employee stock plans

Outten & Golden attorneys are familiar with a wide variety of employee stock plan arrangements. We often review and negotiate employment agreements and severance agreements involving grants under employee stock plans. Our goal is to help employees understand their rights and obligations under these plans, including making them aware of possible confidentiality, non-competition, and non-solicitation obligations that stock plans may contain. We also negotiate and litigate disputes involving employers' refusals to comply with the terms of stock plans.

Employee stock plans are compensation arrangements that govern the employee's grant of equity, stock, or other ownership interest in the company. The four typical "broad-based" employee ownership plans include:

  • an employee stock ownership plan (ESOP),
  • a stock option plan,
  • an employee stock purchase plan (ESPP), and
  • a section 401(k) plan.

Other forms of individual equity plans grant restricted stock or stock appreciation rights (SARs).

When the employee is granted ownership in the company via one of these stock plans, the employee signs on to the terms, conditions and obligations enumerated in the plan. In addition to describing the amount of the grant, the vesting requirements, and the tax consequences of the grant, the stock plan often describes the following: what happens to the grant upon the employee's termination; restrictive covenants that may be connected to the employee's participation in the stock plan; and provisions specifying which law and jurisdiction govern the grant.