A friend asked about about resignation timing, but IANAL

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TomatoTomahto
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A friend asked about about resignation timing, but IANAL

Post by TomatoTomahto »

I'm not a lawyer, but nevertheless, a friend reached out to me on this question, and I am in turn reaching out to you BHs.

He has a job offer and wants to resign at the earliest safe time (ie, to not be cheated out of some deferred compensation).

His deferred compensation that is stock-based will vest January 15, 2015. BUT, that can take a week or longer to show up in his brokerage account, which is at a subsidiary of his employer. Additionally, there are often purchase/sale blackouts on the stock that can last a couple of weeks. Even with approval it can take a week between the order to sell and the funds appearing in his bank account.

Questions:
Is he safe resigning on January 16? At that point, the stock will have vested but not yet shown up in his brokerage account.
Is he safe resigning on January 22 if the stock is in his brokerage account but subject to blackout?
Does he have to wait until he's cleared to sell the stock?
Does he have to wait until he has sold the stock and the money has been deposited to his bank?

TIA.
I get the FI part but not the RE part of FIRE.
thewizzer
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Re: A friend asked about about resignation timing, but IANAL

Post by thewizzer »

I have absolutely no idea.

With that being said, is the job that bad? What's the downside to waiting around until Feb. 1 just to be sure?
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bottlecap
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Re: A friend asked about about resignation timing, but IANAL

Post by bottlecap »

Vested typically means it's yours, even if it hasn't posted to your account. I'd check the documents in question to be sure.

JT
Iorek
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Re: A friend asked about about resignation timing, but IANAL

Post by Iorek »

This is not legal advice and I have no experience in these areas, but I would have thought that the meaning of "vest" is that it's his no matter what happens after that. Now whether they can make it difficult as a practical matter might be a different question.
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TomatoTomahto
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Re: A friend asked about about resignation timing, but IANAL

Post by TomatoTomahto »

thewizzer wrote:I have absolutely no idea.

With that being said, is the job that bad? What's the downside to waiting around until Feb. 1 just to be sure?
The job isn't that bad, but he's looking forward to the new one. Since he's on a 90-day notice contract, he has to wait a long time (as he puts it, for-f'in-ever) to start anyway. And, under some scenarios, he might not have the money in his bank account by Feb 1.
I get the FI part but not the RE part of FIRE.
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TomatoTomahto
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Re: A friend asked about about resignation timing, but IANAL

Post by TomatoTomahto »

bottlecap wrote:Vested typically means it's yours, even if it hasn't posted to your account. I'd check the documents in question to be sure.

JT
That was my thought also. He's looking for the paperwork :oops: For obvious reasons, he doesn't want to ask HR for a copy :D
I get the FI part but not the RE part of FIRE.
downshiftme
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Re: A friend asked about about resignation timing, but IANAL

Post by downshiftme »

I am not a lawyer and if I was I wouldn't give you advice unless you were actually my client.

Whenever I have left an employer, I have always given notice AFTER the last relevant date for any bonus compensation due me. For example, for an annual performance bonus I wait until not just the end of the bonus period or the date the awards are announced, but until the date the funds are actually direct deposited into my account. As a manager making annual bonus awards, I have seen bonus committees and senior managers short change people who have done excellent work and should have earned excellent bonuses, usually on the argument that they prefer to use bonus dollars to give incentive to people for future efforts, rather than reward people for past work. In some cases ill timed resignations resulted in very late breaking changes to already awarded bonuses. I see no reason to allow for the possibility of actions like this to affect my own compensation, especially if I can control when I announce my intentions to leave the firm.
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TomatoTomahto
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Re: A friend asked about about resignation timing, but IANAL

Post by TomatoTomahto »

downshiftme wrote:Whenever I have left an employer, I have always given notice AFTER the last relevant date for any bonus compensation due me.
If he takes that advice literally, he could never resign, as every year additional three-year vesting gets added to his "bonus compensation due," roughly at the same time as past bonuses vest. He definitely wouldn't resign until after he gets this year's cash bonus, and for that matter, deferred cash also, but the question is about deferred bonus payable in stock.

I guess the basic question is, if you are still employed a day after a deferred bonus vests, does the employer have any legal way to not deliver it (short of proving malfeasance or something else to justify a clawback)?

