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Navigating stock options and compensation after layoffs

On Behalf of | Apr 19, 2024 | Stock Options

Imagine this: you’ve poured years of sweat and tears into building a company, holding a high-level position with enticing stock options. Then, one day, the unthinkable happens – layoffs, and you’re caught in the crossfire. Now, facing unemployment, you discover a significant discrepancy between the vested stock options you believe you’re owed and what your former employer is offering. What are your legal options?

This scenario, unfortunately, isn’t uncommon. Employment disputes regarding stock options and executive compensation can be complex and emotionally charged. Luckily, there are viable legal avenues you can explore.

Understanding the layoff and stock grant agreement

California is an “at-will” employment state, meaning employers can generally terminate employees without a reason. However, the legality of your layoff hinges on whether it violated any anti-discrimination laws or your employment contract. Reviewing your employment contract and stock grant agreement to understand the vesting schedule is crucial. Stock options typically vest over a set period, meaning they become yours gradually. The agreement will outline the vesting schedule and any conditions for exercising your stock options (e.g., remaining employed for a specific period).

You should also check out the change of control clause. This clause specifies what happens to your stock options if the company undergoes a merger or acquisition. Don’t forget to find out if your severance agreement includes provisions regarding stock options.

Being laid off and facing a stock option dispute can be stressful. However, you can take steps toward a fair resolution by understanding your legal rights, consulting with a reliable legal team and gathering evidence to support your claim. Remember, a prompt response is crucial. Don’t hesitate to seek legal guidance to help protect your financial interests and help to ensure that you receive the compensation you rightfully deserve.