When an executive is terminated, the severance conversation is rarely just about salary. Bonuses, stock options, restricted share units, pension contributions and benefits can make up a large part of total compensation. For many executives, those pieces are worth more than base pay. The good news is that Ontario law often protects them. The challenge is that the answer depends heavily on how your agreements are worded.
Notice periods for executives
Unless an enforceable contract says otherwise, executives in Ontario are entitled to reasonable notice at common law. Because senior roles are harder to replace and executives are often older and more specialized, notice periods tend to be on the longer end, frequently 12 to 24 months for long-serving leaders.
The key principle is that you should be put in the position you would have been in if you’d worked through the notice period. That means the question isn’t just “what’s my salary?” but “what would I have earned, in total, during that time?”
What happens to your bonus
In 2020, the Supreme Court of Canada confirmed in Matthews v. Ocean Nutrition Canada that a terminated employee is generally entitled to the bonuses they would have earned during the reasonable notice period, if those bonuses were an integral part of their compensation.
Employers often try to avoid this with plan language saying you must be “actively employed” on the payout date. But the Supreme Court said that kind of wording, on its own, isn’t enough. To take away bonus entitlements during the notice period, the language has to be clear and unambiguous. Many plans don’t meet that standard.
Stock options, RSUs and other equity
Equity is where things get technical. Stock option plans and RSU plans usually have their own rules about what happens on termination: whether unvested awards are forfeited, how long you have to exercise vested options, and whether the plan tries to cut off rights on your last day of work.
Courts look closely at this wording. Some plans successfully limit an executive’s rights, while others fail to do so clearly enough. Our breakdown of executive bonuses and stock options after termination in Khatib v. goeasy shows how much the specific language can matter. If you hold equity, it’s essential to have the plan documents reviewed before you sign anything.
Restrictive covenants and other terms
Ontario generally bans non-compete clauses in employment contracts, but there’s an exception for executives. That means your agreement may legitimately restrict where you can work next, and that should factor into any negotiation. Non-solicitation and confidentiality obligations are also common.
There’s often room to negotiate other terms too: the timing and tax treatment of payments, continued benefits, an agreed announcement, a reference letter, or outplacement support.
Don’t sign in a hurry
Executive packages are often presented with a short deadline and a release that waives all claims. It’s reasonable to ask for time to get advice. A careful review can uncover entitlements worth far more than the cost of that advice.
Talk to an executive employment lawyer
Our team advises executives across the GTA, including Toronto, Mississauga, Brampton and Vaughan, on terminations, compensation disputes and exit negotiations. Learn more about our employment law services or our Mississauga employment lawyers. If your departure turns into a dispute, our commercial litigation team can step in.
