As stock options are being used more often by companies to recruit and keep employees, legal disputes involving options also are on the rise nationally.
A growing number of employees have filed lawsuits claiming companies fired them before their stock options vested, costing the workers millions of dollars in lost potential earnings. Companies, meantime, increasingly are placing restrictions on options, such as so-called "clawback" provisions that force employees to forfeit stock option earnings if they leave to work for a competitor.
Legal experts say the law on stock options is still in the nascent stage, with legal precedents waiting to be set.
A former employee of Waltham, Mass.-based computer software firm
sued the company, claiming it fired him to prevent him from exercising his stock options. The
Ninth Circuit Court of Appeals
last year ruled in the employee's favor. It decided that under Massachusetts law, an employer cannot fire a worker in order to prevent the person from benefiting from stock options. Parametric didn't respond to a request for comment on the case.
In Texas, a former employee of
has sued the company, claiming it wrongly terminated him shortly before his stock options were due to mature. The
Third District Court of Appeals
last year concluded Dell had authority to terminate the employee at will. But the court said the question of whether he was fired for cause still was an issue, and returned that portion of the case to the trial court. Dell didn't immediately respond to a request for comment on the case.
In a highly publicized case similar in some respects to the
dispute, three former executives of
, an online women's network, sued the company last year and earlier this year in disputes over stock options. The company said Tuesday that the matter had been settled amicably without anyone admitting fault or liability, though it wouldn't disclose terms.
More than 100 employees of
Fisher Controls International
in Texas sued after the company's then-parent,
, sold Fisher. Monsanto maintained the sale was effectively termination of employment for the workers, as far as their Monsanto stock options were concerned. The employees disagreed. Last year, the
First District Court of Appeals
in Texas returned the case to the trial court. Monsanto didn't immediately respond to a request for comment on the suit this week.
In separate decisions, the
U.S. District Court for the Southern District of New York
and the Ninth Circuit Court of Appeals in California last year ruled in favor of
in lawsuits over its policy of forcing employees to forfeit stock option proceeds if they joined a competing firm within six months after exercising the options. In the New York case, the court ruled that stock options are not wages, and therefore not protected from forfeiture under the state labor law. IBM declined to comment on the suits.