Appellate Court Finds Sufficient Notice Provided for Termination Provisions in Stock Award Agreement

In a welcome decision for employers, the Ontario Court of Appeal found in Battiston v. Microsoft Canada Inc. that a former employee who provided online acknowledgement of having read, understood and accepted the provisions of a stock award agreement via email, including the disputed termination provisions, had been given sufficient notice of those terms to make the termination provisions enforceable.

Factual Background

Mr. Battiston had been employed by Microsoft Canada Inc. for almost 23 years until he was terminated, without cause, in August of 2018. Battiston brought an action for wrongful dismissal claiming an entitlement to all compensation, including compensation under the stock award agreement, until the end of the reasonable notice period.

One of the issues at trial was whether Mr. Battiston was entitled to unvested stock award bonuses that would have vested during the notice period. Stock awards were communicated to Microsoft employees, including Battiston, in an email that required the employee to accept the award by confirming that they had reviewed and accepted the terms of the stock award agreement and the accompanying Plan documents, which provided that any unvested stock awards do not vest to an employee if employment ends for any reason.

Microsoft presented records showing that Battiston had accepted the stock awards online for several years prior to his termination. However, Battiston testified that he did not read the lengthy Stock Award Agreement, nor did Microsoft ever draw his attention to the termination provisions affecting his unvested stock awards in the event he was terminated without cause.

Although the trial judge found that “the Stock Award Agreement unambiguously exclude[d] Battison’s right to vest his stock awards after he had been terminated without cause, he held that the termination provisions in the Agreement were not drawn to Battiston’s attention and could not be enforced because they were harsh and oppressive

The Court of Appeal’s Analysis of Employee Notification of Agreement Provisions

The only issue on appeal was the trial judge’s conclusion that Battiston was entitled to unvested stock awards after his termination. The Court of Appeal allowed the appeal, on the basis that the trial judge’s finding that Battiston did not received sufficient notice of the termination provisions overlooked the following facts:

1. For 16 years, Battiston expressly agreed to the terms of the stock award agreement.
2. Battiston testified that he made a conscious decision not to read the agreement despite indicating that he had read it by clicking the box confirming same.
3. By misrepresenting his assent to Microsoft, Battiston put himself in a better position than an employee who did not misrepresent, thereby taking advantage of his own wrong.

Conclusion

It is not yet known whether Battiston intends to appeal the Court of Appeal’s decision to the Supreme Court.

The Court of Appeal’s decision in Battison is good news for employers who provide incentive compensation to their employees. However, it remains best practice for employers to specifically bring the termination provisions of any incentive plan to employees’ attention and to have employees acknowledge those terms. Of course, even if they are brought to the employee’s attention, termination provisions must unambiguously limit employees’ rights during any common law notice period in order to be enforceable.

For advice specific to your situation, consider contacting your regular lawyer at Rae Christen Jeffries LLP.