Ontario Court of Appeal upholds massive award of 27 months pay on termination

Sunira Chaudhri

Sunira Chaudhri

Toronto Employment Lawyer

By the time of his termination, Milwid had 888 RSUs, half of which were to vest in November of 2020. However, on Aug. 14, 2020, IBM cancelled Milwid’s “unvested” RSUs even though he had no control over his termination date.

Gregory Milwid was employed by IBM Canada Ltd. for most of his working life, until he was terminated just two months into the global pandemic in May 2020.

 

Milwid was employed with IBM since 1982 for an exceptional length of service spanning 38 years.

 

Prior to his termination, Milwid was a Band 10 Manager in IBM’s Cloud and Cognitive Software Unit. He earned a base salary of $169,695, an average annual discretionary bonus of $1,497 and a pension.

 

Milwid also earned Restricted Share Units, or RSUs, which is an incentive typically paid to executive employees in equal installments over a three or four-year period. RSUs are generally used by employers to retain management level employees as RSU grants do not fully “vest” for a number of years, incentivizing employees to stay put rather than look for greener pastures and lose their unvested RSUs.

 

By the time of his termination, Milwid had 888 RSUs, half of which were to vest in November of 2020. However, on Aug. 14, 2020, IBM cancelled Milwid’s “unvested” RSUs even though he had no control over his termination date.

 

At a summary judgment motion, Milwid sought 30 months of reasonable notice, arguing he had been forced into retirement. He pointed to the unprecedented shutdown of the economy due to COVID as an exceptional circumstance that should lengthen his notice period.

 

In its decision, the court acknowledged that IBM was the only company Milwid had worked for in Canada. Notably, the Court found that his age (62), length of service (38 years), his managerial position, his compensation – including the RSU equity awards – and the technical nature of his skills supported an exceptional award of 26 months.

 

The court then awarded Milwid an additional month of pay for a total of 27 months, noting the impact the pandemic had on Milwid’s ability to mitigate his damages.

 

The court also awarded Milwid the RSUs that vested during the 27 month notice period at a share price of US$125.27 per share in the total amount of US$55,619.88.

 

IBM appealed the decision to the Court of Appeal.

 

The Court of Appeal upheld the decision, noting Milwid’s skills were not transferable because they were related almost exclusively to IBM’s products. The court also upheld the RSU payment made to Milwid on his termination, despite IBM arguing that its plan permitted it to cancel his RSUs on termination.

 

While Milwid is a case that again awards an employee beyond the notional 24-month cap in Ontario, the real story is a reminder to employees that despite what Long-Term Incentive Plans (LTIP) may say, many employees remain entitled to very valuable RSU and LTIP awards, even if an employer cancels or threatens to cancel those entitlements on termination.

 

Most employers insist that RSUs and other bonuses that have not yet been paid are “void” if an employee is terminated. The fact is, however, employees remain entitled to many of these bonuses and perks well after their termination, sometimes for a number of years.

 

Employees that are paid bonuses or compensation via deferred payment vehicles like LTIPs should keep this case in their back pocket, especially when an employer will inevitably cancel RSUs and similar bonuses on termination.

 

Have a workplace issue? Maybe I can help! Email me at sunira@worklylaw.com and your question may be featured in a future column.

 

The content of this article is general information only and is not legal advice.

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