Don’t Lose Your Equity: Protect What You Worked For

What Happens to Stock and Equity When You’re Let Go?

You spent years building value, not just for your company, but for yourself. That equity, those stock options, the RSUs, they weren’t just extras. They were promises. And if you’ve been laid off or are facing termination in New York, it can feel like that promise is being pulled out from under you.

At Horn Wright, LLP, we work with employees, founders, and executives who are navigating high-stakes exits. Our experienced business transaction lawyers help protect the equity you earned. If you’re worried about losing your shares, getting taxed unfairly, or being locked out of future upside, we’re here to help you understand your options, and fight for what’s yours.

Stock Options, RSUs, and Equity Grants: How They’re Affected

Equity compensation takes many forms, and the rules around each can vary widely. In New York, we often see employment agreements with stock options, restricted stock units (RSUs), and various kinds of equity grants. Each is handled differently when you’re let go.

• Stock options typically come with an exercise window. Once you leave the company, that window may shrink to 90 days, or less. If you don’t act fast, you could lose the right to buy in at all.
• RSUs usually vest on a schedule and may be subject to a cliff. If you leave before a vesting date, even by a day, you could forfeit the entire tranche.
• Equity grants such as performance shares or founder’s equity often include complex performance milestones or transfer restrictions. These might continue post-termination unless specifically released.

Each plan is governed by its own legal documents. We review them carefully to determine whether your employer is applying the terms fairly, and lawfully.

What Happens to Vested vs. Unvested Shares

Not all equity is created equal. In most employment arrangements, vested shares are yours outright, while unvested shares may be forfeited upon termination. But the definitions of “vested” and “unvested” can sometimes be twisted, especially if the company controls the interpretation.

In New York, courts generally follow contract law principles when it comes to disputes over equity. That means if your employment agreement, stock plan, or grant documents are ambiguous, you may have room to push back. In fact, under New York Business Corporation Law § 501, all shareholders, employees included, have equal rights unless the charter or bylaws state otherwise.

So if your employer is trying to rescind shares you’ve already earned or is misclassifying them as unvested, that’s a fight worth having.

Timeline Traps to Watch Out For

Timing is everything when it comes to equity, and it’s where many employees lose value without even realizing it. Employers often write strict post-termination deadlines into stock agreements, and they’re rarely emphasized when you’re shown the door.

Here are just a few of the traps we see most:

• Short exercise windows for options that expire before you’ve had time to consult an advisor
• Vest dates that fall just after your termination, sometimes timed that way intentionally
• Required notice periods that, if waived, trigger accelerated forfeitures

Many companies use these rules to quietly claw back equity. We help you spot these clauses, calculate your deadlines, and take fast, strategic action to protect your interests.

Get the Full Value of Your Compensation

Equity is part of your total compensation. That means it deserves just as much protection and negotiation as your base pay, bonuses, or severance. But it’s also the most commonly misunderstood part of the package.

Our job is to make sure you walk away with as much value as possible. That includes getting paid for what you’ve earned, and preserving your right to future upside wherever the law allows.

How to Keep Your Equity Intact During Negotiations

Equity rights don’t automatically vanish when you leave a job. But if you don’t assert them especially in a severance negotiation, they can disappear quietly.

A few techniques we use to preserve equity value during negotiation:

• Request equity-specific language in severance documents. If your employer doesn’t mention your stock, that doesn’t mean you’ve lost it, but silence can be used against you later. We insist on clear terms outlining your rights.
• Negotiate extended exercise windows. Companies sometimes offer these to avoid litigation. If you’ve added value, they may be willing to give you more time to exercise your options.
• Push for accelerated vesting under discretionary clauses. Many New York-based companies have boards that can approve early vesting in separation situations. We help you build the business case.

You worked for this equity, it wasn’t a gift. Treating it like compensation gives you leverage during exit discussions.

Using Timing and Language to Preserve Your Options

What your documents say, and when you speak up, matters a lot. Too many employees miss out simply because their agreements didn’t include the right words, or they waited too long to raise the issue.

We guide clients to:

• Time their resignation or termination discussions to align with key vesting dates
• Use precise language when discussing "cause," "termination," or "good leaver" status
• Preserve written evidence of performance that can justify equity retention

In New York, contract interpretation is often about the small stuff. One missing phrase can mean the difference between full value and zero.

Common Employer Tactics That Reduce Your Payout

Unfortunately, some companies count on confusion. They know most employees won’t challenge equity decisions, so they use subtle tactics to shrink payouts.

Watch for these:

• Reclassifying your departure as “for cause” to avoid equity obligations, even when no misconduct occurred
• Claiming board discretion to cancel grants, then failing to document any actual vote
• Bundling equity waivers into broad severance releases that are hard to interpret

Our team investigates these practices and pushes back under New York contract law and applicable securities rules. If your employer plays games, we’ll call them on it.

Tax Surprises That Could Hurt You Later

Even when you win the equity battle, you still need to prepare for tax impacts. Equity compensation is notorious for producing unexpected bills—sometimes years after you leave the company.

We help you plan ahead, so your hard-earned shares don’t come with a side of IRS trouble.

Early Stock Liquidation and Tax Hits

Selling your stock too soon, or too late, can trigger unintended tax consequences. Many employees are surprised to learn that:

• Exercising non-qualified stock options (NSOs) creates regular income tax, not capital gains
• Early exercise or early sale of ISO shares may void favorable tax treatment under the Internal Revenue Code § 422
• RSUs are taxed as ordinary income when they vest, not when you sell

The timing of your exit, combined with the structure of your equity, can cause your tax bill to jump. We work with tax advisors to develop smart, legal strategies that preserve more of your gains.

How Severance Language Can Shift Tax Responsibility

Believe it or not, the way your severance agreement is worded can affect who’s responsible for certain taxes. If your employer structures equity benefits as part of your severance payout, you could get hit with additional withholding, or even double taxation.

We often see issues under IRC § 409A, which governs deferred compensation. If your agreement isn’t compliant, penalties can be steep. We’ll review the language, flag red flags, and help renegotiate if needed.

Working With Tax Professionals Before You Sign

The smartest time to loop in a tax pro is before the deal is done. We frequently coordinate with CPAs and financial advisors throughout New York to structure exits that are legally sound and financially efficient.

You may only leave this job once, but the tax consequences can follow you for years. We make sure your agreement sets you up for success, not surprises.

Protect Your Equity With Experienced Business Transaction Lawyers

Equity is more than numbers on a spreadsheet, it’s your time, your effort, and your reward. At Horn Wright, LLP, our business transaction lawyers represent employees and executives across New York State who want to protect what they’ve earned.

If you're ready to work with one of the best law firms in the country, our team is here to help. Don’t let equity slip through your fingers. We’ll help you hold on to what’s rightfully yours.

Call Horn Wright, LLP, today to take the next step toward securing your future.