An Ontario court has ruled against a former investment banker who was seeking the payout of $1.6 million in deferred compensation that he left on the table when he resigned from his firm to start a hedge fund.
The Ontario Superior Court of Justice sided with TD Securities Inc., which was sued by a former investment banker, Blair Levinsky, who resigned from the bank in January 2010 in order to start his own hedge fund. In doing so, the bank argued that Levinsky was giving up his claim to restricted share units that were granted under its long-term compensation plan in 2007-2009, which amounted to $1.6 million.
According to the decision, he sued, arguing that the provision requiring forfeiture-on-resignation was a restrictive covenant, which was unreasonable, and therefore unenforceable. The bank said that the forfeiture provision was not a restrictive covenant; and, in any event, was reasonable.
The court sided with the bank. It found that the RSUs were a form of loyalty incentive, not a restraint of trade, nor did it create vested rights for the recipient. “An award constituted an allocation of future compensation which was contingent upon the existence of certain facts at the time of maturity of the RSU in order for the recipient to receive the cash benefit of the award,” it says.
Ultimately, the court concludes that forfeiture clause “was not in restraint in trade; it was a valid, binding and enforceable term of the contract of employment between Levinsky and the bank.” It denied his request for a declaration that it was a restrictive covenant and unenforceable, and dismissed his claim for payment of the amounts he forfeited in leaving the firm.