Executive compensation packages are rarely just salary. Bonuses, restricted stock units, and share options are often the largest component of senior pay, and the largest point of dispute when the relationship ends. Khatib v. GoEasy Ltd is a detailed, practical illustration of how Ontario courts apply the Supreme Court’s test from Matthews v. Ocean Nutrition Canada Ltd to bonus and equity plans, and a cautionary tale for employers about what it actually takes to contract out of paying them during the notice period.
Background
Shadi Khatib was hired as a Senior Vice President at Goeasy Ltd in 2016 and was terminated without cause in October 2019, after roughly 3 years and 5 months of employment. He sued for 12 months’ notice, his 2019 bonus and a pro-rated 2020 bonus, the value of vested and unvested Restricted Stock Units and Share Options under Goeasy’s Long-Term Incentive Plan, a tax gross-up, and bad faith and punitive damages, alleging he had been induced to leave secure employment by promises about the value of his equity.
Goeasy did not rely on the termination provisions in Mr. Khatib’s employment agreement, so the entire dispute turned on his common law entitlements and on the enforceability of forfeiture language buried in the separate grant documents for his bonus and equity plans.
| “Would the employee have been entitled to the bonus or benefit as part of their compensation during the reasonable notice period? If so, do the terms of the employment contract or bonus plan unambiguously take away or limit that common law right?”
– Mathen J., quoting Matthews v. Ocean Nutrition Canada Ltd, 2020 SCC 26 |
The Issues
| ISSUE 1
Was Mr. Khatib induced to leave secure employment, entitling him to a longer notice period? |
ISSUE 2
What was the reasonable notice period, and was he entitled to his bonus and equity during it? |
ISSUE 3
Did the company’s conduct warrant bad faith, punitive, or moral damages? |
The Court’s Analysis
No inducement, and a mid-range notice period
The Court rejected Mr. Khatib’s claim that he was induced away from secure employment. He had held a string of shorter-term roles before Goeasy, was one of fifteen candidates considered, and had successfully negotiated a better offer, none of which supports being ‘lured’ from a stable job. Weighing the usual factors (age, role, service, job market), the Court set notice at 8 months, between the 12 he wanted and the 6 Goeasy offered, noting he had reasonably found comparable work within about three and a half months.
The bonus plan’s ‘eligible’ language did not defeat the claim
Goeasy argued the bonus was discretionary because the contract said ‘eligible,’ not ‘entitled,’ and the plan barred payment after termination. The Court disagreed: the bonus was paid every year, was needed to stay competitive, and was never previously withheld, making it a core part of his pay. Just as importantly, Goeasy couldn’t prove Mr. Khatib was ever actually given the document containing that forfeiture language. He was awarded his bonus for the full notice period.
Equity forfeiture clauses failed for lack of clarity
The bigger issue was his stock units and options, which the grant documents said would be forfeited on his ‘Termination Date,’ a term that was never actually defined anywhere. That gap, combined with the company’s own former CFO testifying that his identical forfeiture clause had been overridden by his contract, and evidence other departing executives kept pro-rated equity, was enough to make the clause unenforceable. Mr. Khatib was awarded the value of equity that vested during his notice period, plus a pro-rated share of what would have partly vested had he stayed.
He didn’t win everything: the Court kept one grant’s unusually long vesting date as written, given its much larger size, and declined to award a tax gross-up or any bad faith, punitive, or moral damages.
Key Takeaways
| For Employers | For Employees |
| Forfeiture clauses must be clear, defined, and actually delivered.
An undefined term like ‘Termination Date,’ and no proof the employee ever received the plan document, can be fatal to an otherwise standard forfeiture clause. Ensure equity and bonus plan documents are provided at hiring and use precisely defined terms. Internal inconsistency will be used against you. If a company’s own witnesses, or its treatment of other departing employees, contradicts the forfeiture language it is relying on, that inconsistency will likely defeat the clause. Apply your plan terms consistently across your workforce. ‘Eligible’ is not a magic word. Courts look past labels like ‘eligible’ versus ‘entitled’ to the reality of how a bonus functioned as part of compensation. If it was paid every year and never withheld, expect it to be found integral to compensation regardless of the word used. Relying on termination clauses selectively can weaken your whole position. Goeasy chose not to rely on its employment agreement’s termination provisions, leaving the common law framework, and its own inconsistent internal practices, to govern the outcome. Coordinate your defence strategy carefully with employment counsel before conceding key positions. |
Your bonus and equity may survive your notice period.
Under Matthews v. Ocean Nutrition, you may be entitled to bonuses and equity that would have vested, or partially vested, during your reasonable notice period, even after your job has ended. Ambiguous forfeiture language works in your favour. If the termination or forfeiture provisions in your bonus or equity plan are unclear, undefined, or were never actually given to you, that ambiguity is generally resolved in your favour, not your employer’s. How other employees were treated is relevant evidence. If colleagues in similar roles were allowed to keep pro-rated equity or bonuses after leaving, that inconsistency can help establish that your employer’s forfeiture position is not really enforceable. Not every dispute supports bad faith damages. Even where you succeed on your core entitlement claims, courts will not automatically award bad faith, punitive, or moral damages simply because your employer took an aggressive but genuinely held position. |
Why This Decision Matters
Khatib is one of the more detailed applications of Matthews v. Ocean Nutrition to executive bonus and equity compensation to come out of Ontario courts, and it should be required reading for any employer offering RSUs, share options, or bonus plans to senior staff. The decision confirms that boilerplate forfeiture language is not self-executing. It must be clearly drafted, properly defined, and consistently applied, or it risks being unwound entirely during litigation, potentially at significant cost. For executives and senior employees, the case is a reminder that equity compensation does not simply evaporate the day your employment ends.
| Talk to an employment lawyer
Rozek & Co advises executives and employers on complex compensation disputes, including bonus, RSU, and stock option entitlements on termination. If you are negotiating an executive employment agreement, or facing a dispute over unpaid compensation, contact our Toronto employment law team. |
