Valuing Lost Stock or Equity as Damages in Wrongful Termination Cases

If you are wrongfully terminated at work, one of the major remedies the court can award you is the value and amount of any lost monetary damages that your wrongful termination may have cost you. But lost pay can be more than wages. In many cases, employers pay employees in stock options, which sometimes may be more valuable than the actual wage, at least in the long term. There also may be an opportunity to negotiate for an acceleration of the vesting of your stock or RSUs.

What Are They Worth?

Courts can and do award aggrieved employees their lost stocks, or equity in the business that was once part of their compensation package, but unlike money, stocks don’t just have a value in the present; they have a continuing value in the future. That means that valuing the amount and extent of damages when there are stock options as part of someone’s compensation can be difficult.

Courts have two ways of valuing stock or equity that is lost by an employee because of unfair or wrongful termination.  In some cases, courts will value stock based on whatever its highest value may have been , within a reasonable period of time.

In other cases, courts have just taken the value of the stock at the time of the wrongful discharge, or other illegal employment action by the employer.

It can be very speculative for courts to attempt to make a  future value award—that is, providing employees with the value of stock as it may be worth 5, 10, or more years in the future; that often is seen as too remote and speculative for a court or jury to accurately determine or predict. This is especially true with smaller companies, where stock isn’t publicly traded, and there aren’t many years of past stock behavior to base the future valuation upon.

Sometimes, an employee seeking to get the value of lost stock can look to the company documents such as the Stock Option Plan. What did the company tell investors the stock was or would be worth? What is the company selling its stock for today?

It’s worth noting that some courts have said that stock options are not wages at all, and thus, can’t be recovered as compensation in employment law cases. This is something to look out for and be aware of, if an employee is accepting a compensation package dependent on, and heavily incentivized by, stock options.

However, these are mostly cases where the stock option was just that—an option. Not an actual guaranteed part of an employee’s compensation package.

Make sure you get the compensation you deserve if you were illegally or wrongfully terminated. Contact the San Jose employment attorneys at the Costanzo Law Firm today.

Sources:

rezlaw.com/wp-content/uploads/2021/06/Lee-Loisel_What-about-my-stock-Plaintiff-magazine.pdf

vensure.com/employment-law-updates/california/california-court-of-appeals-stock-options-are-not-wages/