During a promotion last year I was promised stock options by my new manager as part of my compensation. During my annual review two weeks ago he reassured me that I should get the options. I called my HR department to verify, and was told that I did not qualify for those options. WHen I confronted my manager he said sorry I guess I was wrong. At the moment those options worth at least 5000 dollars, these options could potentially be worth hundreds of thousands of dollars. Do I have any recourse?
Manager promised stock options that he should not have
- Thread Starter Roneyj24
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Betty3
Well-Known Member
Unless you have a binding employment contract guaranteeing these stock options, I don't see what you can do - employers/managers can make mistakes or change their minds. Do you have anything at all in writing re the stock options?
Unfortunately I do not have anything in writing. However there was a form submitted to HR requesting the stock options. At the time neither I nor my manager was informed I would not qualify for these options. This was a significant portion of my compensation without the options I would have not accepted the position.
Betty3
Well-Known Member
If there is nothing in writing guaranteeing these stock options, I don't see what you can do. You can certainly talk to an employment lawyer since you relied on the stock options as part of your compensation when taking the promotion but "detrimental reliance" is hard to win in an employment setting.
Disabled Vet
Well-Known Member
The manager is an acting representative of the company. If during the interview process for this job (promotion). the manager states to the employee your salary is X and you have stock options. Now that can be backed up because the manager must have said it.. or else they wouldn't have filled out the form the OP stated. I would talk to the manager again. Explain the reason you took this position is because of the possible pay from these stock options. Then ask the manager if he/she would go with you to HR to talk about it as well. Explain your case to the HR folks. Maybe..... They will increase your pay, give you these stock options or nothing. It's worth a try.... I used to tell my guys, remember if you make a wave make sure you can ride it. So be professional, nice during these talks and not forceful.
cbg
Super Moderator
Very big maybe. I think if anything, the pay increase is the more likely of the two.
An employer can get into very big trouble when they offer benefits to someone who is not, under their plan documents entitled to them. We can't tell from what we have if these stock options are under ERISA but if they are, the employer CANNOT offer them to an employee who does not qualify, regardless of what was said by who at hire.
An employer can get into very big trouble when they offer benefits to someone who is not, under their plan documents entitled to them. We can't tell from what we have if these stock options are under ERISA but if they are, the employer CANNOT offer them to an employee who does not qualify, regardless of what was said by who at hire.
Betty3
Well-Known Member
Managers make mistakes & sometimes there isn't anything (or much) you can do about it.
I agree with the others that your only real recourse is to see if your employer will raise your salary in lieu of the stock options. At best you would have a claim for the current value of the options. Speculating as to what they might someday be worth won't get you far as no one can predict what the future holds. For everyone who got in on the ground floor of Microsoft there is someone else holding Enron stock.
Someone mentioned ERISA, all I have read about ERISA pertains to retirement benefits. These options were given to emoyees as an incentive to remain with the company. They were vested 25% per year. I am not looking for anything other than the options I was promised. If my manager that offered them to me as part of my compensation, freely admits to the offer; would that change anything?
Someone mentioned ERISA. All I have read about ERISA pertains to retirement benefits. These options were given to emoyees as an incentive to remain with the company. They were vested 25% per year. All I want are the options I was promised. If my manager that offered them to me as part of my compensation freely admits to the offer, would that change anything?
Betty3
Well-Known Member
I don't know. It can't hurt. Your manager apparently doesn't make the final decision as to whether you are entitled to them or not though.
Stock option plans can fall under ERISA. If this is a qualified plan (and we can not tell from here) then you are only entitled to those options if you qualify under the terms of the plan. Your manager can not by pass this. Admitting they were promised changes nothing although the company might be willing to grant some other benefit in its place as a good will gesture (extra vacation, extra pay, better office, whatever). There is a very small chance that if you took this to court, you might prevail if it was more than just an honest mistake, you can proce damages and can prove to some satisfaction that the deciding factor in takingthe job or not was the stock options. For 5K in options, that is going to be a tough argument to make or at least one that is going to cost you well over 5K to pursue.
cbg
Super Moderator
A great many more plans than retirement plans can fall under ERISA. We can't know if these do or don't, but ERISA is in no way limited to retirement plans.
