Stock, Stock Options, “Equity” Archives

Voluntary – Key Words & Phrases

Published on February 19th, 2019 by Alan L. Sklover

Sklover Working Wisdom keywords and phrases

Be on the lookout for . . .

“Voluntary,” as in “Voluntary Departure,” “Voluntary Resignation”
or “Voluntary Waiver”

You’re quite likely to find the word “voluntary” in several work-related legal documents. If you do notice it, that word may be very advantageous to you.

Generally speaking, “voluntary” means “done on one’s own free will.” It is synonymous with discretionary, unforced and optional. In legal documents, it often suggests that the act described was not required, not coerced, and not demanded.

Let’s say that, according to your employer’s Annual Bonus Plan, you are not entitled to your annual bonus if you “voluntarily” resign before the day it is paid. What if, two weeks before bonus payment date, you resigned and left your job in fear that your boss might beat you up in one of his infamous uncontrolled rages?

Was your departure “voluntary?” I’d say no. Are you entitled to your annual bonus? I’d say yes, although I’m confident that most employers would disagree.

You have a strong, reasonable and likely winning argument that the bonus is yours, so long as you spot, appreciate and point to the word “voluntary.”

In Repayment Agreements, you might promise to repay your employer in, as examples, a Sign-on Bonus Agreement, a Relocation Expenses Policy, or a Tuition Assistance Plan if you “voluntarily” leave before two years of service. What if you left earlier than that because, all of a sudden, your salary was reduced by 40%, and your family likes to eat three meals a day? (Some kids demand 4 or 5!!)

Is feeding your hungry family “voluntary?” I’d say No. Was your departure to take a better paying job truly “voluntary?” I’d say No. For this reason, you have a very good, and probably winning, basis to argue, with likely success, that your repayment is not required.

So, in this circumstance, too, you may very well not have to repay any sign-on bonus, educational assistance, etc., so long, that is, as you spot, appreciate and raise in your defense the word “voluntary.”

The same goes for whether a Non-Compete Agreement is valid or void, according to its own words. If the non-compete says it is valid if you “voluntarily” leave your job, and you can show that you are allergic to the new paint used throughout the office, then it is void as to you, so long, that is, as you spot, appreciate and raise the word “voluntary.”

There are many other legal documents that may contain the word “voluntary.” Look for “voluntary” in any and every workplace document, whether in an agreement, a company policy, an Employee Handbook, Stock Award, or other document.

You may be VERY GLAD you did.

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© 2019 Alan L. Sklover All Rights Reserved and Strictly Enforced.

Offer Letter or Company Plan – Which One Governs?

Published on October 10th, 2017 by Alan L. Sklover

 
“Whoever is careless with the truth in small matters
cannot be trusted with important matters.”

– Albert Einstein

ACTUAL CASE HISTORIES: Case History 1: Joseph signed an Offer Letter that said the following: “The Company will provide you and your family with health insurance coverage, subject to the terms provisions and conditions of the Company Health Insurance Plan.” Sounded good to Joseph.

After starting the job, though, Joseph found out that the terms of the Company Health Insurance Plan provided that “New employees and their families are not eligible for paid health insurance coverage until the employee has been on the job for six months.” So, the “terms and provisions” of the Plan essentially took away what the Offer Letter had seemed to provide Joseph and his family. Big disappointment, to say the least. In this case history, the Plan “overcame” or “superseded” what was in Joseph’s Offer Letter, or at least modified it to his and his family’s significant detriment. Ouch!

Case History 2: When Lemuel started his job, he was very interested in the company’s willingness to offer stock options to its employees. For this reason, he carefully reviewed the terms of his employer’s Stock Option Plan. It said quite clearly that “Company employees will receive a minimum of 1,000 stock options for each twelve months on the job, unless agreed otherwise.” Sounded great to Lemuel.

After a year on the job, Lemuel asked his Human Resources representative if he could get a written statement of how many stock options he had been awarded. To his surprise, he was told “You don’t have any.” When Lemuel insisted on an explanation, she responded, “Your Offer Letter stated clearly ‘Your compensation consists of a base salary, an annual bonus and health care coverage. No other compensation is being offered to you. To receive any additional form of compensation, you and an authorized representative of the Company and you must sign another document that provides that to you.”

So, the “terms and provisions” of Lemuel’s Offer Letter essentially took away what the Stock Option Plan had seemed to provide Lemuel and his family. In this case history, the Offer Letter “overcame” or “superseded” the Company’s Stock Option Plan. Ouch! Big disappointment, to say the least. Seems that the Offer Letter took away what the Stock Option Plan seemed to provide, by “overcoming” or “superseding” what was in the company’s Stock Option Plan.

Does your Offer Letter (or employment agreement) overcome everything that is said in any of the employer’s compensation and benefit Plans? Or do your employer’s compensation and benefit Plans overcome your Offer Letter (or employment agreement)? How can you tell? Perhaps, more importantly, what can you do?

LESSON TO LEARN: If they differ, which one – your offer letter or your employer’s plans – “govern and control?” It all depends, of course, on the wording of the documents – both offer letter and plan – and your willingness to take the time and effort to (a) read them carefully, and (b) ask for clarification, either on your own or, perhaps, with the guidance of an experienced employment attorney.

