Fired Before Your Equity Vested? Lawyer for Tech and Startup Employees

Fired right before your stock vested? Losing unvested options or RSUs can cost hundreds of thousands of dollars. If the real reason was discrimination, retaliation or a breach of your agreement, California law gives you options, and your equity may be negotiable on the way out.

On this page: Equity at termination · When it is illegal · Timing · Non-competes · Negotiating · Deadlines · FAQ

For many engineers, product leaders and early employees, equity is the largest part of their compensation. Being let go weeks before a vesting cliff, a large tranche, or an acquisition can cost far more than a paycheck. California law does not let an employer fire you for an illegal reason, and the way your equity is handled at termination is often open to negotiation. Smith Trial Group represents tech and startup employees across Southern California. Attorney Cardon Smith spent years defending Fortune 500 companies in business and employment litigation, so he knows how companies evaluate these claims.

How Equity Usually Works at Termination

• Vesting schedules. A common schedule is four years with a one-year cliff. If employment ends before the cliff, no shares vest; after the cliff, shares usually vest monthly or quarterly. Unvested equity is generally forfeited when employment ends unless your documents say otherwise.
• Stock options and exercise windows. Vested options usually must be exercised within a set period after termination, often 90 days. Incentive stock options generally must be exercised within three months of termination to keep their favorable tax treatment. Missing the window can mean losing the options entirely.
• RSUs. Restricted stock units at private companies may have both a time-based condition and a liquidity-event condition. Read whether vested units survive termination until an IPO or acquisition.
• Acceleration. Some agreements provide single-trigger acceleration (on an acquisition) or double-trigger acceleration (on an acquisition followed by termination without cause or resignation for good reason).
• Repurchase rights and clawbacks. Some plans let the company buy back shares or claw back equity on termination for “cause.” How “cause” is defined matters.

Gather your offer letter, equity grant notices, the stock plan, any option or RSU agreements, and any employment or change-in-control agreement. The specific language decides most of these questions.

When Termination Before Vesting Is Illegal

California employment is generally at will, so an employer can usually end employment for any lawful reason, even shortly before a vesting date. The question is why you were let go. Termination is illegal if a motivating reason was:

• Discrimination based on age, pregnancy, disability, race, sex, national origin or another protected characteristic under the Fair Employment and Housing Act. Older engineers replaced by younger, cheaper hires and employees let go during or after pregnancy or medical leave are common examples. See age discrimination.
• Retaliation for complaining about harassment, discrimination, unpaid wages or safety issues, for taking protected leave, or for reporting suspected fraud or violations of law. See workplace retaliation and whistleblower protection.
• A breach of contract, such as an agreement that promises acceleration, severance or termination only for cause.

In addition, California courts have recognized that an employer may not act in bad faith to deprive an employee of compensation the employee has already earned. Earned commissions and bonuses that are wages must be paid when employment ends, and failing to pay final wages on time can trigger waiting time penalties under the Labor Code. Whether an equity award counts as earned compensation depends on the documents and the facts.

Why Timing Matters

A termination shortly before a cliff, a large vesting date, a funding round or an acquisition is not illegal by itself, but suspicious timing combined with other evidence can support a claim. Examples include a recent complaint, a recent leave request, a pattern of letting go employees near their vesting dates, shifting explanations, or a sudden performance plan after years of strong reviews. Preserve your reviews, messages and the timeline.

Non-Competes and Moving On

California’s Business and Professions Code 16600 makes most employee non-compete agreements void, and since 2024 California law (Business and Professions Code 16600.5) makes them unenforceable against California employees even if they were signed elsewhere. Employers also had to notify affected employees that unlawful non-compete clauses were void. You still must protect your former employer’s trade secrets, and some non-solicitation and confidentiality terms may apply. Do not take code, customer lists or confidential documents when you leave.

Negotiating Your Exit

Most companies ask departing employees to sign a release in exchange for severance. That is often the best moment to negotiate equity, including accelerated vesting, an extended exercise window, treating the departure as a termination without cause, or extra cash to replace forfeited equity. If you have a potential discrimination or retaliation claim, your leverage is greater. Do not sign a release before having it reviewed. See severance agreement review and executive employment lawyer.

Deadlines

A discrimination or retaliation claim under FEHA requires a complaint with the California Civil Rights Department, generally within three years of the termination. Other claims, such as federal claims and contract claims, have different deadlines, and option exercise windows can close in as little as 90 days. Get advice quickly.

Frequently Asked Questions

Can my company fire me right before my equity vests?

In most cases a California employer can end at-will employment for a lawful reason, even before a vesting date. It cannot fire you for a discriminatory or retaliatory reason, or in breach of a contract, and suspicious timing can be evidence of an illegal motive.

Do I lose my unvested stock options if I am fired?

Usually, unvested options are forfeited at termination unless your agreement provides acceleration. Vested options typically must be exercised within a limited window, often 90 days, so review your documents right away.

Can I negotiate my equity in a severance agreement?

Yes. Accelerated vesting, an extended exercise window or additional cash are common requests. Your leverage depends on the strength of any legal claims and the company’s interest in a release.

Is my non-compete enforceable in California?

Most employee non-compete agreements are void in California under Business and Professions Code 16600, and California law since 2024 makes them unenforceable against California employees even if signed elsewhere. Confidentiality and trade secret obligations still apply.

Are unpaid commissions and bonuses wages?

Earned commissions and many earned bonuses are wages under California law and must be paid when employment ends. Late final wages can trigger waiting time penalties of up to 30 days of pay.

How do you charge for these cases?

Discrimination and retaliation cases are generally handled on contingency. For severance negotiation and contract review, we discuss fee options in the free consultation.