Toronto, ON — June 3rd, 2026 — In Friel v. HUB International Limited, 2026 ONCA 313, the Ontario Court of Appeal confirmed that even where equity is granted because of employment, disputes about that equity may live in a completely different contractual and jurisdictional box.
Facts
Mr. Friel began working in 2012 for HUB International HKMB Limited, an Ontario-based insurance brokerage that formed part of a larger, US-based corporate structure.
His Employment Agreement governed the usual terms including salary, benefits, and termination, and required that any disputes “arising out of or in connection with” that employment agreement be resolved through mediation and arbitration in Ontario.
Separately, Mr. Friel later entered into a series of equity arrangements with entities higher up in the corporate chain. Those entities, including Hockey Parent Holdings L.P. and Hockey Parent Inc., were Delaware-based holding companies that ultimately owned the Canadian operating business.
Through these arrangements, Mr. Friel acquired Class A units in the parent entity and options to acquire Class B shares in one of the Delaware entities. Those equity rights were governed by standalone Option Agreements and an Equityholders Agreement, each of which was expressly subject to Delaware law and a Delaware forum selection clause. The option documents made clear that the equity grants were not employment compensation and did not form part of the Employment Agreement.
The dispute arose after Mr. Friel’s employment came to an end. He resigned one day after some of his options vested to work for a competitor. Following his departure, he sought to exercise vested options to acquire shares in the Delaware entity. The respondents said he was not entitled to exercise those options as his employment with a competitor constituted “misconduct”, or alternatively, that any dispute had to be resolved under the Delaware governed equity agreements. Mr. Friel commenced proceedings in Ontario, arguing that the dispute was fundamentally about his employment and therefore subject to the arbitration clause in his Employment Agreement.
The motion judge disagreed and held that the dispute belonged in Delaware. The Court of Appeal upheld that result.
Analysis
The Court rejected each of Mr. Friel’s three core arguments.
- The dispute did not fall within the Employment Agreement’s arbitration clause
Mr. Friel argued that the dispute was at least “in connection with” his employment. The Court rejected that position at the threshold stage by focusing on how the contracts were structured. It agreed with the motion judge that the grant of options was not part of his employment and was not contemplated by or connected to the Employment Agreement. The equity rights were created by separate agreements that explicitly disclaimed any connection to employment compensation. As the Court noted:
[14] Examining the terms of the Option Agreement, she found that the grant of options to Mr. Friel in HPI was not part of his employment with HUB Ontario and that the dispute was therefore not “contemplated by” or “in connection with” the Employment Agreement. The Option Agreement unambiguously stated that the grant of options did not constitute employment compensation, was not a term or condition of employment and did not form part of the Employment Agreement.
- The competence‑competence principle did not require referral to arbitration
Mr. Friel argued that, even if there was an issue about scope, the matter should be referred to arbitration under the competence-competence principle. The Court declined to do so. It held that this was a case where jurisdiction could be determined through a straightforward review of the contracts. There were no material factual disputes. The question was simply which agreement governed the rights being asserted. In those circumstances, the Court was entitled to decide the issue directly rather than send it to an arbitrator.
- The Delaware forum selection clause was enforceable
Mr. Friel argued that the Delaware forum selection clause should not be enforced because of inequality in bargaining power. The Court accepted that there was some inequality but found that this was not enough. The agreement was not improvident, and the clause did not place any meaningful remedy out of reach. As a result, the forum selection clause was enforceable, and the dispute had to proceed in Delaware.
Takeaways
Equity compensation agreements could arguably be distinct from employment agreements, even when they arise from the same relationship and depend on continued employment. Courts will respect that separation where the documents are clearly drafted. The distinguishing factor in this decision is that the court was dealing with vested options and there was no reference to this equity in his employment agreement.
Where equity rights are placed in standalone agreements with their own governing law and dispute mechanisms, those provisions may control.
Finally, forum selection clauses in equity agreements remain enforceable. Inequality of bargaining power alone may not defeat them absent an improvident bargain or a real barrier to relief.
If you would like to further discuss equity compensation agreements, please reach out to a member of the Protea LLP team.
