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Offering employee stocks or share options? Employers need to put terms, conditions in writing

December 4, 2023
By John Hyde

Toronto Stock ExchangeThe Toronto Stock Exchange on Bay Street. Photo: pictore/Getty Images

A recent Ontario Court of Appeal ruling, Maynard v Johnson Controls Canada LP, is an important reminder to employers that they need to provide employees with the written terms and conditions of employee stocks or share options.

This includes bringing employee’s attention to any provisions, such as forfeiture provisions, that may impact what the employee is entitled to upon termination.


John Maynard had been employed by Johnson Controls Canada LP for about 14 years. Maynard’s compensation included a base salary of $203,000, benefits, and an incentive plan that provided him with restricted stock units (RSUs). The value of the RSUs received each year constituted a significant portion of his compensation package.

The RSUs were governed by a “Share and Incentive Plan” which included forfeiture provisions that automatically forfeited the RSUs upon termination of employment.


The employment contract included a termination provision that stated Maynard would receive his minimum statutory entitlements. It also stated that, if he signed a release acceptable to Johnson, he would get an additional lump sum payment based on his “salary.”

Upon Maynard’s termination, Johnson calculated the termination amounts using his base salary only, and did not account for the value of the RSUs. Maynard refused to sign the release and began litigation.

The Ontario Superior Court (ONSC) decision

The first question before the ONSC was whether Johnson was permitted, pursuant to the plan and employment contract, to exclude the value of the RSUs from the calculation of termination pay.

The ONSC found that Maynard never received a copy of the plan, nor had the forfeiture provisions been brought to his attention. As such, the plan (and forfeiture provisions) did not form a part of the employment contract and Johnson could not rely on them to exclude the RSUs from the calculation of the termination amounts. Further, the employment contract itself did not clearly exclude the RSUs from the calculation. As such, the court determined that the RSUs were to be a part of the termination pay calculation.

The second question was whether Maynard had forfeited his entitlement to the additional termination amount by refusing to sign the release.

The ONSC stated that it would be “unfair and unreasonable” to find that Mr. Maynard’s refusal to sign the release disentitled him from the additional payment given that signing the release would have prevented Mr. Maynard from challenging Johnson’s miscalculation of the additional amount.

The ONSC awarded Mr. Maynard an additional 56 weeks of pay, which included the value of the RSUs and the value of his benefits. This amounted to $427,891.18.

The Ontario Court of Appeal (ONCA) decision

Johnson appealed the ONSC decision, arguing that the employment contract limited Maynard to statutory minimums, and it was not open to the ONSC judge to interpret the employment contract.

The ONCA disagreed, again noting that the plan (and the forfeiture provisions) had not been brought to Maynard’s attention, and as such, it was open to the ONSC judge to determine that the calculation of Maynard’s termination entitlement included the RSUs.

The ONCA also noted that nothing in the employment agreement permitted Johnson to impose an arbitrary deadline by which Maynard had to sign the release. Nor did the employment agreement permit the miscalculation.

As such, Johnson could not rely on the release requirement in the employment contract to force Maynard to sign a release that had been miscalculated.

The ONCA upheld the ONSC’s award, dismissed the appeal, and awarded $32,000 in costs payable by Johnson to Mr. Maynard.

Lessons for employers

This case is a reminder to employers of the importance of bringing the terms and conditions of any employee share or stock options plan, including forfeiture provisions, to the attention of the employees. It would be good practice to have documentation confirming this was done.

This case is also a caution that the court may not enforce employment contract terms if the results of such enforcement would be “unfair and unreasonable.” For example, in this case, the court did not enforce the release requirement clause, because its enforcement would create a “Catch-22” situation for the employee: if he had signed the release to receive the additional termination pay, he would not have been able to pursue Johnson for the correct amount, but, if the release requirement was enforced, the failure to sign the release also forfeited that amount.

Finally, it is important for employers to note the Court’s comment that nothing in the employment contract permitted the employer to impose an arbitrary deadline for the employee to sign the release to receive the additional termination pay. As such, employers need to be cautious about imposing such deadlines, or need to consider including language within employment contracts that permit them to impose such deadlines.

For more information see Maynard v Johnson Controls Canada LP, 2023 ONCA 392.

John Hyde is the managing partner at Hyde HR Law in Toronto. He advises management on all aspects of employment and labour law, including representation before administrative tribunals, collective agreement negotiation, arbitrations, wrongful dismissal defence and human rights.

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