The cases in Alberta have taken an opposite view of the issue of equity derivative plans in an employment context.
In brief summary, the Ontario cases have first examined the relevant plan and surrounding facts to determine if the sums “earned” are employment income or a different form of remuneration. If the finding is that the plan provides employment based compensation, then it will apply the Supreme Court of Canada test as set out in Matthews.
The Supreme Court in Matthews affirmed that the correct approach to consider the plaintiff’s claim is as follows: 1
- First, determine whether the sum claimed would have reasonably followed, had the plaintiff been provided fair notice;
- Secondly, if so, consider whether the constitutional documents, such as the employment contract, or the bonus plan, unambiguously take away or otherwise limit this claim.
The fundamental difference between the Alberta approach and that of Ontario is found in its view of the decision of the SCC in Matthews.
This issue of the correct interpretation of Matthews first arose in the February 2025 decision of the Alberta Court of Appeal in Kirke v Spartan Controls. The Alberta Court of Appeal noted that the motions judge had concluded that the Ontario Court of Appeal in Mikelsteins had not followed the correct order of analysis set out in Matthews. The initial decision stated that the Ontario court ought to have first determined the common law reasonable notice question and not initially determine the question of contractual rights. These reasons concluded that the Ontario Court of Appeal did not follow the analysis as required by Matthews as it considered the second question first.
The Court of Appeal in Kirke declined to determine this issue as it viewed this point as not relevant to its conclusion:
Respecting this topic, the summary trial judge had difficulty with the decision in Mikelsteins v Morrison Hershfield Limited, 2021 ONCA 155, leave to appeal to SCC ref’d, 38806 (20 January 2022) on the basis that, in his view, the Ontario Court of Appeal had departed from the order of analysis set out in Matthews, by moving to determine contractual rights without first considering the common law reasonable notice question. We do not need to decide whether that critique is well founded. If the summary trial judge made an error in this respect, which we do not say he did, it is irrelevant because, as set out later in these reasons, he reached an appropriate conclusion on the facts of this case.
This was so as the motions judge found that the equity payments were part of the compensation package, but that the Shareholders Agreement which allowed the company to buy back the shares on 90 days’ notice was enforceable.
A meaningful decision on this same issue by Angotti, J. of the Alberta King’s Bench followed in July of 2025 in Lischuck v K-Jay Electric delivered on July 31, 2025.
The plaintiff held shares in the employer through a limited company, controlled by the plaintiff and his spouse. In 2008, the company had paid a bonus sum based on the prorated shares held by the plaintiff. Starting in 2009, the employer paid from its eligible bonus pool a sum of 10% of the pool based on performance and 90% based on the prorated number of shares held. The bonus sum was paid to the plaintiff personally.
The question of the order of the analysis cited this passage from Matthews: 2 In referring to Mikelsteins, the court noted:
With all due respect, this appears contrary to the admonition and principles set out in Matthews, at para 53-54:
….when employees sue for damages for constructive dismissal, they are claiming for damages as compensation for the income, benefits, and bonuses they would have received had the employer not breached the implied term to provide reasonable notice (see also Iacobucci v. WIC Radio Ltd., 1999 BCCA 753, 72 B.C.L.R. (3d) 234, at paras. 19 and 24; Gillies v. Goldman Sachs Canada Inc., 2001 BCCA 683, 95 B.C.L.R. (3d) 260, at paras. 10-12 and 25; Keays, at paras. 54-55). Proceeding directly to an examination of contractual terms divorces the question of damages from the underlying breach, which is an error in principle.
Moreover, the approach in Paquette respects the well-established understanding that the contract effectively “remains alive” for the purposes of assessing the employee’s damages, in order to determine what compensation the employee would have been entitled to but for the dismissal (see, e.g., Nygard Int. Ltd. v. Robinson (1990), 1990 CanLII 1991 (BC CA), 46 B.C.L.R. (2d) 103 (C.A.), at pp. 106-7, per Southin J.A., concurring; Gillies, at para. 17). (emphasis added)
The fundamental distinction is then whether the decision maker should first determine whether the remuneration is employment based or something distinct first, as in the Ontario cases, or should round 1 be an assessment of what damages would have followed in the period of fair notice. The trial judge agreed with the concerns expressed by the motions judge in Kirke, as set out above.
On the question of the distinction between employee rights and rights as a shareholder, the court disagreed with the concept that the two may be seen as independent and different.
K-Jay submitted that the decision in Mikelsteins dealt with the claim for bonus and increased share value as a true corporate matter. That is a fair summary of the analysis in that case. After stating that the shareholder claims were not related to the employee’s employment, the Court of Appeal applied an analysis that maintained a principle from Ontario authority that, legally, the employment ended upon the date that the employee received notice of his immediate termination for the purposes of determining claims arising from shareholdings. The Court expressly stated it was preserving established law in Ontario on the rights and obligations of shareholders to support the interests of the corporate employer who allows employees to be shareholders over the interests of the employee shareholder.
[71] In my respectful view, this is not consistent with either the law in Alberta or the Supreme Court’s direction in Matthews as to the legal characterization of when employment terminates and the appropriate analysis to consider an employee shareholder’s claims. I disagree that an individual shareholder, whose ability to hold shares is tied to their employment in any fashion, can be dealt with simply as a corporate law matter. This places the interests of the corporate employer above those of the employee, which is not consistent with the balance between employees and employers established over decades of employment law, a balance that is maintained by the required analysis set out in Matthews. Therefore, I decline to follow the Ontario line of cases.
The court then awarded the bonus sums which were, on these facts, paid to shareholders and also some non-shareholder employees.
A point to be noted is that the shares of the plaintiff were held by a limited company, owned by the plaintiff and his spouse. The agreement limiting a claim for lost incremental value of the shares over a common law notice period was denied in an earlier proceeding. 3 This appears to be at odds with the passage cited above.
The end result is that the Alberta courts have taken a fundamentally different approach from the Ontario cases. The issue no doubt will be headed to the Supreme Court of Canada.
For more on Matthews, see this link.
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- Matthews v Ocean Nutrition
- underlining added by the court in Lischuk
- master’s decision; upheld on appeal