
Ask HN: How should I handle an equity dispute? - ktavera
I worked for a company that offered 5000 shares upon signing the employment agreement that vest at 20% a year.  After I was employed for a year and 25 days the company decided to relocate and lay off some employees.  There was no equity forfeiture clause in the contract in the event of termination.  Furthermore the contract stated that in the event of a liquidity event all shares vest immediately. The company was purchased a few weeks ago.  The CEO maintains that I am not entitled to <i>any</i> shares because although the signed employment agreement was executed by both parties I didn&#x27;t relocate and and get on payroll until a few days after the employment agreement was executed.  I had code written and meetings that occurred during the time he claims I was not an employee.<p>Two things --<p>First, does the date on the employment contract mean that I was an effective employee on that date?<p>Secondly, does the fact that the 5000 shares were assigned to me with no details as to what happens upon termination mean that I still own those 5000 shares?<p>The liquidity event (acquisition) occurred and other employees were paid for their shares.  I reached out to the CEO and he stated that I owned nothing.<p>My thoughts -- I definitely am entitled to 1000 shares.  Also due to the ambiguous (non-existent) details of what happens to the 5000 shares upon termination I think I may be entitled to be paid for those as well.<p>What are HN&#x27;s thoughts on this situation?
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patio11
Find a lawyer -- basically any will do. He'll send them a sternly written
letter, which is going to say a variant of "You can make this go away cheaply
or you can fight it in court if you have a lot of confidence in how airtight
your paper is. Your call."

 _I had code written and meetings that occurred during the time he claims I
was not an employee._

Your lawyer will have a _lot_ of fun with a newly rich entity which desires to
commit to the position on paper that it has stolen your IP. The acquirer's
legal team are also going to raise holy hell about representations made during
due diligence, because "WHAT?!"

Relevantly to the entrepreneurs in the room: this is why you pay somebody to
make sure your paper says what you think it does prior to e.g. issuing equity
grants.

~~~
7Figures2Commas
> Your lawyer will have a lot of fun with a newly rich entity which desires to
> commit to the position on paper that it has stolen your IP. The acquirer's
> legal team are also going to raise holy hell about representations made
> during due diligence, because "WHAT?!"

The OP should absolutely consult with qualified legal counsel, but I'm always
amused at how quick folks are to make assumptions when it comes to legal
disputes. Just about everything beyond the first three words you wrote ("find
a lawyer") requires one to make significant assumptions, including:

1\. The OP's description of what occurred is accurate.

2\. The OP actually understands the legal documents he signed.

3\. The OP's former employer made mistakes or attempted to defraud the OP.

4\. The acquiring company didn't perform adequate due diligence.

5\. The value of the shares in dispute makes them worth fighting for.

All of these (save the second, clearly) are absolutely possible, but
generally, Occam's razor applies to legal disputes.

~~~
tptacek
I'm not sure what any of those 5 points have to do with whether he should talk
to a lawyer.

~~~
7Figures2Commas
Per my comment, they don't. But the rest of the comment I was responding to
("he'll send them a sternly written letter", "your lawyer will have a lot of
fun with a newly rich entity which desires to commit to the position on paper
that it has stolen your IP") is pure speculation based on assumption.

Folks should stick to "find a lawyer" and leave it at that.

~~~
tptacek
Disagree. Some of us have actually done the "find a lawyer thing" in various
circumstances and seen what happened. Where it's possible to share details,
it's helpful, and so we do.

~~~
7Figures2Commas
My SO is a litigator. Based on the stories I hear all the time, I can state
with absolute confidence that the sharing you refer to here, which consists
primarily of non-attorneys making assumptions and engaging in speculation, is
not only unlikely to help the OP but could be detrimental to him if he acts
based on the information he received from a non-attorney (or even an attorney
who has not agreed to represent him).

Your own past experiences with attorneys are irrelevant here and do not
eliminate the fact that nobody can use HN to provide the OP with the legal
counsel he clearly needs. The simple truth of the matter is that the OP is
unlikely to find a satisfactory resolution to this matter without the help of
a competent attorney.

~~~
tptacek
That was a very forceful argument for something Patrick had already said.

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ckorhonen
Did you exercise the shares when you left the company? Do you have emails or
dated letters which can be used to support this?

Usually you have 90 days from your last day to do this (in writing, with the
onus totally being on the employee), otherwise the options transition back to
the company.

