Ask HN: How should I handle an equity dispute?
I worked for a company that offered 5000 shares upon signing the employment agreement that vest at 20% a year. After I was employed for a year and 25 days the company decided to relocate and lay off some employees. There was no equity forfeiture clause in the contract in the event of termination. Furthermore the contract stated that in the event of a liquidity event all shares vest immediately. The company was purchased a few weeks ago. The CEO maintains that I am not entitled to any shares because although the signed employment agreement was executed by both parties I didn't relocate and and get on payroll until a few days after the employment agreement was executed. I had code written and meetings that occurred during the time he claims I was not an employee.
Two things --
First, does the date on the employment contract mean that I was an effective employee on that date?
Secondly, does the fact that the 5000 shares were assigned to me with no details as to what happens upon termination mean that I still own those 5000 shares?
The liquidity event (acquisition) occurred and other employees were paid for their shares. I reached out to the CEO and he stated that I owned nothing.
My thoughts -- I definitely am entitled to 1000 shares. Also due to the ambiguous (non-existent) details of what happens to the 5000 shares upon termination I think I may be entitled to be paid for those as well.
What are HN's thoughts on this situation? Find a lawyer -- basically any will do. He'll send them a sternly written letter, which is going to say a variant of "You can make this go away cheaply or you can fight it in court if you have a lot of confidence in how airtight your paper is. Your call." I had code written and meetings that occurred during the time he claims I was not an employee. Your lawyer will have a lot of fun with a newly rich entity which desires to commit to the position on paper that it has stolen your IP. The acquirer's legal team are also going to raise holy hell about representations made during due diligence, because "WHAT?!" Relevantly to the entrepreneurs in the room: this is why you pay somebody to make sure your paper says what you think it does prior to e.g. issuing equity grants. (Usual disclaimer: I'm a lawyer, but not your lawyer, and not licensed in NC or VA, so don't rely on what I say here as a substitute for legal advice.) 1. I've seen this movie a few times. You want an employment lawyer, preferably one that has done work for tech-company employees and thus likely knows about stock options and restricted stock. Even more preferably, you want an employment lawyer who has actually tried at least a few cases in court. (Some lawyers are full of bluster but then fold up when confronted with the prospect of actually having to try a case.) Unfortunately I don't know any employment lawyers in North Carolina or Virginia. 2. Employment lawyers come in two varieties: Management side, and employee side. Some employee-side lawyers get their training in management-side firms and then switch sides and move to smaller firms or one-person shops. I know one or two here in Houston who represent both employees and management (not in the same cases). 3. I wouldn't bother communicating with the old CEO. The person you want to talk to initially, I think, is the CFO of the acquiring company, or its general counsel if they have one. 4. I disagree with Patrick [EDIT: sort of] about the sternly-written letter part. A lawyer who immediately comes in with guns blazing will trigger all sorts of immune-system responses with the acquiring company. When the dispute concerns a comparatively-limited dollar value, it usually represents relatively low exposure to the company. When that's the case, you want a lawyer who will write a polite letter and ask for a meeting or phone call to exchange views. At least in my experience, that will usually get you farther, faster, at lower cost, and greater odds of being taken seriously, than being aggressive when they don't perceive you as being a real threat to them. [EDIT: On the other hand, an aggressive lawyer will get everyone's attention more quickly than a polite and reasonable one. It's just that some aggressive lawyers can poison the atmosphere immediately, while others don't know how to tone it down when it comes time to close in on a reasonable settlement.] 5. Never threaten a lawsuit; doing so could let the other side beat you to the punch by suing you in their preferred jurisdiction, e.g., for a declaratory judgment that they're not liable to you. If the time comes when you have to file a lawsuit, then just do it, without anger, rancor --- or warning [1]. (EDIT: But always be ready to file a lawsuit, both in preparation and psychologically; the increased confidence can make it more likely you'll get a fair settlement early.) 6. Start now to gather whatever documents you have that are even remotely relevant --- emails, calendar entries, code commits, etc. Judges and juries tend to place more confidence in contemporaneous documents than they do in after-the-fact testimony. Witnesses might genuinely have "creative" memories, especially if they have an axe to grind, a score to settle, an ass to cover, an agenda to advance, etc. 7. Don't destroy any documents; that can look like a coverup. In court, at best it can damage your credibility; at worst, it can result in sanctions --- possibly including having to pay the other side's attorneys' fees, and perhaps even dismissal of your case. 8. There are some possible "plot twists" that you didn't mention, but that could have a significant effect on the legal posture. 