No right to unvested stock after failure to read employment contract: Court of Appeal

Battiston v. Microsoft Canada Inc.

The recent Ontario Court of Appeal decision in Battiston v. Microsoft Canada Inc. overturned the trial judge’s decision and provided some helpful insights as to what constitutes an adequate termination clause in stock option agreements and other stock awards.

Please note that the plaintiff in Battiston is currently seeking to appeal his case before the Supreme Court of Canada.

Facts

• Mr. Battiston was terminated without cause from Microsoft after almost 23 years of service.
• He brought an action for wrongful dismissal, which included a claim for damages for all stock awards that were scheduled to vest during the common law reasonable notice period.
• When provided the stock awards, Mr. Battiston had to execute The Stock Award Agreement which expressly provided that, if the award holders’ employment was terminated for any reason, their stock awards would cease to vest as of the date of termination and the vesting period would not be extended by any notice period.
• The Superior Court of Justice found that Microsoft failed to provide an adequate notice of termination provision in a stock award agreement.
• The court determined that Battiston was entitled to receive continued vesting of his stock option awards throughout his 24-month reasonable notice period.
• Microsoft appealed the Superior Court’s decision

Court Decision

The Ontario Court of Appeal overturned the lower court’s decision. The panel found that the trial judge erred in finding that the employee did not receive sufficient notice of the termination provision. The court record reads that:

• For 16 years Battiston expressly agreed to the terms of the agreement;
• Battiston made a conscious decision not to read the agreement despite indicating that he did read it by clicking the box confirming such; and
• By Battiston misrepresenting his assent to his employer, he put himself in a better position than an employee who did not misrepresent, thereby taking advantage of his own wrong.

Lessons for Employees

• Fully understand your written agreement: It is the employee’s responsibility to fully read and comprehend a written agreement with their employer before they enter into it. If an employer or potential employer requests that an employee enters into a written contract, the individual should have that agreement reviewed by an experienced employment lawyer at Samfiru Tumarkin LLP before signing, as these documents can have implications regarding their severance package when if they lose their job in the future.

Lessons for Employers

• Termination clauses must be clear: These provisions in an employment contract must be detailed and unambiguous in order to be enforceable.

• Make employees aware of terms of an incentive plan: An employer must provide notice of such terms to its employees, but it does provide some guidance from the court of appeal as to what will be sufficient notice and how incentive compensation plans or stock awards can be limited in entitlements for the notice period.