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lisper
You seem to be contradicting yourself here:

"After I was employed for a year and 25 days the company decided to
relocate..."

"I didn't relocate and 100% work with the company until 2 days after my one
year anniversary."

But regardless, you should probably get yourself a lawyer.

~~~
ktavera
sorry for the confusion, company was located in a different location and I
worked remote for 3 weeks until I could move. should have cleared that up.

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tptacek
You never know, and IANAL, but the acceleration clause in your agreement
probably does not automatically vest the shares of people not currently
employed by the company at the time of the sale.

Do you have options or shares? If options: did you execute? If you didn't, you
may have problems.

~~~
ktavera
Just shares, no mention of options. Yeah if it were options i'd see an issue
with not exercising before the liquidity event.

~~~
tptacek
Issuing shares directly to employees is kind of uncommon. Do your shares have
a buyback on them?

I'm not clear why you think you might have a claim on all 5000 shares. Can you
be a little clearer about this? You didn't really share a timeline of your
employment, so it's hard to reason this out from first principles.

Assume you get all 5000 shares. How much is that going to be worth?
Low/mid/hi-how-many-figures?

~~~
ktavera
Because the contract stated that upon employment there would be a grant of
5000 shares that would vest annually or in a liquidity event would vest
immediately, with no mention of forfeiture. Valuation is hard to determine
since the former CEO is non-responsive, all I know is others with the same
equity position received significant payouts.

~~~
tptacek
You never know, you could have the world's most poorly written stock vesting
contract, but it seems very unlikely that their vesting scheme was designed so
that vesting didn't matter in the one case where vesting actually does matter.
You don't need a "forfeiture" clause for vesting to have teeth. You'd probably
need to share more of the details for us to noodle around any further with
this.

(If you've got any kind of confidentiality agreement with your former
employer, don't share details.)

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gojomo
The strength of your claim will likely depend on the specific wording of the
contract and circumstances of employment. For example, are they shares, or
options that required extra exercise steps/payments at certain times? Exactly
what language is used to describe the vesting? (It seems a long shot that
you'd be due the full 5000 shares if your employment clearly ended before the
liquidity/vesting event: the whole point of vesting is to curtail the equity
in the hands of those who have quit or been fired. But conversely, a true year
of vesting means something was due you.)

But, semi-anonymous commenters on the internet are not the help you need. You
need competent legal advice.

You could get this from a lawyer in private practice, but also perhaps a legal
clinic (often associated with law schools) or perhaps any employee-protection
government agency in your or the company's jurisdiction.

Note that while you're shopping for a lawyer, you'll often get 30+ minutes of
their help for free, as they find out if the case interests them, and they
discuss what steps are possible, at what costs, and to what benefit. It is
very beneficial to talk to multiple lawyers at this stage: you may be amazed
how wildly different their recommendations are, from the same documents and
core facts, based on their varying styles and expertise. (As a non-expert
yourself, engaging the first one with a good story is a big mistake. Picking
one from among 5+ that you've talked to, because in comparison he had the most
insight, is better.)

Get together your paperwork – especially the contract and any other key
documents demonstrating your employment relationship (such as key dates where
it began/changed/ended). Also, type up a more detailed timeline of relevant
events with exact dates, involved people, and agreements/document-excerpts.
(Perhaps that's just a page or two.)

Then, use that to shop around. Even if your first few inquiries are to the
wrong kind of firms – by specialty or size – they'll then suggest more
appropriate alternatives.

Offer to email the contract & timeline to any professional who wants details
before they confer with you. You'll learn a lot from these discussions even
before you're paying anyone on the clock – if it ever comes to that. You'll
probably even want to improve the timeline once your first few conversations
help focus your attention on the key aspects.

And if the case is really strong – the plain language of the contract and
typical understanding of your tenure means you're due shares – it may just
take a strong letter from a credible attorney to receive a settlement.

~~~
tptacek
Even if the case isn't really strong, if it's at all colorable, the threat of
legal drama will probably be productive. The time period immediately around a
sale is delicate. Even if the deal has already closed, some chunk of the money
is probably held back in escrow to deal with exactly this kind of stuff.