9. Be careful what you disclose publicly (like here on HN); you could be jeopardizing any applicable attorney-client privilege and/or work-product immunity. 10. Watch out for statute-of-limitations deadlines for filing suit; depending on the claims you might file, some of the deadlines can be pretty short. 11. Don't bad-mouth the company [EDIT: or anyone associated with the company]. You don't want them counterclaiming that you libeled them or slandered them. (N.B. Libel is in writing; slander is oral; and both are "verbal," that is, in words, although I suppose either could be graphic as well.) 12. On the subject of counterclaims: Consider what kind of claims the company might bring against you if you were to sue them. For example, they might come up with a claim that you stole their IP. Or that you did something else wrong. Or that you were terminated for cause. That approach is a standard immune-system response, to try to make you nervous about having some downside and not just upside. 13. I can't represent you in this, but I'd be willing to talk for a few minutes on the phone, off the meter, as long as it's clear that we're not entering into a representation. Shoot me an email; my address is in my HN profile. [EDIT: 14. Don't use a company computer, email account or phone to communicate about this. The company could be monitoring those comm channels, or it could choose to do so. The case law is still evolving as to whether employees have a legitimate expectation of privacy in those circumstances. In some jurisdictions, communicating with your lawyer over a company-owned channel might jeopardize your attorney-client privilege; as I say, the law is evolving in that area.] [1] http://www.oncontracts.com/take-a-lesson-from-indiana-jones-... > Your lawyer will have a lot of fun with a newly rich entity which desires to commit to the position on paper that it has stolen your IP. The acquirer's legal team are also going to raise holy hell about representations made during due diligence, because "WHAT?!" The OP should absolutely consult with qualified legal counsel, but I'm always amused at how quick folks are to make assumptions when it comes to legal disputes. Just about everything beyond the first three words you wrote ("find a lawyer") requires one to make significant assumptions, including: 1. The OP's description of what occurred is accurate. 2. The OP actually understands the legal documents he signed. 3. The OP's former employer made mistakes or attempted to defraud the OP. 4. The acquiring company didn't perform adequate due diligence. 5. The value of the shares in dispute makes them worth fighting for. All of these (save the second, clearly) are absolutely possible, but generally, Occam's razor applies to legal disputes. I'm not sure what any of those 5 points have to do with whether he should talk to a lawyer. Per my comment, they don't. But the rest of the comment I was responding to ("he'll send them a sternly written letter", "your lawyer will have a lot of fun with a newly rich entity which desires to commit to the position on paper that it has stolen your IP") is pure speculation based on assumption. Folks should stick to "find a lawyer" and leave it at that. Disagree. Some of us have actually done the "find a lawyer thing" in various circumstances and seen what happened. Where it's possible to share details, it's helpful, and so we do. My SO is a litigator. Based on the stories I hear all the time, I can state with absolute confidence that the sharing you refer to here, which consists primarily of non-attorneys making assumptions and engaging in speculation, is not only unlikely to help the OP but could be detrimental to him if he acts based on the information he received from a non-attorney (or even an attorney who has not agreed to represent him). Your own past experiences with attorneys are irrelevant here and do not eliminate the fact that nobody can use HN to provide the OP with the legal counsel he clearly needs. The simple truth of the matter is that the OP is unlikely to find a satisfactory resolution to this matter without the help of a competent attorney. That was a very forceful argument for something Patrick had already said. Is there any value whatsoever added by questioning OP's version of events? It's not like we are liable to ever hear from OP or the company that supposedly wrong him. So, just go with it, there's no benefit to doing otherwise. Go with what? The OP came to HN asking legal questions. Non-attorneys on HN have no business speculating and trying to provide legal advice to the OP. Attorneys on HN may not be licensed in the OP's jurisdiction, may not be engaged in the relevant practice areas and have obviously not been retained by the OP. They, therefore, cannot provide the OP with the type of guidance the OP would receive from an attorney with whom he has established an attorney-client relationship. If the OP had posted "Ask HN: I think I just had a heart attack", I would hope that most of the folks here would be responsible enough to suggest that the OP go to the nearest ER or call 911 right away instead of playing the online differential diagnosis game. But legal issues that could have a material impact on someone's career and finances? Speculate away! For heaven's sake, the most upvoted comment here, which starts with the only correct response ("find an attorney"), goes on to suggest that the OP find any attorney ("basically any will do"). Really. I hope you see the problem now. Nope, still don't. People speculate about the domains of other professions constantly. It's just part of how people are wired. OP got the advice he needed. A lawyer will correct misconceptions developed here, such as they are. And in the mean time, we will in all likelihood continue to feel free to jaw about what