Executive’s Loss Of Share Unit Rights On Resignation Enforceable

In an interesting executive employment decision, the Ontario Superior Court of Justice recently upheld a contractual provision that resulted in forfeiture of restricted share units after resignation in Levinsky v The Toronto-Dominion Bank.

The Plaintiff, a Vice President and Managing Director at TD Bank, participated in the Bank's Long Term Compensation Plan. The Plan granted the Plaintiff Restricted Share Units each year. Under the Plan, shares that had not yet matured would be forfeited upon resignation. The Plaintiff resigned in 2010, and accordingly, lost his entitlement to shares allocated to him in 2007, 2008 and 2009. The value of the shares was over $1 million. The Plaintiff argued that the requirement to forfeit shares on resignation was a restrictive covenant and unreasonable and therefore unenforceable. He also argued that it was an unreasonable restraint on trade.