Jul 27 2026
Amanda DeMatteis: Hi Josh.
Josh Goodbaum: Hi, Amanda. What are we talking about today?
DeMatteis: Let’s talk about what happens to an employee who has equity in their employer and then ends their employment – whether by termination, resignation, or retirement.
Now, “equity” can mean many things; it can be stock options, stocks, RSUs, PSUs, phantom stock. I mean, it’s almost endless the different forms that equity can take. But what do we tell an employee who is terminated and wants to know what happens to that equity as a result of their termination?
Goodbaum: It really depends on the documents, Amanda, and that’s why employees and executives in particular who have equity need to understand what their rights are under their documents.
Most equity is given pursuant to an individual grant agreement. That’s going to be something that you sign when you get whatever it is you got, and that document is going to create exceptions to or supplement a company-wide plan – something like an equity incentive plan or an equity compensation plan, which should be available on your company’s intranet and might even be publicly available.
The usual rule is that anything that has vested by virtue of your continued employment is yours. It’s your property, and you’re going to keep it when you go, unless it is clawed back pursuant to the grant agreement or the plan document by virtue of something you did wrong – for example, your breach of a restrictive covenant.
The non-vested stock or equity or options that you have are typically forfeited, unless you separate through a good reason resignation with an acceleration clause, and that “good reason” should be defined in your grant agreement or in your individually-negotiated employment agreement. And options – even if they’re vested – typically expire a certain time after separation. In other words, the options have a limited exercise window, where you either need to reach into your pocket to exercise the options by buying company stock or you lose the right to do so. If you don’t use them, you lose them.
The rules about equity tend to be stricter and less flexible when we’re dealing with public companies – companies that are regulated by the U.S. Securities and Exchange Commission (or SEC) – as compared to private companies, which sometimes have more flexibility in how they handle vested and unvested equity.
But overall, you really need to study the documents that came with your equity to figure out what your rights are. And if you want help thinking about studying those documents – if you’re thinking about separating from your company and you want to figure out what your rights and obligations are – that’s the time to get an executive employment lawyer involved.
DeMatteis: Great advice, Josh. Thank you so much.
If you are thinking about or facing a separation and have equity with an unclear status, make sure to talk to an executive employment lawyer. The last thing you would want to do is leave any money on the table when your employment comes to an end.
Thanks so much for watching. We’ll see you next time.
Posted by Garrison, Levin-Epstein, Fitzgerald & Pirrotti, P.C. in Employment Law, Videos
Tagged Amanda DeMatteis, Joshua Goodbaum