These days, with employers trying their very best to lower their “employment-related overhead costs,” we are seeing more and more of these issues, and sadly, most often only after someone has lost out on what they deserve.

But you can protect yourself, if only you are willing to try to do so by (i) reading carefully, (ii) thinking carefully and (iii) requesting clarification that even a 10-year old could understand.

That’s what we call wise “navigation and negotiation” of your employment relation, to ensure you get all you deserve, and don’t miss out on anything you do deserve.

Take it from me: unless you act to protect yourself, no one else will, especially your employer.

WHAT YOU CAN DO: Have you received an offer letter, or are you expecting to receive one soon? Do you believe you are entitled to any compensation or benefit that is provided under a company Plan, such as stock, stock options, severance, health care, disability insurance, life insurance, educational benefits, or otherwise? To avoid being deeply disappointed, here are seven things you can – and should – do to protect yourself:
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Blackout Period – Key Words & Phrases

Published on October 4th, 2017 by Alan L. Sklover

Key Words

What is the meaning of:

Blackout Period ?

In its most general sense, a “blackout period” is a period of time during which certain people are either prohibited, or limited, from engaging in a certain activity.

In the employment context, the term “blackout period” is most commonly used in two ways:

First, employers who maintain investment or retirement plans for their employees sometimes impose “blackout periods” during which employees are prohibited from making certain changes to their investments. This is generally intended to prevent employees who know about the planned changes from taking advantage of their knowledge of the proposed changes, to the possible detriment of other employees, who are unaware.

Second, corporate executives and certain employees who may be privy to “inside information” are prohibited by the imposition of a “blackout period” from buying or selling the company’s stock. This is intended to deter what is called “insider trading,” which is unfair to all other shareholders who do not possess the “inside information.”

What “inside information” would justify the imposition of a “blackout period?” Examples include (i) knowing that an announcement is going to be made that the company is being purchased, or is merging, which might make the stock price go up, and (ii) knowing that the company will soon announce that its computers have been hacked, and its secrets have in this way been divulged to hackers, which might make the stock price decline.

Some companies impose regular “blackout periods,” such as fifteen days before each fiscal quarter or fiscal year earnings reports are publicly announced.

“Blackout periods” are imposed by companies to deter improper activities, but may be enforced by governmental agencies, including the U.S. Securities Exchange Commission.

If your employer imposes a “black out” period on any of your activities, chances are very high that you will be notified. Engaging in prohibited activities during a company-announced “blackout period” is almost always considered grave misconduct and therefore “cause” for firing.

Get the picture? Keep it in mind. You read about it here. Knowledge is power. Forewarned is forearmed. That’s what SkloverWorkingWisdom™ is all about.

For a complete list of our Model Letters, Model Memos, Checklists and Form Agreements, just [click here.]

For a telephone consultation on strategies to deal with “constructive discharge” or other workplace issues, just [click here.]

© 2017 Alan L. Sklover. All Rights Reserved. Commercial Use Strictly Prohibited

Carried Interest – Key Words & Phrases

Published on April 13th, 2016 by Alan L. Sklover

Key Words

What is the meaning of:

CARRIED INTEREST?

“Carried Interest” (sometimes called “Carry”) is a term used to refer to one of the fees an investment manager may receive. It is a share of the investment’s profits, over and above any share of the investment profits that the manager may be due from the manager’s own initial contribution to the investment.
It is really a kind of “performance bonus,” because the greater the investment’s profits, the greater the manager’s “carried interest” is worth.

The term “carried interest” originated in the 1600’s, when a ship captain was awarded a percentage of the ship’s “carried” cargo for completing a successful sea voyage.

In “private equity” investments, the investment manager receives “carried interests” when the investment is completed, generally when the investment is sold.

In “hedge fund” investments, the investment manager receives “carried interest” at the conclusion of a year, determined by a percentage of the year’s profits.

Employees of investment management firms may be awarded a small share of the firm’s “carried interests,” to be vested over time, the way that other long-term incentives are awarded. It is a variant of stock, stock options and other forms of “equity” awarded by traditional investment firms. Like “equity awards” in traditional investment firms, “carried interests” often vest over time.

If you are offered “carried interests” by an employer, your “carried interests” may well come with “strings attached” in the form of non-compete agreements, requirements that you invest your own money at times, even forfeiture and “clawback” provisions that take your awards away from you if you fail to fulfill your obligations.

The “paperwork” involved really does need to be carefully reviewed by an attorney experienced in these matters. The rewards are potentially great, matched only by the risks involved.

On these and other workplace issues, I am available for telephone consultations lasting 30 minutes, 60 minutes, or 2 hours. If you would like to set up a consultation, just [click here.]

© 2016 Alan L. Sklover. All Rights Reserved. Commercial Use Strictly Prohibited

Offered a Position and Shares in a Start-Up? – 10 Traps in the Legal Papers, and Your Ways Out

Published on March 9th, 2016 by Alan L. Sklover

“The spirit of our verbal agreement was true partnership, but
over time it morphed into this one-sided employment arrangement.”

