitled to pro rata damages for the five equity grants with vesting dates beyond the notice period. The Court directed the parties to calculate damages for the value of the unvested grants on a pro rata basis using a methodology tied to the share price on the last day of the notice period, the applicable performance factors, and percentage of the total vesting period that had elapsed from the applicable grant date to the conclusion of the eight-month notice period.
The Court’s reasoning was based on (a) the unenforceability of the LTIP termination provisions (presumably based on the undefined “Termination Date”); (b) evidence that other employees had received pro rata vesting following termination; and (c) the absence of language in the EA addressing the treatment of LTIP grants, including unvested units, on termination.
Key Takeaways for Employers
This decision departs from established jurisprudence limiting damages for unvested equity compensation to awards that would have vested within the reasonable notice period. If upheld on appeal, it could support damages for compensation that would never have vested during an employee’s notice period.
The decision also highlights two distinct risks for employers relying on forfeiture provisions:
- the applicable contractual or plan documents may not have been properly provided to the employee, preventing them from becoming binding contractual terms; and
- even where the documents were provided to the employee, the provisions may be unclear or otherwise flawed, rendering them unable to withstand scrutiny.
We understand that this decision is under appeal and will continue to monitor developments.
If you have any questions or require more information, please contact your Hicks Morley lawyer.
The author thanks Shivohum Nar, a 2026 summer student, for his assistance with this article.
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