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Job Events: Termination


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Job Loss And Your Stock Grants (Part 1): Options, Restricted Stock, And ESPPs

Matt Simon
Whether it is expected or not, job loss is an upheaval that gives you a lot to think about. However, as you clear off your desk, don't forget your stock compensation. Too many departing employees have lost valuable potential gains because they were unaware of the post-termination rules for their stock grants.

Job Loss And Your Stock Grants (Part 2): Changes Of Employment Status, Post-Termination Tax, Severance This is premium content

Matt Simon
Amid the upheaval of job loss, don't forget your stock compensation. This article covers important aspects of job termination that apply to all stock grants.

Negotiating And Structuring Your Stock Compensation (Part 3): Equity Rights And Severance When You Terminate Employment This is premium content

Alisa J. Baker
Part 3 of this article series reviews the steps you must take to preserve your equity rights at or before the termination of your employment, and in any severance arrangement. The impact depends on your specific agreements, the company's overall plans and policies, and—in many cases—the reason for the termination.

Watch For Noncompetes And Other Restrictive Covenants In Stock Grant Agreements

Bruce Brumberg
NEW! Your stock grant agreement can have a provision that will not only claw back your gains if you leave to work for a competitor but also restrain you from taking a job at that company. As this article explains, these types of provisions, called restrictive covenants, can lurk in grant agreements for stock options, restricted stock, and performance shares.

Stock Option Terms: What You Can Expect This is premium content

Richard Friedman
UPDATES! Get a sense of what you should, and should not, expect in the terms of your stock option grant. A major survey of companies looks at trends in vesting schedules, post-termination exercise rules, and other plan features.

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What happens if I terminate my employment before an option grant is fully vested?

If your option was granted with a graded vesting schedule, you are allowed to exercise the vested portion of the option grant, but most commonly you forfeit the remainder...

Do I forfeit my restricted stock if I leave the company before vesting?

If you leave the company before the vesting date of restricted stock or RSUs, you typically forfeit whatever stock has not vested. Exceptions can occur, depending on...

If I leave the company, what happens to the money that has been deducted from my paycheck to purchase ESPP shares?

You will continue to own stock purchased during your employment, but your eligibility for participation in the plan ends. Any funds withheld from your salary will be...

I am leaving my job. Is my company required to tell me how many vested options I have, how long I can exercise them after I leave, or when they expire? This is premium content

No law requires this. It is your obligation to know these details. Court cases show that...

I am planning to leave my job. Do stock options stop vesting when I give notice or on the actual date of termination? This is premium content

Most companies' stock plans focus on the date of termination, meaning the actual...

My company recently went through layoffs. What rights do involuntarily terminated employees have in their stock options, and what may my company do?

No law gives you special rights in your stock options. Under most stock option plans and grant agreements, an employee whose termination stems from unfavorable economic conditions generally has...

Can my company fire me just before the vesting of my stock options or restricted stock/RSUs?

In short, yes, assuming this termination is made for good-faith reasons, such as business downsizing. Most employees are "at will," which means...

I'm no longer an employee, so why is there withholding on my NQSO or SARs exercise? This is premium content

Former employees' transactions, regardless of the reason for termination, follow the same withholding and reporting requirements that apply to...

I'm no longer an employee, so why is there withholding on my restricted stock vesting? This is premium content

Former employees' transactions, regardless of the reason for termination, follow the same withholding and reporting requirements that apply to...

Can the terms of my severance accelerate vesting or give me a longer period to exercise my options? This is premium content

You can try for this in your severance agreement. Companies occasionally do this for all employees in special situations. But...

How much time do I have for exercising vested stock options after my employment ends? This is premium content

The period for option exercise depends on both your employer's plan design and the reason for your termination. If the options are not exercised by the specified date, they are forfeited. Court cases and survey data show that...

If I lose my job but I am then rehired, can unvested stock options be reinstated, or can the exercise period of my vested options be extended to the end of the original term? This is premium content

While being rehired is great news, the bad news is that the unvested options were canceled or forfeited when you were laid off, regardless of the reason for termination. As for the vested options...

What are the most common periods after termination during which stock options can be exercised? Does the reason (e.g. disability, early retirement) matter? This is premium content

Usually, you will have time after you leave the company to exercise your options. However, some companies...

If my employment agreement gives me longer after termination to exercise my stock options than the stock plan and grant agreement do, which controls?

Usually the stock plan rules override other agreements made under that...

What is the tax impact on me if my company modifies outstanding stock options or SARs, such as by extending the option term? This is premium content

With approval from the board, and perhaps also shareholders, your company can modify outstanding grants in a way that is consistent with its stock plan. However, it should avoid tax pitfalls for you and the company, such as...

My company is selling the division where I work. I will no longer work for that company but will keep the same job under the new corporate owner. What will happen to options and restricted stock in the divestiture? This is premium content

Check your stock plan to see whether it addresses this type of divestiture (or spinoff), in which just a small division or subsidiary is sold. Many plans...

Does the reason for my termination affect vesting?

Yes. Stock plans often have different provisions on post-termination exercise periods for vested options, on any acceleration of vesting, and on the treatment of...

According to surveys, how are unvested stock options most commonly treated upon various types of termination? This is premium content

In its 2013 Domestic Stock Plan Design Survey, the National Association of Stock Plan Professionals found that the following treatments of options at termination are most common...

Is there any risk of violating the insider trading or Section 16 rules after I leave the company by exercising options or selling company stock? This is premium content

The rules do not apply only to trades in your company stock while you are working for the company...

Does the severance-pay period extend the clock for post-termination exercise?

Not usually. The post-termination exercise period starts when you...

When I am still working at my company, can it rescind or cancel my outstanding stock options or restricted stock before vesting instead of firing me?

Not unilaterally. Although no specific law exists on this question, courts have examined this situation and provided some guidance...

Does receiving dividend payments on my restricted stock before it vests mean I automatically get the stock even if I leave the company before vesting? This is premium content

Dividends and the shareholder voting rights that go with restricted stock do not...

If I remain with the company for the duration of the vesting schedule, is there any way I can lose the benefit of my option?

You could mistakenly let the options expire without exercising them. You do not have your vested options for life...

When I am no longer with my company (e.g. because of job loss, disability, or death), will tax-law limits or deadlines dictate when I must exercise an ISO? This is premium content

Yes. Under the Internal Revenue Code, you must exercise an ISO within...

Do special rules determine when a leave of absence is a termination of employment for the purposes of ISOs?

For ISO purposes, a bona fide leave of absence greater than three months can constitute a termination of employment if...

My company allows me to exercise my ISOs more than 90 days after I leave my job. What is the tax treatment at exercise?

The Internal Revenue Code is very clear on the requirements of favorable tax treatment for ISOs. Among other conditions...

Must I still file Form 4 for my company stock purchases and sales after I leave the company, or if I want to indicate that I am no longer an insider? Do the rules for matching short-swing profits still apply? This is premium content

The Section 16 rules, including the requirements of Form 4, apply for up to six months after...

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