– Actual Client Comment

ACTUAL CASE HISTORY: Kent was the Senior Editor of a major sports-related magazine. He was recruited away by a competing start-up publication, induced to leave his employer of many years by a promise of great wealth to be achieved through his becoming a minority shareholder of the new or young company. Kent gave the new magazine credibility, and for joining he was offered a large number of “Class B” interests in the company.

“When we are sold, or go public, you will become quite, quite wealthy” he was many times told by the start-up’s founder and investors. That was repeated so many times that Kent had already begun to consider where he would purchase his retirement dream, a horse farm.

Through an heroic contribution of energy, imagination, devotion, daring and perseverance, Kent helped the new magazine take significant market share away from larger, more-established competitors. He treated the new magazine as “his baby.” On a salary lower than he was used to, and minimal benefits, he built quite a powerhouse in just a few years. Sure enough, the magazine had attracted great interest, and a communications consortium came forward seeking to purchase the company that owned the magazine. For Kent, however, that was the beginning of his problems.

It all started with a casual management meeting that devolved into a discussion of Kent’s poor judgment, and then an announcement that Kent was being let go. It got worse when he learned that, because he was being let go, he would lose all of his unvested stock. Still worse, he found out that the company had a right to repurchase his vested stock for just $3,000. A third type of stock Kent had been given as a bonus had been so “diluted” by the company issuing 10 million new shares to investors that his remaining interests were worth about $45.00. Finally, he was reminded that the original documents he signed provided that Kent could now not work in the magazine industry for the next 24 months.

No job. No stock. No future. The dream had, somehow, turned into a nightmare. When Kent protested that this was not consistent with the spirit of the deal, he was simply advised, “Speak to your lawyer . . . the one who let you sign those papers.” That is when Kent called us – and not his previous lawyer – to try to salvage the situation.

More times than I can count,: someone contacts my firm and says, “I am being offered a new job. As part of the compensation package, they are offering me shares or units in the new or young company. Can you help me?” My answer is always, “Sure, I have done that many times.” A more candid answer would be “Sure, I have done that many times. However, it’s not an easy thing to do.”

“Why?” you might ask. It is not easy because lawyers for business founders or owners – particularly “Private Equity” owners, almost always make it difficult, and intentionally so. They do so in three basic ways:

First, by purposeful confusion. That is, by preparing three or four different agreements that, together, constitute one offer: (1) one that pertains to employment; (2) one that pertains to non-competition agreements, (3) one that pertains to company self-governance, itself, and (4) one that pertains to earning, vesting and possibly losing ownership interests. It’s a lot of words, a lot of pages and a lot of jargon. No single employee can understand it all. It is quite rare to find an attorney who has experience in each field. In this way, the key points – and real risks – get buried.

Second, through dreams of sugarplums. As the saying goes, “The large print giveth, and the small print taketh away.” Said a bit differently, the potential rewards are highlighted, while the likely risks are made quite difficult to spot, and even more difficult to remedy. Thus, clients begin to count their eventual wealth, which naturally blinds them.

Third, with complexity of cure. When you have three of four separate agreements, often in different typefaces, often without page numbers, always with different paragraph numbering systems and – most complex of all – with hard-to-understand, almost irrational definitions of words and phrases.

There are just too many ways, in too many different places, that the risks are effectively hidden, and the rewards are potentially forfeited. It is something akin to the game of “Whack-A-Mole,” where every time a mole appears from the ground, and you whack at him, another mole pops his head up from another mole hole.

In no other part of my practice of decades have I seen more “bait and switch” than I have in this context. The employee must make life changes and agree to restrictions NOW in return for a mere PROMISE of something to be delivered later, which “something” may in all likelihood never come to be, or if it does come to be, is perhaps 1/1000th as valuable as originally suggested.

LESSON TO LEARN: The task before us is tough: making real – at least likely – the dream opportunity, which by the legal papers has been diminished, made unlikely, and often turned into a nightmare reality by confusing, confounding and complex legal drafting. One thing the legal drafting is not is accidental. Rather it is quite intentional. That is the one thing I can guarantee you.

No matter how difficult the task at hand may be, you are so much more likely to be successful in it if you know what you are doing. Thus, by knowing the essential deal points in this context, and knowing how to address them, can only be helpful.

So long as your requests for change in the legal papers is respectfully presented, reasonable in magnitude and accompanied by a rationale – that is “I want to join you. I just need some things made clearer before I can comfortably come aboard.”

Simply signing what is before you, and hoping that you will be treated “fairly,” is not something that I have seen work out well for employees. And, too, you owe it to yourself and your family to try to avert calamity in your quest for that pot of gold. Here’s how:
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Alan L. Sklover

Alan L. Sklover

Employment Attorney
and Career Strategist
for over 35 years

Job Security and Career Success now depend on knowing how to navigate and negotiate to gain the most for your skills, time and efforts. Learn the trade secrets and 'uncommon common sense' of Attorney Alan L. Sklover, the leading authority on "Negotiating for Yourself at Work™".

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