might happen. Did you exercise the shares when you left the company? Do you have emails or dated letters which can be used to support this? Usually you have 90 days from your last day to do this (in writing, with the onus totally being on the employee), otherwise the options transition back to the company. You seem to be contradicting yourself here: "After I was employed for a year and 25 days the company decided to relocate..." "I didn't relocate and 100% work with the company until 2 days after my one year anniversary." But regardless, you should probably get yourself a lawyer. sorry for the confusion, company was located in a different location and I worked remote for 3 weeks until I could move. should have cleared that up. You never know, and IANAL, but the acceleration clause in your agreement probably does not automatically vest the shares of people not currently employed by the company at the time of the sale. Do you have options or shares? If options: did you execute? If you didn't, you may have problems. Just shares, no mention of options. Yeah if it were options i'd see an issue with not exercising before the liquidity event. Issuing shares directly to employees is kind of uncommon. Do your shares have a buyback on them? I'm not clear why you think you might have a claim on all 5000 shares. Can you be a little clearer about this? You didn't really share a timeline of your employment, so it's hard to reason this out from first principles. Assume you get all 5000 shares. How much is that going to be worth? Low/mid/hi-how-many-figures? Because the contract stated that upon employment there would be a grant of 5000 shares that would vest annually or in a liquidity event would vest immediately, with no mention of forfeiture. Valuation is hard to determine since the former CEO is non-responsive, all I know is others with the same equity position received significant payouts. You never know, you could have the world's most poorly written stock vesting contract, but it seems very unlikely that their vesting scheme was designed so that vesting didn't matter in the one case where vesting actually does matter. You don't need a "forfeiture" clause for vesting to have teeth. You'd probably need to share more of the details for us to noodle around any further with this. (If you've got any kind of confidentiality agreement with your former employer, don't share details.) So the employment contract says that the company would grant you shares, and that these shares would be subject to vesting? But the company never actually issued those shares? So, when you left the company, the only paperwork you had about those shares was the employment agreement? If so, it sounds like you don't own the shares, but the company owes you the shares. The fact of whether or not you own the shares should be easy to determine. The part that's harder (and requires analysis of what you signed) is whether or not the company paid you what you were owed during the period of your employment (including, if applicable, shares). The strength of your claim will likely depend on the specific wording of the contract and circumstances of employment. For example, are they shares, or options that required extra exercise steps/payments at certain times? Exactly what language is used to describe the vesting? (It seems a long shot that you'd be due the full 5000 shares if your employment clearly ended before the liquidity/vesting event: the whole point of vesting is to curtail the equity in the hands of those who have quit or been fired. But conversely, a true year of vesting means something was due you.) But, semi-anonymous commenters on the internet are not the help you need. You need competent legal advice. You could get this from a lawyer in private practice, but also perhaps a legal clinic (often associated with law schools) or perhaps any employee-protection government agency in your or the company's jurisdiction. Note that while you're shopping for a lawyer, you'll often get 30+ minutes of their help for free, as they find out if the case interests them, and they discuss what steps are possible, at what costs, and to what benefit. It is very beneficial to talk to multiple lawyers at this stage: you may be amazed how wildly different their recommendations are, from the same documents and core facts, based on their varying styles and expertise. (As a non-expert yourself, engaging the first one with a good story is a big mistake. Picking one from among 5+ that you've talked to, because in comparison he had the most insight, is better.) Get together your paperwork – especially the contract and any other key documents demonstrating your employment relationship (such as key dates where it began/changed/ended). Also, type up a more detailed timeline of relevant events with exact dates, involved people, and agreements/document-excerpts. (Perhaps that's just a page or two.) Then, use that to shop around. Even if your first few inquiries are to the wrong kind of firms – by specialty or size – they'll then suggest more appropriate alternatives. Offer to email the contract & timeline to any professional who wants details before they confer with you. You'll learn a lot from these discussions even before you're paying anyone on the clock – if it ever comes to that. You'll probably even want to improve the timeline once your first few conversations help focus your attention on the key aspects. And if the case is really strong – the plain language of the contract and typical understanding of your tenure means you're due shares – it may just take a strong letter from a credible attorney to receive a settlement. Even if the case isn't really strong, if it's at all colorable, the threat of legal drama will probably