Overview
In Liggett v. Veeva Software Systems, Inc., the Ontario Superior Court of Justice addressed the enforceability of termination clauses, the appropriate common law notice period, and an employee’s entitlement to stock-based compensation following termination.
The Court found that the termination provision in Kevin Liggett’s employment contract was unenforceable because it provided for dismissal “for cause” in terms broader than permitted under the Employment Standards Act, 2000 (ESA). As a result, Mr. Liggett was entitled to common law reasonable notice rather than the limited notice outlined in his contract.
Applying the Bardal factors, the Court awarded Mr. Liggett a six-month notice period, along with compensation for lost benefits valued at $7,500. Most importantly, the Court also ruled that Mr. Liggett was entitled to Restricted Stock Units (RSUs) and stock options that would have vested during the notice period, awarding $90,672.48 based on his historical selling pattern rather than the value at termination.
Of significant importance in this case was the ruling that the Veeva’s RSU plan, which purported to restrict Mr. Liggett’s rights to unvested RSUs, was void and unenforceable as it violated the minimum provisions of the ESA.
This ruling not only reinforces key principles in wrongful dismissal law, and consequences of ESA-noncompliant termination clauses but more importantly, it sets a new precedent on the treatment of equity-based compensation during the notice period. By allowing the RSUs value to be calculated based on selling patterns versus termination value, the courts have signaled that the value of the RSU is dependent on the case’s circumstances.
Background
Kevin Liggett was employed as a Senior Product Manager at Veeva Software Systems for over four and a half years, earning a base salary of $150,000, supplemented by RSUs, stock options, and group benefits.
On March 5, 2021, Veeva terminated Mr. Liggett’s employment, offering only eight weeks of notice, less than his contractual entitlement of 12 weeks. Mr. Liggett did not accept the offer, and Veeva ceased payments on March 24, 2021.
After leaving Veeva, Mr. Liggett secured new employment in June 2021, three months later, though his new role did not provide comparable benefits or RRSP contributions.
Key Legal Issues
The court was asked to resolve several important questions, including:
- Was the termination clause in Mr. Liggett’s employment contract void because it provided for dismissal for cause in terms contrary to the Employment Standards Act, 2000 (ESA)?
- If the clause was void, what common law notice period was Mr. Liggett entitled to?
- What was the quantum of damages, including salary, benefits, RSUs, and stock options?
- Was Mr. Liggett entitled to RSUs and stock options that would have vested during the notice period?
- How should the stock options and RSUs be valued: at termination or based on his usual selling pattern?
Case Details
Plaintiff’s Position (Mr. Liggett):
- The termination clause in his employment contract was broader than ESA standards and therefore unenforceable, entitling him to common law notice.
- As a Senior Product Manager with significant responsibilities, Mr. Liggett argued for a longer notice period based on his role, expertise, and mid-career status.
- He claimed six months of notice, along with salary, benefits, RSUs, and stock options during the notice period.
- Proposed that the vesting and sale patterns of his RSUs and stock options reflect his normal behavior to calculate damages accurately.
Defendant’s Position (Veeva):
- Claimed Mr. Liggett’s notice should be four to five months.
- Argued he was not entitled to RSUs or stock options because the contracts unambiguously removed such entitlements upon termination.
- Suggested that all stock-based compensation be valued at the termination date.
Legal Considerations:
- The court applied the Bardal factors (character of employment, length of service, age, and availability of similar employment) to determine the appropriate notice period.
- The court also relied on Matthews v. Ocean Nutrition Canada Ltd., which confirmed that employees are entitled to bonuses, RSUs, and stock options vesting during the notice period unless clearly and unambiguously removed by contract.
- Notably, the court found that Veeva’s RSU plan deprived Mr. Liggett of a right to any RSUs that vested after termination, even those that would have vested within his minimum statutory notice period. The court ruled that this provision violated and the ESA and therefore voided the whole restrictive provision.
- The court’s reasoning was that RSUs constituted a form of wages, which cannot be altered during a period of statutory notice. This is in direct contrast to case of Wigdor v Facebook Canada Ltd. and Meta Platforms, Inc., 2025 ONSC 4051 from July 2025
Results
After a detailed review, the court ruled in favour of Mr. Liggett:
- Notice Period: Six months, reflecting the character of his senior role and mid-career status.
- Salary Damages: Calculated based on his base salary for the six-month notice period, adjusted for earnings from new employment.
- Benefits: $7,500, based on 10% of his base salary.
- Stock Options & RSUs: $90,672.48, representing the value of the stock awards that would have vested during the notice period.
- Pre-Judgment Interest: To be calculated based on the notice period, benefits, and stock compensation, reflecting appropriate timelines for vesting and sales.
