Can I loose my company stock if I leave and compete?

My company is privately held. Therefore, we do not have shares of stock, we have "units." Each year I am given units as part of my year end bonus and as part of a Long Term Reward Plan. The bonus shares vest immediately, and the Long Term Plan units vest 1/5 of the total plan each year. It has been said (verbally and in writting) that if we leave the company and we compete, that the units will be voided and we will never receive the payout - even on the units that have already vested. Is this legal? Can this be enforced? How is it that units that have already been vested, be taken away from me. This is a lot of money and I need to make sure that I can get it. Please let me know. Thank you.

1 answer  |  asked Mar 27, 2002 12:14 PM [EST]  |  applies to California

Answers (1)

Janet M. Koehn
is this an unlawful covenant?

this plan is intriguing. on the one hand, a covenant not to compete is void and unenforceable in california, with limited exceptions including the sale of the goodwill of the company. however, you have some type of equity, whether it is called stock or not, which this plan seeks to exact as a penalty for what would be illegal to require by contract.
this type of plan requires careful scrutiny by an attorney experienced in employment law and compensation plans. if as you say there is a great deal of money at stake, it is well worth the time and money to get a considered opinion from such an attorney.
if you are in southern california, please call me for an appointment.
janet koehn
805-658-0655

posted by Janet M. Koehn  |  Mar 27, 2002 2:55 PM [EST]

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