Options-related Lawsuits On Rise

April 12, 2001 (PLANSPONSOR.com) - With many companies restructuring, employment lawyers are seeing a jump in options-related disputes, as both employers and employees re-examine the promises made during the technology boom.

While some employees allege that they were wrongfully dismissed just before they were to cash in on their stock options, employers want workers, who crossed over to competitors, to repay stock-option gains.

Though most claims are settled out of court, courts are demonstrating that they are receptive to employees’ allegations that management acted unfairly in terminating employees and forcing them to lose out on options gains.

The largest awards have been made when courts have concluded that discrimination caused former employees to miss out on options gains to which they would have been entitled, had they remained employed.

“Action ” Steps

Employment lawyers recommend precision in drafting options agreements to reduce the chances of future litigation, according to the Wall Street Journal:

  • spell out when options will be vested
  • state what happens when there is a change in corporate control
  • decide what constitutes a change in control
  • state what constitutes a voluntary and involuntary departure
  • determine under what, if any, circumstances an employee can exercise options after leaving the company.