Employment Law

Do I get to keep my stock options after losing my job?

A photo of a person looking at a stock's performance. (Photo: Jason Briscoe / Unsplash)

In some cases, non-unionized employees in Canada can lose the ability to exercise their stock options when they are fired or let go — preventing them from accessing an important part of their compensation.

With a growing number of Canadian workers receiving a portion of their pay through stock options, it’s important to understand the rights that you have.

How do stock options work?

A stock option is a form of deferred compensation, similar to a pension. They can be accessed through a variety of plans, including:

  • Long-term incentive plan (LTIP)
  • Short-term incentive plan (STIP)
  • Restricted stock unit (RSU)
  • Performance stock unit (PSU)

All of these plans provide non-unionized employees with an option to buy shares in their company at a certain strike price.

The option will “vest” on a certain date in the future. The hope is that the market value of your shares will be higher than the strike price of the share grant.

If the market value of your shares does  go up, you can immediately sell them and pocket the difference.

Stock options vesting schedule

A stock options vesting schedule will typically look like this:

Date of grant: January 1, 2023. Total number of shares optioned to employee: 99

  1. 33 shares to vest on the first anniversary of the stock option grant
  2. 33 shares to vest on the second anniversary of the stock option grant
  3. 33 shares to vest on the third anniversary of the stock option grant

Any shares that haven’t vested yet are called “unvested shares.”

What happens to my stock options if I’m fired?

In Canada, non-unionized employees who are fired without cause are entitled to all components of their compensation for the duration of their severance period — including their stock options.

  • Example: Mark is owed 13 months of severance pay after being let go by his company. As a result, he will be entitled to all of the shares that would vest during the 13 months following his termination. Any stock options vesting after his severance period would be forfeited.

However, the situation changes if a non-unionized worker is terminated for cause. In addition to not receiving a severance package, any unvested stock options would be forfeited as of their last day of work.

WATCH: Employment lawyer Lior Samfiru explains what rights employees have if they are being fired or let go on an episode of the Employment Law Show.

The reality is that most stock option grants are made in accordance with a stock option plan, which sets out the terms of the grant.

These plans include specific provisions for a number of matters, including termination of employment, death of an optionee, or optionees that are on leave.

Prior to accepting a stock option grant, have your plan reviewed by an experienced employment lawyer at Samfiru Tumarkin LLP.

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How is severance pay calculated?

Severance for non-unionized employees in Canada can be as much as 24 months’ pay.

This includes individuals working full-time, part-time, or hourly in Ontario, Alberta, and B.C.

The amount of compensation you are entitled to is calculated using several factors, including:

  • Age
  • Length of service
  • Position at the company
  • Ability to find new work

To figure out how much you could be owed, use our firm’s free Severance Pay Calculator. It has helped millions of Canadians determine their severance entitlements.

If your company doesn’t provide you with the correct amount, you have been wrongfully dismissed and should contact Samfiru Tumarkin LLP immediately.

We regularly resolve wrongful dismissal claims and can help you secure proper severance.

Severance pay for provincially regulated employees
Rights to severance for federally regulated workers
• Severance packages in a recession

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What should I do if I don’t want to lose my stock options when I’m fired?

What happens to your stock options shouldn’t be discussed at the time of your termination, this discussion should take place when the option is granted.

If you want your stock options to continue to vest according to their vesting schedule, even if you are fired or let go, get your employer to agree to this in writing.

In the event that your boss refuses to grant this request, carefully review your compensation package. If it’s only competitive once your stock options are taken into account, you should seek legal counsel before accepting it.

While the potential for a massive payout should be considered, unfavourable market conditions can affect the value of a non-unionized employee’s stock options.

If the bulk of your compensation vests after you are terminated, that unvested compensation could be lost through no fault of your own.

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My boss is pressuring me to sign my severance offer immediately, what should I do?

Many non-unionized workers in Canada believe that they have to sign a severance offer from their employer as soon as possible. However, this isn’t true.

Your boss can’t legally force you to accept any offer before leaving a termination meeting or a few days after receiving it.

If your company provides you with a severance offer, don’t sign anything before speaking with an experienced employment lawyer at Samfiru Tumarkin LLP. This is crucial when stock options are involved.

In some cases, employers try to add:

  • A termination clause that limits the amount of severance pay you are owed and your access to stock options
  • Non-compete clauses that prevent you from being able to pursue employment elsewhere in your industry

We can review your stock option plan and determine if any clauses affecting your access to your options are legally enforceable.

If the provisions aren’t legally enforceable, then the default rule will prevail — entitling you to all of the stock options that would vest during your severance period.

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Lost your job? Speak with an employment lawyer

If you are fired or let go for any reason, contact the experienced employment law team at Samfiru Tumarkin LLP.

Our lawyers in Ontario, Alberta, and B.C. have helped tens of thousands of non-unionized individuals resolve their workplace issues.

We can review your situation, enforce your rights, and ensure that you receive the compensation you are owed.

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