A recent decision of the Court of Appeal for Ontario suggests a more practical approach to the interpretation of employment agreements. In Battiston v Microsoft Canada Inc.,1 the court held an employee cannot avoid the impact of contractual language by neglecting to read it when: (i) the employer brings it to the employee’s attention; and (ii) it is clear and unambiguous.
What happened?
Fransic Battiston was an employee of Microsoft for 23 years. As part of his compensation. Battiston was entitled to receive Microsoft stock under Microsoft’s Rewards Policy, the allocation of which was discretionary and determined by Microsoft annually. Each year, Microsoft’s decision to award stock was communicated via an email which expressly required the employee to read the terms of the award and click “accept”. The email stated:
Congratulations on your recent stock award! To accept this stock award, please go to My Rewards and complete the online acceptance process. A record will be saved indicating that you have read, understood and accepted the stock award agreement and the accompanying Plan documents. Please note that failure to read and accept the stock award and the Plan documents may prevent you from receiving shares from this stock award in the future.
Questions? Please find additional information about stock awards on HRWeb.
[emphasis added]
The Stock Award Agreement stated all unvested stock was cancelled once employment was terminated and that stock would not vest during an employee’s notice period.
For 16 years, Battiston received Microsoft’s email regarding the stock award, and for 16 years he clicked “accept” indicating he had read, understood and accepted the stock award agreement.
In 2018, following a series of poor performance reviews, Battiston’s employment was terminated without cause. Microsoft offered 23 ½ months’ notice which Battiston rejected. Instead, he sued for wrongful dismissal seeking, among other things, damages in lieu of 1,057 unvested shares he had received as of his termination and which would have vested had he remained employed throughout his notice period.
The trial decision
At trial, Microsoft argued Battiston was not entitled to any stock which remained unvested at the time of his termination. To this end, the Stock Award Agreement was clear and unambiguous and had been repeatedly accepted by Battiston.
Battiston conceded he had received and ‘accepted’ Microsoft’s email each and every year, but maintained his practice was to “not read the Stock Award Agreements”. He said he was under the impression he would be able to cash out any stock awarded but unvested should he be terminated without cause. He further argued the termination provisions were onerous and unenforceable because Microsoft did not bring them to his attention.
The trial judge agreed with Microsoft that the Stock Award Agreement was clear and unambiguous. Nevertheless, the judge held that Battiston was entitled to damages equivalent to the value of the stock which would have vested during the period of reasonable notice. Relying on Tilden Rent-A-Car Co. v Clendenning,2 the judge ruled that it was not enough that Battiston accepted the Stock Award Agreement; it was also necessary for Microsoft to have specifically drawn to Battiston’s attention the termination provisions in it. The judge also found the Stock Award Agreement to be “harsh and oppressive” because it precluded unvested stock from vesting during the period of reasonable notice:
I find that the termination provisions found in the Stock Award Agreements were harsh and oppressive as they precluded Battiston’s right to have unvested stock awards vest if he had been terminated without cause. I also accept Battiston’s evidence that he was unaware of these termination provisions and that these provisions were not brought to his attention by Microsoft. Microsoft’s email communication that accompanied the notice of the stock award each year does not amount to reasonable measures to draw the termination provisions to Battiston’s attention. Accordingly, the termination provisions in the Stock Award Agreements cannot be enforced against Battiston. Battiston is entitled to damages in lieu of the 1,057 shares awarded that remain unvested.
The Court of Appeal overturns the trial decision
Microsoft successfully appealed to the Court of Appeal, which held the trial judge erred in finding Battiston had not received sufficient notice of the termination provisions under the Stock Award Agreement. Specifically, the court held the trial judge’s decision failed to address three key facts:
- For 16 years Battiston expressly agreed to the terms of the Stock Award Agreement.
- Battiston made a conscious decision not to read the Stock Award Agreement despite indicating he did read it and agree by clicking “accept”.
- By misrepresenting his agreement, Battiston put himself in a better position than an employee who did not misrepresent, thereby taking advantage of his own wrong.
Lessons for employers
The Court of Appeal decision is welcome news for employers for at least two reasons. First, it confirms that, with careful drafting and planning, it is possible to design an incentive plan that ensures no further benefits accrue post-termination. Second, it gives comfort to employers, such as Microsoft, that use an online process to collect employee consent to contractual terms, including the vesting provisions of a stock or other incentive plan. In both cases, the court will consider whether the plan language is clear and unambiguous, as well as the manner in which it is presented to the employee.
To learn more and for assistance, contact your Sherrard Kuzz LLP lawyer, or our firm at info@sherrardkuzz.com.
12021 ONCA 727
2(1976), 1978 CanLII 1446 (ON CA) (Note: the decision stands for the proposition a party can only be bound to a signed standard form contract when it is reasonable to believe that they consented to the terms)