ETA:
In some cases ill timed resignations resulted in very late breaking changes to already awarded bonuses.
Was this after the employee was notified of the bonus amount verbally, and with a written description of the bonus? I don't doubt that finding out that someone intends to leave can affect the bonus amount, but find it difficult to comprehend how that can take place after handing the employee the comp paperwork.
Last edited by TomatoTomahto on Sat Nov 22, 2014 9:36 pm, edited 3 times in total.
I get the FI part but not the RE part of FIRE.
downshiftme
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Re: A friend asked about about resignation timing, but IANAL

Post by downshiftme »

If he takes that advice literally, he could never resign
Well, certainly there is always next year's bonus or some other intervening date that would roll on forever. I only meant to wait until after the confirmation that I had indeed received - actually got - the last significant bonus I wanted to be sure was delivered. I do not know the legality of which dates mean that a stock bonus is indeed owned and cannot be clawed back, that is why I always rely on actual possession, but perhaps a lawyer familiar with this topic and any local laws that apply in this case could help.
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TomatoTomahto
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Re: A friend asked about about resignation timing, but IANAL

Post by TomatoTomahto »

Downshiftme, it's a very tricky form of golden handcuffs that my wife and I were also subject to. In our cases, we had roughly a year's comp deferred in three separate tranches at any given time. For another firm to hire you away right after vesting would cost them approximately an additional year's comp to buy that out. If they made an offer later than that, they would owe that PLUS whatever portion of your annual bonus you'd worked for at the old employer but had not yet been awarded. It is no accident that my friend's offer was made at this time of year.

All in all, it makes hiring senior people expensive. As though ageism weren't enough to reduce mobility :annoyed
I get the FI part but not the RE part of FIRE.
downshiftme
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Re: A friend asked about about resignation timing, but IANAL

Post by downshiftme »

That sounds like those golden handcuffs are indeed working as the company intended.

Meanwhile, I just saw this story about a company that actually deposited an annual bonus in employees accounts, then later changed their mind and tied it to a future corporate event and tried to claw back the already deposited money. It's a jungle out there.

http://news.yahoo.com/hawaii-airline-te ... nance.html
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TomatoTomahto
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Re: A friend asked about about resignation timing, but IANAL

Post by TomatoTomahto »

Larry Ellison, classy always. Those bonuses are rounding error to him.
I get the FI part but not the RE part of FIRE.
ccieemeritus
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Re: A friend asked about about resignation timing, but IANAL

Post by ccieemeritus »

I am not a lawyer. So I don't really know what I'm talking about here. But here goes.

I think he'd be safe resigning on January 22nd (once the stock is in his brokerage account). Another "safe" indicator is once tax is withheld on the compensation if he has online access to paystubs.

While there's a good probability he's "safe" on the 16th (past the vesting date), giving it a few extra days to eliminate a "paperwork error" is what I would
do. Particularly since January 16th is a Friday. January 22nd sounds good.

I would obey the last blackout in January. Once he's away from the company for a few weeks I don't think new blackouts (starting after
his termination date) would apply. But reading the paperwork is the best way to know for sure.

If the brokerage account is a subsidiary of his employer and they are suspected of doing bad things, I would personally feel better transferring the stock over to another broker as soon as possible.
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TomatoTomahto
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Re: A friend asked about about resignation timing, but IANAL

Post by TomatoTomahto »

darrellr wrote:I would obey the last blackout in January. Once he's away from the company for a few weeks I don't think new blackouts (starting after his termination date) would apply. But reading the paperwork is the best way to know for sure.

If the brokerage account is a subsidiary of his employer and they are suspected of doing bad things, I would personally feel better transferring the stock over to another broker as soon as possible.
Being "away" from his employer will take him out three months from resignation. I think it's lunacy the way companies moved from 2-4 week notice to this -- if you're going to a competitor, they don't want you on-site, but they require 90-day notice, so they pay you for that time and call it "garden leave." But, they only have to pay your salary, not your bonus, which is often more than your salary. Anyway, that's a topic for another day.

You raise an interesting point. I wonder if he can move a stock subject to blackout to another broker. They would probably refuse another broker, since they would not be assured that the other broker would adhere to the blackout (if there, in fact, is one). I haven't named names, so in a sense it doesn't matter, but for the record he doesn't know that the broker has or would do bad things, he's just a cautious type.
I get the FI part but not the RE part of FIRE.
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