A Stock Option Contract Should Be Honored

New York, NYA billion dollars is a lot of money. $1.5 billion is even more. And when one thinks of the losses incurred by employees with their employee stock options, little wonder that so many are seeking the advice of an attorney for help from ERISA law. The worsening recession, and the contracting economy are bad enough. Substantial losses in an employee savings plan can make the devastation even harder to bear.

There has never been a more important time for the Employee Retirement Income Security Act (ERISA), given the economic morass the US finds itself in. But more than that, ERISA provides guidance for private businesses in the establishment; the management of pension and health plans and provisions for employees when those benefits are mismanaged; or when stock options are not handled in a prudent fashion with the best interests of the employee at heart.

There are many ways in which a company can attempt to pull the wool over their employee's eyes, especially in a worsening economy.

Take a company that engages in fraud by mis-representing to employees the actual number of stock options that will be given. Misrepresentations with regard to vesting schedules, exercise prices, and overall entitlement to stock options is yet another source of unsavory behavior that will have the ERISA lions roaring with their hackles up.

Sometimes an employee will be denied his, or her rights to accelerated vesting of unvested options in the event of a change in control through a merger or a sale. The latter may have resulted in an employee experiencing diminished income, or left with reduced hours. And yet—in spite of rights granted to the employee by a signed Stock Option Agreement—the accelerated vesting of an unvested option is denied.

A related situation occurs when the sale of a company, or of a division within a company, results in the termination of employees. However, in reality those terminations can occur specifically to prevent the vesting of unvested stock options. In California, in particular, such an outrageous move could qualify as a breach of the covenant of good faith and fair play.

And then there are those employees who have seen their stock options wrongfully cancelled, or breached when their subsidiary or division is sold by the parent firm that originally granted the options. The employees still work there, and even in the same jobs. But due to a paper transaction, signed stock option agreements are simply tossed out the window like some unimportant piece of paper.

In this economy, companies and corporations are in a state of flux. Companies are downsizing, shrinking. Selling off divisions, or re-drawing others. The status quo is under siege. Corporations have been known to bend the rules, or even discard them altogether in an effort to stave off disaster,

Sadly, it can also spell disaster for the employee.

Not much can be done by the individual to turn around a global economy. That job is better left to governments, whose task it is to stimulate the economy through a series of stimulus initiatives and confidence-boosters. And yes, there is a role to play for the individual who will join with other individuals in spending the economy back into the black.

But there's something else the individual can do, and that is to look out for his own station in life. That station includes signed agreements, contracts and legal rights that should not be watered down, or struck down by a company in survival mode.

Or worse—simply driven by greed.

If you are a participant in employee stock options, or an employee savings plan—and you suspect or have seen unsavory behavior on the part of your employer that serves to harm, or limit your investment, consult a stock options lawyer to determine if you have an ERISA law claim.