Equity compensation, whether stock options, restricted stock units (“RSUs”), or share awards, is a potentially lucrative component of an employee’s compensation package. When an employee is wrongfully dismissed, losing out on unvested equity can translate to hundreds of thousands or even millions of dollars in damages. But while determining whether an employee is entitled to lost equity is critical, a second, equally important question remains: how exactly do courts determine the monetary value of those lost shares?
McElgunn v Vermilion Energy Inc.
The Alberta Court of King’s Bench recently tackled this question in McElgunn v. Vermilion Energy Inc.1 (“McElgunn”). In McElgunn, a senior geological advisor with nine years of service was wrongfully dismissed. The employee appealed a portion of an arbitration award that had improperly concluded she had no entitlement to damages for lost share grants under the Company’s incentive plan. The court allowed the appeal, ruling that she was indeed entitled to damages for the share award she would have received during her notice period.
Tired of Dating
As the Ontario Court of Appeal recently affirmed in Wigdor v. Facebook Canada Ltd.2, the default is that employees are entitled to all equity awards that would have vested during their notice period, unless the contract or incentive plan clearly removes that entitlement without breaching employment standards legislation. However, once the entitlement is established, McElgunn helps answer the next key question: what specific date should be used to calculate the value of the lost equity? This was a key issue in that decision, as the date would impact the value of the 10,757.85 shares the employee was entitled to.
The employee argued that she should be awarded damages based on the highest trading price the stock reached after the April 1, 2023 vesting date ($21.60 per share), relying on cases suggesting that when an employer’s breach deprives an employee of the choice of when to sell, the employee should get the benefit of the highest market price. Alternatively, she proposed an average between the vesting price and the peak price ($20.11). The employer argued that damages should be based on the share price on the actual vesting date ($17.14 per share).
The court agreed with the employer and emphasized that the fundamental goal of wrongful dismissal damages is to put the employee in the financial position they would have been in had the employment contract not been breached. While an employee could theoretically hold shares and sell at a peak, the burden is on the employee to produce evidence showing what they would have actually done with the shares. Because the plaintiff provided only vague testimony that she sold stock “opportunistically” without specific proof of a historical holding or trading strategy, the court refused to give her the benefit of the doubt, as that would be speculative and improper.
Ultimately, the court held that the only loss proven on the evidence was the value of the shares on the date they ought to have been issued. Consequently, the court calculated her damages using the $17.14 share price on the April 1, 2023 vesting date, awarding her $184,389.57.
McElgunn provides a clear lesson: without concrete evidence demonstrating a historical pattern or intention to hold shares to sell at a higher price, courts will default to the share value on the date of vesting or entitlement.
Bonus Round
Does the court’s approach and need for evidence sound familiar? That’s because we wrote a similar post about how our courts approach bonus damages. Spoiler alert: evidence is crucial there too – an employee or employer must produce evidence to support the bonus calculation they are arguing for, otherwise the court will use the approach that best fits the circumstances, such as an average of the past three years.
The Upshot
Calculating damages for lost equity compensation requires far more than just pointing to fluctuating stock charts – it requires actual evidence. If you are an employer, we can help you draft enforceable incentive plans and accurately evaluate your exposure regarding unvested stock and bonus awards during severance negotiations. If you are an employee, we can review your compensation package and assess your equity entitlements and their value.
As we always say: if you think you need an employment lawyer, you probably do!
Endnotes
- McElgunn v Vermilion Energy Inc., 2026 ABKB 531 (CanLII), <https://canlii.ca/t/km950>
- Wigdor v. Facebook Canada Ltd., 2026 ONCA 572 (CanLII), <https://canlii.ca/t/kmhh6>
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