What Happens to Your RSUs if You Get Fired?

When faced with the surprise of losing a job, one common concern is what happens to any restricted stock units (RSUs) that have vested. RSUs are a form of equity incentive that employees receive, usually in the form of company stock that vests over time. If you are terminated, this issue becomes even more pressing.

Vesting and Ownership

RSUs vest when the company allows you to take ownership of the stock over a period. Once they vest, these shares become your property, independent of why you left the company. The company cannot reclaim these shares, regardless of the circumstances, including being fired.

Case Study: Fist Fight with Boss

Imagine the scenario where you have a grant of 1200 RSUs, vesting 100 each month starting in January 2023. Suppose you have a conflict with your boss on February 22nd, leading to a termination on February 23rd. Here's an in-depth look at how vesting works in such a scenario:

Vested Shares in January: You receive 100 shares in January, and these shares are already owned. When you are fired, these shares remain with you, as you are already the legal owner. February Vests: If the shares vest on the first business day after the 20th, by the time you are fired on February 23rd, you have not received the 100 shares for February. Vesting Process Time:** Typically, the vesting process takes several business days (about 5). Therefore, the shares are vested into your stock brokerage account, such as Morgan Stanley, Charles Schwab, or ETrade, a few days after you are fired.

This means that even if you are fired on the 23rd, you will still receive the 100 shares you vested in January. However, you won't receive any additional shares that would vest the same day you were fired.

Post-Vesting Delays

While regular paychecks are often prorated based on the number of days worked, vesting is generally not prorated. If you were fired on the 19th, you would likely not receive any of the 100 shares for February, as the shares usually vest on the first business day after the 20th.

In some cases, the vesting process might take a few days to complete. If the 19th were a Sunday, and the paperwork couldn't be processed until Monday, you might technically receive the shares four days after your termination. However, this would still be a rare scenario and would require a strong legal argument to succeed.

Additional Considerations

Some employees have contracts that provide a severance package or a "golden parachute" if they are terminated. These agreements are usually only applicable to senior executives or those in high-risk roles. Additionally, layoffs often come with accelerated vesting schedules, but this typically occurs after the last day of employment. Being "fired" is not always an accurate term for layoffs, which are usually handled through a separation process.

If you find yourself in the unfortunate situation of being terminated, it's a good idea to review your employment agreements and understand the details of how your RSUs work. Consulting with a legal professional can also provide valuable insights into protecting your best interests during this time.