be productive. The time period immediately around a sale is delicate. Even if the deal has already closed, some chunk of the money is probably held back in escrow to deal with exactly this kind of stuff. usual legalese: I am a lawyer, but I am not your lawyer. I'm no longer practicing. You need to get yourself a lawyer ASAP. Where are you located? i'm located in north carolina, company is in VA, the company that acquired them has several international offices, not sure where they're based out of yet. I've never used these guys, but they are a big firm and if your equity is worth a lot you may want to consider them: http://www.kattenlaw.com/employmentlaw I can't recommend them other than to say that it is a fairly large firm and if I needed a first call, I'd probably call them. If you want a smaller shop most bar associations have special practice groups. They have referall practices that are basically free or very cheap and can get you a basic lay of the land way better than anyone on here. Here is the one that I think is closest to you: http://www.meckbar.org/lawyerreferral/lawyerreferral.cfm I don't know if you need a specialist or anything, but the firm we use is based in NC: http://www.rbh.com/ I don't have much to compare them to, but I've been pretty happy with their work. This is all to common. I am currently in a not an entirely dissimilar situation. What I have learned from it I would tell anyone working at a Startup. When your grant comes due make them give it to you. Get a lawyer then if need be. Now to the "I'm not a lawyer advice." In most states you have 1 year to claim things not given to you under an employment agreement. As long as your year is not up you may have a case. If you are past a year your options may be limited. Now a list of questions you need the answer to. Were you granted Shares or Options?
An Option would have to be executed with in a given amount of time. A share is actual equity in the company, but an option is the ability to buy a share for a set price. Often you are given an options grant based on the "strike price" on the day you were hired. If the company had raised money at $5m Valuation, and sold for $25M and you had 1% of the company, you'd get 1% of $20M. Because your Buy price would be based on the valuation of the company when you were hired. If you didn't exercise an option after termination you don't own any shares. Did you sign anything on termination? Most of the time the exit agreement which often includes a severance becomes the document that says, "We don't owe you nothing" and is very hard to fight. Two questions may not be a "list" but I think those two will suffice for now. If anyone has a recommendation on a law firm I could retain i'd be grateful for the guidance. You want a Labor and Employment lawyer - If you don't get any recommendations you can always start here - http://www.lawyers.com/labor-and-employment/raleigh/north-ca... I wasn't sure about the jurisdiction so I was focusing on VA based attorneys but it wouldn't hurt to speak with an NC based one as well, thank you. http://upcounsel.com works well. You describe your legal request and they will route you to lawyers who have experience with these sorts of things. Good luck! Thanks everyone -- I knew engaging a lawyer was the next step after the CEO was non-responsive but having other tech professionals and entrepreneurs chime in with some insight was very valuable. Thank you all for your interest and advice. OP should find an attorney. Also, OP is presumably now on the market? :) Willing to relocate to SFBA? CEO should not screw people over (presumably) tens of thousands of dollars in a much larger deal. And should have been more competent w.r.t. contracts. i'm a senior js engineer and angular fanatic / mentor. pretty sure SFBA is over-crowded with us :) And yet, there are probably still jobs there... Find an employment attorney ASAP. Any thoughts on what kind of attorney handles these kinds of disputes? labor law? contract law? having trouble finding the right kind of lawyer. I am not an attorney but have done a lot of legal work in various companies I have been involved with and have a lot of experience with employment contracts. You definitely need an attorney that specializes in employment law and I might be able to recommend several but I would some additional info about your situation. Your profile doesn't list an email or phone so if you want to provide a way to contact you I can get in touch to see if I can help further. If you don't know any attorneys at all then just google some local ones and call 'em up. If they can't help you they will refer you to a buddy that can. Otherwise call an attorney you happen to know or know of for same. Pretty much all of them should be competent enough to write a letter for you and get the ball rolling. They refer to themselves as "Employment Lawyers." Don't know where you are, but googling "Employment Lawyer NYC" gives me back a gajillion results. If you're in NYC, I can give you a recommendation (my email address is in my profile) The options agreement was included in the employment contract? In my experience they've been two separate documents. If you do have both (or if they were combined) signed then you should absolutely contact a lawyer. They'll contact the company and then the company will contact their lawyer, who will most likely tell them to just give you what you're entitled to. I'm happy to post excerpts of my employment contract if it would help the community gauge the situation. how much is this 1000 shares worth (roughly)? is it worth hiring a lawyer? based on what my former co-workers got paid it is definitely worth the cost of a lawyer. Please update later to show how this turned out.