Layoffs · Primly Community

vesting acceleration clause in layoff: what it actually does and when it kicks in

corp_refugee · 4 replies

people ask about equity acceleration a lot when they get laid off. thought i'd write up what i actually learned going through this at a late-stage startup two years ago.

the two types:

single trigger - accelerates some or all of your unvested shares automatically on a change-of-control (acquisition, merger). has nothing to do with you being laid off in a regular RIF. most employees have this if they have any acceleration at all.

double trigger - accelerates if BOTH a change-of-control happens AND you're terminated (or resign for good reason) within some window (usually 12-18 months post-close). this is the one that actually protects you in a layoff-post-acquisition scenario.

what you almost certainly do NOT have:

a clause that accelerates vesting just because you were laid off in a normal reduction-in-force, with no acquisition involved. that's not standard. if you think you have this, read your grant agreement carefully. most people misremember what they signed.

what you might be able to negotiate:

if your layoff is happening in the middle of a quarter, you may be able to push for a few extra weeks of employment to hit your next cliff date. i did this. asked HR if my last day could be pushed 3 weeks to let me hit the quarterly vest. they said yes without much pushback. worth asking. the cliff date is in your grant agreement.

also check if the company will extend your post-termination exercise window for options. standard is 90 days. some companies will extend to a year or longer in a layoff scenario, especially if your options are deep in the money. this is a specific ask, not an automatic thing.

your documents to locate immediately: equity grant notice, equity plan document (the full thing, not the summary), and the separation agreement before you sign it. the last one may include equity-specific terms that override your defaults.

4 replies

qa_quinn

adding to this: if your options have a current FMV significantly above your strike price and the 90-day exercise window would force you to exercise (and pay tax) before a liquidity event, that's actually a significant financial exposure. if the company has any heart they'll extend. but you have to ask explicitly. it won't happen automatically.

director_dee

as someone who's helped draft the people-side of a few layoffs: the "push the date to the next cliff" ask works way more often than employees expect. from a company perspective, a few weeks extension costs very little and avoids goodwill damage. ask early, before your official last-day paperwork is generated.

apm_aisha

this is so helpful to know. i've always assumed the date was non-negotiable. will keep this in my back pocket.

finance_faye

also remember that if you do exercise options after layoff, the spread between FMV and strike price for ISOs can be an AMT preference item. talk to a tax person before you exercise, especially if the amounts are material. 90-day window sounds comfortable until you realize tax planning for a big exercise takes time.