For instance, here is Workday's definition of service in their Equity Incentive Plan highlighting mine: It sounds as though he was hired with the knowledge that he was working on his PhD and that this made the employee, a desirable employee to have. How have other startups handled stock option vesting during an unpaid leave of absence? Sample 1 Sample 2 Sample 3 See all Then, as you mention, you can later grant him an ISO when he comes back to work as a full time employee. The Committee determines, in its sole discretion, which leaves of absence count for this purpose, and when Service terminates for all purposes under the Plan. Get Free Membership Enter your email:
For future SNAFUs like this, you could write a policy (with legal counsel consent) if you prefer the options not vest during sabbaticals, including your own. Although on sabbatical, he is technically still an employee of the company and expected to return to work after his approved unpaid leave of absence.
Yes, our option plan does provide us with the flexibility to change vesting schedules as needed. I think we are now weighing the pros and cons of the practical side. It's tough since this is an important, but recent addition to the team and his leave could last anywhere from months.
I am wondering if it makes more sense to give him a smaller grant that vests upon completion of this 6 month project more like a contractor and then just have a new and separate grant with standard vesting once he joins full time towards the end of If the original grant has already been made, you should definitely consult with counsel on this.
If the original grant is an ISO, there are tax code restrictions that may affect the tax-qualified status of the option. For example, if the leave is for longer than 3 months and the return to work is not guaranteed by statute or contract, then the unvested ISOs at the time the 3 months ends will lose their tax-qualified status and will be treated as NSOs.
In addition, any vested ISOs must be exercised at the time the 3 months ends or they, too, will lose their ISO status. If the original grant has not been made yet, you may want to consider granting him an NSO which does not have employment status restrictions and can continue to vest during the LOA, or stop vesting, as the company decides.
Then, as you mention, you can later grant him an ISO when he comes back to work as a full time employee. It sounds as though he was hired with the knowledge that he was working on his PhD and that this made the employee, a desirable employee to have.
If having his PhD makes him a more valuable employee for the company to have and you have already mentioned that he is a key employee who has made contributions , why even alter his vesting schedule for the 3 months that he is gone? Is he still to be considered an employee at the company? Unless it is spelled out that he can not vest during this LOA in his Employment Agreement and the Option Plan, consider not doing anything. You will end up with an employee who will be VERY appreciative for your understanding of his situation.
Just leave the option award and vesting alone - don't do anything. Any advice offered here will be inadequate because we don't know what jurisdictions prevail for your company i. I encountered this re: Don't mess with making any 'rules' for LOAs or other unpaid leaves i.
Treat each situation on its own merit. Switch your standard option award to NSO's in general, as they're slightly easier to administer, especially if you award any to non-employees. LOA's, as Achaessa points out, so that as long as there is no break in this employee's 'service' or employment status you can avoid some of the legal issues of ISO's. Since he is still considered an employee you have allowed a leave of absence , the options must remain in place and vest as though he was still actively working for the company.
In the event of military leave, vesting shall toll during any unpaid portion of such leave, provided that, upon a Participants returning from military leave under conditions that would entitle him or her to protection upon such return under the Uniform Services Employment and Reemployment Rights Act , he or she shall be given vesting credit with respect to Options to the same extent as would have applied had the Participant continued to provide services to the Company throughout the leave on the same terms as he or she was providing services immediately prior to such leave.
Sample 1 Sample 2 Sample 3 See all Unless the Committee otherwise provides at the time of the leave or otherwise , if the Grantee is granted a leave of absence by the Company, the Grantee a shall not be deemed to have incurred a termination of employment at the time such leave commences for purposes of the award, and b shall be deemed to be employed by the Company for the duration of such approved leave of absence for purposes of the award.
A termination of employment shall be deemed to have occurred if the Grantee does not timely return to active employment upon the expiration of such approved leave or if the Grantee commences a leave that is not approved by the Company.
For purposes of the Plan, employment shall not be deemed to terminate when the Participant goes on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Company in writing. Employment, however, shall be deemed to terminate 90 days after the Participant goes on a leave, unless a contract or statute guarantees his or her right to return to work.
Employment shall be deemed to terminate in any event when the approved leave ends, unless the Participant immediately returns to work. For purposes of Incentive Stock Options, no leave of absence may exceed three months, unless the right to reemployment upon expiration of such leave is provided by statute or contract.
If the period of leave exceeds three months and the Awardee's right to reemployment is not provided by statute or contract, the Awardee's employment with the Company shall be deemed to terminate on the first day immediately following such three-month period, and any Incentive Stock Option granted to the Awardee shall cease to be treated as an Incentive Stock Option and shall terminate upon the expiration of the three-month period starting on the date the employment relationship is deemed terminated.
Subject to Section A of the Code, with respect to the Award, the Company may, in its sole discretion, determine that if you are on an approved leave of absence for any reason you will be considered to still be in the employ of, or providing services for, the Company, provided that rights to the Restricted Stock Units during a leave of absence will be limited to the extent to which those rights were earned or vested when the leave of absence began.
A Participant who is, as of the Offer Date, or following the Offer Date commences, on a Leave of Absence shall be deemed to remain employed by Anheuser-Busch InBev and its subsidiaries unless the Leave of Absence extends beyond the second anniversary of the date on which the Leave of Absence commenced, in which event the Participant will be deemed to have resigned, in the meaning of Section 8 of the Plan and for the application of the Plan only, on and as of the Leave of Absence expiration date.
Notwithstanding the above, for purposes of the Pro-Rata Formula under Section 8.
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Registering as a Premium member will give you complete access to our award-winning content and tools on stock options, restricted stock/RSUs, SARs, and ESPPs. Who becomes a Premium Member? See our long list of paid subscribers. Leave of Absence. For purposes of Incentive Stock Options, no leave of absence may exceed three months, unless the right to reemployment upon expiration of such leave is provided by statute or contract. Normally a plan will specify that an option ceases vesting upon the recipient ceasing to provide service. The definition of ceasing to provide service will carve out approved and statutory leaves, but say that the treatment of the option during the leave will be up to the company.