Legal Law

Can Severance Pay Be Provided in Stock Options?

Severance Pay

Losing a job can be stressful, even when the decision to let you go is made for non-financial reasons. It is also a time to start planning your financial future, figure out where you’ll find work next and consider how you’ll cover expenses while looking for a new position. severance pay is a common way for companies to ease the transition out of the company and provide some stability. It can include salary payments, continued insurance coverage, outplacement services and other benefits such as company equipment or a cell phone. Many severance packages also contain stock options, which are the right to buy shares in the company at a price set some time in the future. However, there are restrictions on how long you have to exercise these options after termination.

Tech workers are often compensated with equity, in the form of both restricted and unrestricted share options, which are only vested once a certain amount of time has passed since they were granted. While some tech companies may be more willing to accelerate the vesting of these options as part of a severance package, this is not always possible and may not be in your best interest.

While a company is legally required to pay you your severance package within three months after the termination date, there are some limits on how much it can give you. According to the Ministry of Labour, you are entitled to at least one month’s salary for each year of employment up to a maximum of 3 years. If your employer gives you less than the minimum requirement, you can make a claim to the Ministry of Labour for breach of the Employment Standards Act.

Can Severance Pay Be Provided in Stock Options?

There are also some limitations on the amount of severance you can get based on your age and whether you’re a unionized employee. In addition, if your employer has an arbitration clause in the severance agreement, you will likely have to sign it as part of your termination process, and the arbitrator could reduce the severance pay Toronto based on this clause.

In order to avoid these issues, you should ensure that your severance package is well-drafted and clearly states what you’re eligible for. This will prevent any potential disputes and disagreements. In addition, it’s a good idea to have an experienced employment lawyer at Samfiru Tumarkin LLP review your severance agreement and determine whether any provisions affecting the granting of vested or unvested stock options are legally enforceable.

One of the main concerns of terminated employees is that they’ll lose the right to purchase vested options after their termination. Most companies only allow for a short window in which to exercise the options, called the “exercise period.” However, an experienced attorney can negotiate this and extend the exercise period to six months, two years, five years or more.

The right to purchase vested or unvested stock options can be an important component of a severance package, particularly for highly-paid executives. While it’s understandable that some employees will focus more on securing promised bonus payments or a severance salary payment, ensuring that you have the option to continue to purchase stock options can add significantly to your overall compensation package.