New York Employment Lawyer Blog

Here are the guidelines of how to preserve stock options when you are fired. Exercise them and do it to the letter!

In Deal v. Consumer Programs, Inc., an 8th Circuit Court of Appeals case, Ms. Peggy Deal was fired following a change of control in the corporation. Her Employment Agreement entitled her to severance payment, unaccrued base salary and a bonus. Under a separate Options Agreement, she was entitled to purchase stock for 90 days at a reduced price post termination.

Ms. Deal received her severance but was denied her unaccrued salary and bonus. Ms. Deal retained a lawyer and notified Consumer that she was seeking the monies owed and that she was going to exercise her options. Before paying for the stock, as per the agreement, she sought reassurance that Consumer would uphold its end. Consumer did not respond to two letters sent regarding the stock options and Ms. Deal never paid the purchase price. The 90 days came and went.

Ms. Deal sued for the monies owed under the Employment Agreement and the stock. She was awarded the monies but not the stock. Both parties appealed and the appellate court said that despite Consumer’s failure to perform under the Employment Agreement Ms. Deal had no right to seek assurances for the options deal. She did not pay the purchase price for the stock and the time period for her to exercise the options had passed. Therefore, she was denied her options.

When an employee is terminated for whatever reason (or no reason at all) it is important to ferret out the employment issues from the pure contractual issues. Despite Consumer’s failure to live up to the terms of the employment agreement Ms. Deal must observe and follow the terms of a separately negotiated and signed contract with Consumer.