“When Laid Off, Can I Get My Unvested Options Vested_” _ Sklover Working Wisdom

8/27/2014 When laid off, can I get my unvested options vested? | Sklover Working Wisdom

http://skloverworkingwisdom.com/blog/when-laid-off-can-i-get-my-unvested-options-vested/ 1/12

Blog When laid off, can Iget my unvested options

vested?

When laid off, can I get my unvested optionsvested?

Published on January 5th, 2013 by Alan Sklover

Question: Hi, Alan. I am currently employed by a large tech company and I have received equity compensation

throughout my tenure. Some of this equity has yet to vest.

I have recently been informed that my position is being eliminated and I have been encouraged to find a newposition, either in or out of the company. I have identified a position in a different industry and, if I do not find

another position in my company, I will likely take the position in the new company.

Should I approach my current employer and try to get my unvested options vested? Can you suggest a strategy

to do this? Thanks.

Lori

Merrick, New York

Answer: Dear Lori: Sorry to hear of your impending job elimination. Your positive attitude is good to see, and

will surely help in your upcoming transition, whatever it may entail. Im glad youve written in. Here are my best

thoughts:

1. First, are you certain that you will lose your unvested options if you depart the company? I say this

because I have found that many of my clients have wrongly presumed that unvested options are simply lost upon

termination of employment. Whether or not you lose your unvested options at this time should be clearly set forth

in your employers Stock Option Plan. Request a copy of that Plan from your Human Resources representative,and read it over carefully. Be aware that many companies change their Stock Option Plans periodically, and so

you may have more than one Stock Option Plan applicable to your options that might require review.

2. My experience is that a great many equity plans provide for continued vesting so long as the

employee is terminated without cause, and the employee does not compete directly or share

confidential information. By equity I refer to stock, stock options and other securities of a company. Over

the decades I have reviewed many, many employee participation equity plans, and have found many of them to

provide for continued vesting of stock options where (a) the employee is terminated without cause, (b) the

former employee does not go to work for a direct competitor, and (c) the former employee does not engage in

any other misconduct, such as sharing or using the former employers confidential information. Some Plans, but

only a few, provide for accelerated vesting in the event of a termination without cause. (By accelerated I

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mean all vesting takes place now, at one time, and not over an extended period of time.) Look for these things,especially, when you review your stock option plan(s).

While most stock option plans contain an awful lot of legal mumbo-jumbo language, I think you can probably

review your employers Stock Option Plan by yourself looking for what happens upon a termination without

cause, without having to pay an attorney to do so for you.

3. It is also likely that your employer has a Severance Plan most large employers do which might,

on its own, provide for continued or accelerated vesting of your unvested stock options. At large

employers, it is most common indeed, almost universal to provide some kind of severance to employees who

are laid off, restructured or downsized due to no fault of their own. A severance agreement provides for (a) theemployer to get certain advantages it seeks but does not legally deserve, including the employers waiver of

claims, and an agreement to keep confidential matters secret, and for (b) the employee to get certain payments

and/or benefits, as well, including continued salary and continued health insurance. You may find that your

employers Severance Plan provides for continued or accelerated vesting of your stock options if you read the

Severance Plan, or what is commonly called the Summary Plan Description, or SPD for short.

While most severance plans also contain an awful lot of legal mumbo-jumbo language, I think you can

probably review your employers Severance Plan by yourself looking for what happens to your unvested optionsupon a termination without cause, without having to pay an attorney to do so for you.

4. If your Stock Option Plan provides for loss of unvested stock options upon termination, and your

Severance Plan does not say differently, then you have nothing to lose, and everything to gain, byrequesting vesting either over time or accelerated now of your unvested stock options. I believe

strongly that a departing employee and especially a departing employee who has been terminated withoutcause is unwise, perhaps even foolish, not to request that unvested equity whether stock, stock options, or

other forms of equity be vested immediately or over time. As I often say to clients who are reluctant to ask forvesting, If you dont want to request the vesting of those stock options, then simply have your employer send

them to me.

And as I also often say, There is generally no downside to any request that incorporate the Three Magic Rs,that is, (a) is presented with Respectful, (b) is Reasonable in amount or degree of request, and (c) is

accompanied by a solid and convincing Rationale. So long as these three Rs are incorporated into yourrequest, then I would not expect any kind of downside to making the request.

5. The best Rationale to accompany your request for vesting of unvested stock options upontermination without cause is that loss of what you earned in the past is simply Punishment for No

Crime. By punishment for no crime I mean that you are having something taken away from you, that youearned, without any good reason. It seems so odd, and out of place, to hurt a departing employee in the

pocketbook when he or she least deserves it and most needs it. Such a request can be made either beforetermination takes place, or during the process of your severance negotiations. It should not be directed to anyone

in Human Resources, but instead to a senior executive who knows you, who can intervene on your behalf, if heor she is motivated by your request to do so.

6. If you have any valid and credible claim against your employer just as examples, that you were

chosen for position elimination because of your age, gender or race then when you raise that inseverance negotiation this is the remedy you might consider requesting as a resolution. In the



previous section, above, I mentioned the Punishment for No Crime rationale, which is really an appeal for

fairness, as well as a mention of need. While they are both good rationales for any request, a strongerrationale is I have a legal claim; can we resolve by vesting, instead of heading to Court? Is this threatening a

lawsuit? Some would say so. I would not say so: I would say it is simply resolving all matters, including waivingclaims, when ending a relationship, which is precisely what is supposed to happen in the severance process.

By the way, other claims you might raise at this time could be for non-payment of this past years bonus (either

full year or partial year), or unfulfilled past promises to you or either raises or promotions, or both.

For more information about severance negotiating at time of termination, see our Blogsite Resource CenterSection on Severance Negotiating.

Remember, though, that if you resign to take a different job for another employer before you are officially

terminated then you will not be entitled to any severance whatsoever.

7. In case you hear We cant do that; the Plan does not allow it, dont forget the Doctrine ofFinancial Equivalents. What the heck is that? you might be asking. It is simply this: while the employer may

be prevented from vesting your unvested stock options (at this time or in the future) by the terms of its StockOption Plan, nothing in the world prevents your employer from paying you a sum of money that approximates thevalue of what you are now losing. That is, the financial equivalent of the lost equity. There is no rule against

that, and is a rationale that often overcomes the we cant do that defense when raised by Human Resourcesrepresentatives.

8. With these things in mind, I hope you will seriously consider making a request for your unvested

options to be vested (immediately or over time), or that you be paid for the value of what you arelosing. Its hard enough to make a living, and even more difficult to attain a position and do good work such that

you are awarded stock options. It would be a shame to now lose what you worked so hard to attain. This is thetime to make this request, not years later when you will probably wish you did. I dont really have a vote in

this, but if I did Id surely say Go for it.

If you would like to obtain a model letter to assist you in making a request that your unvested options be vested,simply [click here].

Lori, thanks for writing in. Good luck in relocating yourself in a position that provides support for you and your

family, as well as purpose and meaning in your life. Have faith that you will, and, I am certain, that you will.

My best to you,Al Sklover

P.S.: One of our most popular Ideal Packages of forms, letters and checklists is entitled Ultimate Severance

Package consisting of four Model Letters/Memos for severance negotiation, as well as our 94-Point

Severance Negotiation Checklist. To obtain a complete set, just [ click here. ]

2012 Alan L. Sklover, All Rights Reserved.

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“When Laid Off, Can I Get My Unvested Options Vested_” _ Sklover Working Wisdom

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