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CanadaKaz
usual legalese: I am a lawyer, but I am not your lawyer. I'm no longer
practicing. You need to get yourself a lawyer ASAP. Where are you located?

~~~
ktavera
i'm located in north carolina, company is in VA, the company that acquired
them has several international offices, not sure where they're based out of
yet.

~~~
CanadaKaz
I've never used these guys, but they are a big firm and if your equity is
worth a lot you may want to consider them:

[http://www.kattenlaw.com/employmentlaw](http://www.kattenlaw.com/employmentlaw)

I can't recommend them other than to say that it is a fairly large firm and if
I needed a first call, I'd probably call them.

If you want a smaller shop most bar associations have special practice groups.
They have referall practices that are basically free or very cheap and can get
you a basic lay of the land way better than anyone on here. Here is the one
that I think is closest to you:
[http://www.meckbar.org/lawyerreferral/lawyerreferral.cfm](http://www.meckbar.org/lawyerreferral/lawyerreferral.cfm)

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drakaal
This is all to common. I am currently in a not an entirely dissimilar
situation.

What I have learned from it I would tell anyone working at a Startup. When
your grant comes due make them give it to you. Get a lawyer then if need be.

Now to the "I'm not a lawyer advice."

In most states you have 1 year to claim things not given to you under an
employment agreement. As long as your year is not up you may have a case. If
you are past a year your options may be limited.

Now a list of questions you need the answer to.

Were you granted Shares or Options? An Option would have to be executed with
in a given amount of time. A share is actual equity in the company, but an
option is the ability to buy a share for a set price. Often you are given an
options grant based on the "strike price" on the day you were hired. If the
company had raised money at $5m Valuation, and sold for $25M and you had 1% of
the company, you'd get 1% of $20M. Because your Buy price would be based on
the valuation of the company when you were hired.

If you didn't exercise an option after termination you don't own any shares.

Did you sign anything on termination?

Most of the time the exit agreement which often includes a severance becomes
the document that says, "We don't owe you nothing" and is very hard to fight.

Two questions may not be a "list" but I think those two will suffice for now.

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ktavera
If anyone has a recommendation on a law firm I could retain i'd be grateful
for the guidance.

~~~
pandemicsyn
You want a Labor and Employment lawyer - If you don't get any recommendations
you can always start here - [http://www.lawyers.com/labor-and-
employment/raleigh/north-ca...](http://www.lawyers.com/labor-and-
employment/raleigh/north-carolina/law-firms/)

~~~
ktavera
I wasn't sure about the jurisdiction so I was focusing on VA based attorneys
but it wouldn't hurt to speak with an NC based one as well, thank you.

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ktavera
Thanks everyone -- I knew engaging a lawyer was the next step after the CEO
was non-responsive but having other tech professionals and entrepreneurs chime
in with some insight was very valuable. Thank you all for your interest and
advice.

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rdl
OP should find an attorney. Also, OP is presumably now on the market? :)
Willing to relocate to SFBA?

CEO should not screw people over (presumably) tens of thousands of dollars in
a much larger deal. And should have been more competent w.r.t. contracts.

~~~
ktavera
i'm a senior js engineer and angular fanatic / mentor. pretty sure SFBA is
over-crowded with us :)

~~~
rmc
And yet, there are probably still jobs there...

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toomuchtodo
Find an employment attorney ASAP.

~~~
ktavera
Any thoughts on what kind of attorney handles these kinds of disputes? labor
law? contract law? having trouble finding the right kind of lawyer.

~~~
Blueliner
I am not an attorney but have done a lot of legal work in various companies I
have been involved with and have a lot of experience with employment
contracts. You definitely need an attorney that specializes in employment law
and I might be able to recommend several but I would some additional info
about your situation. Your profile doesn't list an email or phone so if you
want to provide a way to contact you I can get in touch to see if I can help
further.

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ryanSrich
The options agreement was included in the employment contract?

In my experience they've been two separate documents. If you do have both (or
if they were combined) signed then you should absolutely contact a lawyer.

They'll contact the company and then the company will contact their lawyer,
who will most likely tell them to just give you what you're entitled to.

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ktavera
I'm happy to post excerpts of my employment contract if it would help the
community gauge the situation.

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icedchai
how much is this 1000 shares worth (roughly)? is it worth hiring a lawyer?

~~~
ktavera
based on what my former co-workers got paid it is definitely worth the cost of
a lawyer.

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eru
Please update later to show how this turned out.

