What happens to my stock options if I am terminated?
If you have vested options and are terminated, you will typically have a short window to exercise your vested options, normally up to 30 days, sometimes longer depending on the plan. The employee should be sure to diarize the exercise deadline so as not to miss out on exercising the vested options, as the deadline may not be extended. Some plans allow for a portion of the unvested units to vest on a pro-rated basis, from the time of the grant to the date of termination.
However, the vast majority of plan state contain onerous forfeiture provisions which state that any unvested options are forfeited upon termination.
That said, the dismissed employee may still be entitled to compensation for the lost options. Courts have awarded dismissed employees damages for the lost opportunity to exercise option awards. This can include damages not only for the capital appreciation in the stock units, but also lost dividends.
An employee who is facing possible forfeiture of options or equity should get legal advice, particularly if you are being asked to sign a release in favour of the employer. You may be giving up much more than you realize.
