In a welcome decision for employers, the Supreme Court of Canada recently denied leave to appealof the Ontario Court of Appeal's decision in Battiston v. Microsoft Canada Inc., 2021 ONCA 727 ("Battiston").
The Court of Appeal decision in Battiston upheld the notice of termination provisions in a stock award agreement, by overruling a Superior Court decision finding that the employer had not provided adequate notice of such provisions to the employee, rendering them unenforceable.
We discussed the Battiston decision in detail on this blog in 2021, and have provided a brief overview of below, along with a reminder of key takeaways.
Battiston involved a 23-year employee of Microsoft who was terminated without cause. The employee had participated in Microsoft's stock award program for a period of 16 years, pursuant to the terms of governing stock award agreements.
The stock award agreements provided that any unvested stock awards would not vest in the event of termination of employment for any reason. Each year, the employee was provided with an email notification of the stock awards. On receipt of the notification, he was asked to click a box confirming that he had read, understood, and accepted the stock award agreement. Notably, the email notifications contained the following language (or similar):
Congratulations on your recent stock award! To accept this stock award, please go to My Rewards and complete the online acceptance process. A record will be saved indicating that you have read, understood and accepted the stock award agreement and the accompanying Plan documents. Please note that failure to read and accept the stock award and the Plan documents may prevent you from receiving shares from this stock award in the future.
Consistent with the termination provisions in the award agreements, on termination of the employee's employment, Microsoft took the position that the employee was not entitled to the vesting of any granted but unvested stock awards. The employee commenced a claim for wrongful dismissal, arguing (among other things) that the termination provisions in the award agreements were unenforceable and that he had continued entitlements to the vesting of his stock awards.
The Ontario Superior Court made two key findings. First, it found that the termination provisions in the stock award agreement unambiguously excluded the employee's rights to unvested stock awards during his reasonable notice period. Second, it agreed with the employee that the employer, by way of its email notifications, had failed to sufficiently draw these "harsh" and "oppressive" terms to the employee's attention such that the employer could not rely on the termination provisions. As a result of these findings, the Superior Court found that the employee was entitled to continued vesting of his stock option awards throughout his 24-month reasonable notice period.
The above decision was overruled by the Ontario Court of Appeal, which disagreed that the employee received insufficient notice of the termination provisions in the stock award agreements. In this regard, the Court of Appeal took into account that the employee (i) expressly agreed to the terms of the agreement for 16 years, (ii) made the decision to not read the agreements despite confirming electronically that he had done so, and (iii) had put himself in a better position than an employee who did not misrepresent their assent to the agreement.
Impact & Action
As we noted in our previous blog article, Battiston does not change that (i) termination provisions must be clear and unambiguous in order to be enforceable, and (ii) an employer must provide notice of such terms to its employees.
The Battiston line of cases also provide some guidelines for employers as to the type of notice that would be sufficient for drawing onerous terms to an employee's attention and related best practices in this regard. In particular, we note:
- Employers should ensure that their incentive plans and award agreements are well-drafted and contain up to date language, particularly in respect of onerous terms such as termination provisions;
- Employers should ensure that employees are provided with and have the opportunity to review all relevant plans and award agreements and to this end, employers should understand the process by which awards are delivered to employees (particularly where electronic platforms are used);
- Employers should consider having employees initial (or electronically click to accept) relevant sections of incentive plans and/or agreements; and
- Employers should consider providing FAQs about the relevant plans and/or offering information sessions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.