You’ve just been terminated with a large unvested equity balance, and the assumption is that it simply disappears. It might not. This article explains what typically survives termination, what doesn’t, and why the exact wording of your stock option plan can decide the outcome.
For senior employees, the equity sitting in your stock option plan is often worth more than the severance cheque itself — sometimes far more. And yet it’s usually the part written off without a second look, treated as an unfortunate but unavoidable loss the moment a termination letter arrives.
Vested equity is generally yours to keep, subject to a deadline to exercise it. The unvested portion deserves far more attention than most employees give it.
Vested and Unvested: When It Becomes Yours
Vesting is simply the schedule that determines when equity actually becomes yours — often over three or four years, a portion at a time. A stock option gives you the right to buy shares at a set price; a restricted stock unit, or RSU, is a promise of actual shares once vesting conditions are met. Once equity has vested, it’s generally yours, though you’ll usually have a limited window to exercise any vested options. Unvested equity is different — it hasn’t become yours yet. Whether it is lost after a termination is another question.
What Your Plan Documents Actually Say
Most equity and stock option plans state, in some form, that any unvested options are forfeited immediately on termination. That language exists in almost every plan — but whether it actually applies to you depends entirely on the wording, and on whether you were properly made aware of it. If the forfeiture provision was buried in a document you were never shown or asked to acknowledge, it may not be enforceable against you at all. Boilerplate or ambiguous forfeiture clauses are frequently found insufficient by courts, especially where the language doesn’t clearly and unambiguously address what happens during a notice period, not just at the moment of termination itself.
Equity That Would Have Vested During Your Notice Period
This is the section that matters most. Several legal principles allow a terminated employee’s equity to continue vesting through their notice period, even after the termination date on paper. Where a dismissal is without cause and the forfeiture language isn’t clear and unambiguous, courts have awarded the value of options or RSUs that would have vested during the reasonable notice period you’re entitled to — treating the notice period as though you were still actively employed for vesting purposes. If the forfeiture wording is ambiguous, or conflicts with employment standards legislation, it generally won’t be enforced, and you may be entitled to those shares regardless of what the plan document claims.
Watch the Exercise Window
Even equity you’ve clearly vested and are entitled to isn’t safe from being lost. Most plans give you a short window — often 30, 60, or 90 days — to exercise vested stock options after termination. Miss that deadline, and you forfeit value you were unquestionably owed, with no room for negotiation after the fact. As soon as you’re terminated, find the exact exercise deadline in your plan documents and put it in your calendar immediately — this is one of the few pieces of this puzzle that doesn’t wait for a lawyer’s advice.
Do Not Sign the Release Until Equity Is Reviewed
A standard severance release is written broadly enough to waive equity claims too — sometimes worth far more than the severance payment attached to it. Given what’s potentially at stake, tens of thousands, hundreds of thousands, or in some cases millions of dollars, this is not a section to skim. Before you sign anything, gather:
- Your full stock option or equity plan document
- Every grant agreement you’ve received, going back to your start date
- Your complete vesting schedule to date
- The exercise deadline for any vested options
- Your termination letter and any severance offer paperwork
Have all of it reviewed together, not the severance number in isolation.
Every one of these pieces — vesting, forfeiture wording, notice period vesting, exercise windows, and the release — connects to the others. Reviewing them together, before you sign, is the only way to know what your equity is actually worth.
Equity is often the single most valuable, and most overlooked, part of a senior employee’s exit. Once you sign the release, that claim is gone — permanently.
That means your decision is final.
The exercise window on any vested options closes on its own schedule too, entirely independent of any negotiation, so delay can cost you even before you’ve decided anything else.
Get Your Equity Reviewed Before You Sign
It’s easy to assume the forfeiture language in your plan is the final word — but that’s rarely something you should decide on your own. A focused review of your plan documents alongside your severance offer can show you exactly what you’re entitled to, and what’s worth negotiating. You don’t have to navigate this alone. Book a consultation before you sign anything.
This article is general information only, not legal or tax advice. Equity compensation carries tax consequences you should confirm with a tax professional.