Betty3
Well-Known Member
& even if ERISA isn't involved, doesn't mean you are entitled to/will receive the stock options. You can only pursue it & see if you so desire.
Stock options are complicated.
- Almost anything can fall under ERISA. Just fund it through an outside trustee and you have involked ERISA. Certain types of benefits (retirement plans including 401(k) and medical plans) must be ERISA, but other types of benefits might be ERISA.
- ERISA is enforced by DOL. If ERISA is in play, then there must be a formal written plan and the plan must be followed to the letter. I have done stock plans before, but ERISA was not involved.
- HOWEVER stock options are more commonly an IRS issue. Under IRC (different law), stock options can be qualified or non-qualified. ISO and ESPP are the most common types of qualified stock options, as are ESOP, which is something differnet. What all three of these have in common is that there are formal plan rules controlled by IRS and IRC (not ERISA). Past that, there are non-qualified plans, which are what they sound like, any plan which is not qualified. Qualified stock plans tend to have some sort of tax preference while non-qualified stock "plans" (which might not have an actual plan) do not. IRS pbulication 15B Fringe Benefits discusses the IRS stock rules in detail.
- Lastly, under Common Law, employers can normally change compensation on a go forward basis. However, if the employee was promised say $10/hr and only paid $8/hr, in theory there is potential recourse under Common Law. Adding stock or stock options does not change this principal. Second however is that claiming is not proving. The employer has many potential defenses including "a reasonable person would have gotten it in writing or checked the benefit plans". I have never worked for a company where managers were allowed to unilaterly do things like make stock option offers without going through normal channels. If nothing else, our formal published plans did not allow it and the wording of the published plans made it very clear that this was not allowed. We also tended to put specific "this is not a contract" language in all of our offer letters.
- Almost anything can fall under ERISA. Just fund it through an outside trustee and you have involked ERISA. Certain types of benefits (retirement plans including 401(k) and medical plans) must be ERISA, but other types of benefits might be ERISA.
- ERISA is enforced by DOL. If ERISA is in play, then there must be a formal written plan and the plan must be followed to the letter. I have done stock plans before, but ERISA was not involved.
- HOWEVER stock options are more commonly an IRS issue. Under IRC (different law), stock options can be qualified or non-qualified. ISO and ESPP are the most common types of qualified stock options, as are ESOP, which is something differnet. What all three of these have in common is that there are formal plan rules controlled by IRS and IRC (not ERISA). Past that, there are non-qualified plans, which are what they sound like, any plan which is not qualified. Qualified stock plans tend to have some sort of tax preference while non-qualified stock "plans" (which might not have an actual plan) do not. IRS pbulication 15B Fringe Benefits discusses the IRS stock rules in detail.
- Lastly, under Common Law, employers can normally change compensation on a go forward basis. However, if the employee was promised say $10/hr and only paid $8/hr, in theory there is potential recourse under Common Law. Adding stock or stock options does not change this principal. Second however is that claiming is not proving. The employer has many potential defenses including "a reasonable person would have gotten it in writing or checked the benefit plans". I have never worked for a company where managers were allowed to unilaterly do things like make stock option offers without going through normal channels. If nothing else, our formal published plans did not allow it and the wording of the published plans made it very clear that this was not allowed. We also tended to put specific "this is not a contract" language in all of our offer letters.
My experience with corporate stock options is that they are worthless most of the time; it is all speculation.
And in small, privately held companies, the higher-ups can really mess with the value of your stock:
Issue more stock to dilute your stock value,
Issue different classes of stock, where you don't get the "safe" class of stock they get,
Terminate you right before you are fully vested, so they can regain the stock that you might have obtained (watch out for this right before lucrative mergers).
Better to not compromise regular salary for stock options; I invest the money from my salary in better companies than the one(s) I work for (I can't believe I just said that...)
And in small, privately held companies, the higher-ups can really mess with the value of your stock:
Issue more stock to dilute your stock value,
Issue different classes of stock, where you don't get the "safe" class of stock they get,
Terminate you right before you are fully vested, so they can regain the stock that you might have obtained (watch out for this right before lucrative mergers).
Better to not compromise regular salary for stock options; I invest the money from my salary in better companies than the one(s) I work for (I can't believe I just said that...)
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