A recent decision from Ontario’s Court of Appeal provides a much-needed boost to employers who operate share incentive and stock options plans which have Canadian participants.

In Battiston v. Microsoft Canada Inc. 2021 ONCA 727, the Court allowed an appeal by Microsoft Canada and overturned a trial judge’s finding about how stock option or related share-based awards should be treated upon termination of employment.

For almost 23 years, Fransic Battiston worked for Microsoft Canada. After he was terminated without cause, he sued the company for wrongful dismissal.

The trial judge found that Mr. Battiston was entitled to 24 months pay in lieu of notice, based on all elements of compensation.

The appeal by Microsoft Canada was only with respect to the trial judge’s conclusion that that Mr. Battiston was entitled to unvested stock awards after his termination.

In their appeal, Microsoft Canada relied upon the express wording in the relevant Stock Award Agreement, which provided that any unvested stock awards do not vest to an employee if employment ends for any reason. This type of wording is quite common in share and stock plans, and it would be reasonable to say that the relevant wording was aligned with standard provisions seen around the world in a wide range of industries and setting.

The trial judge found that the termination provisions on the Stock Award Agreement were not brought to Mr. Battiston’s attention and could not be enforced because they were harsh and oppressive.

The appeal by Microsoft Canada relied upon a number of arguments, including that the terms of the Agreement were brought to the attention of all plan participants, including Mr. Battiston.

Each year that he was granted relevant stock awards, Mr. Battiston received an email as follows:

Congratulations on our recent stock award! To accept this stock award, please go to My Rewards and complete the online acceptance process. A record will be save indicating that you have read, understood and accepted the stock award agreement and the accompanying Plan documents. Please note that a 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.

(Emphasis added.)

For 16 years, Mr. Battiston confirmed that he received these emails. The Court of Appeal found that his practice was to click a box to confirm that he had read, understood and accepted the Agreement.

When faced with this evidence at trial, the response from Mr. Battiston was that he did not read the agreement and thus did not know about the termination provisions. He claimed that he thought he would get the unvested stock if his employment was terminated.

The reasons of the trial judge included a finding that the email communications from Microsoft did not amount to “reasonable measures” to draw the termination provisions to the attention of a Plan participant.

In allowing the appeal by Microsoft Canada, the Court of Appeal held that this finding could not stand. This was based on the following rationale:

1. There was not dispute that, for 16 years, Mr. Battiston had expressly agreed to the terms of the Agreement by clicking the relevant box.

2. The alleged ignorance about the termination provisions was based on what was described as a conscious decision to not read the Agreement.

3. The decision to not read the Agreement was despite clicking a box indicating that the Agreement had been read and was understood and agreed to.

When taken together, the Court of Appeal found that the Plan member was attempting, through either not reading the Agreement or saying he had not, to put himself in a better position than someone who had read the document.

Takeaway for Employers

This decision provides some welcome respite from the flurry of pro-employee decisions which have emerged from the courts in recent years. The core contractual concept of acceptance of a clear offer remains relevant, and there can be cases where the court’s analysis will be fairly close to finding that “a deal is a deal”. When individuals are provided with clear documents or information, and then proceed to confirm that they accept the terms offered, there may be little or no scope for attempting to claim that those documents are not relevant. If a party obtains the benefits associated with a contract or Plan, then there may also be associated limits and obligations set out in that same Plan. If this approach is consistently followed, this may help to both moderate damages awards in termination cases, and encourage more widespread adoption of share-based compensation plans.