What happens to my stock units?

RSUs are typically subject to time-based vesting. This can be annual, quarterly or monthly vesting schedule. Some plans have cliff-based vesting, meaning that all of the units vest at the same time, typically after a few years.

By contrast, the vesting of PSUs are typically subject to both time-based requirements plus the performance-based requirements.

If they are vested, typically the employee is entitled to receive the share itself, or the cash value of the vested share unit upon termination. If they are unvested, in most plans, these share units are cancelled upon termination or resignation.

What happens to my stock options?

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 plans 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.