Last week I listened to a podcast featuring the co-founder of Cisco Systems Sandy Lerner who built Cisco with her then husband Len Bosack.
The founders sold a large chunk of their company to a Silicon Valley investor Don Valentine, agreed to become employees of the company including a term that their own stock in the company would only vest after four years of employment.
After the company hired a new CEO, Lerner was fired — just two years into the four-year vesting agreement. Bosack resigned in solidarity.
According to Lerner, Cisco offered her none of her stock on her termination as she was not employed at Cisco for the full four years. This was the case even though Lerner founded the company! Only after hiring a lawyer, did she and Bosack received their stock, which they later sold for $170 million.
There are a lot of takeaways from this story:
1. Even the best and the brightest can get tripped up when it comes to their employment. Lerner and Bosack were sophisticated executives. Despite that, they did not insist on an employment agreement containing terms that protected their stock in the company; leaving it open for their own company to later strong-arm them. It is always valuable to have an employment offer reviewed before accepting a role to ensure there are no prohibitive terms that may hurt you if you are terminated.
2. This story applies to much more than stock. Often, employees are denied bonuses, long-term incentive plans, short-term incentive plans, restricted share units (RSUs), profit share, deferred compensation and more if terminated before the payout date. Like in the case of Lerner, many employees are actually entitled to these payments but sometimes need the help of a lawyer to get paid. If terminated, always have your package reviewed to determine if you are leaving money on the table. It could be significant.
3. The case law continues to evolve to clarify what employees are entitled to on termination. In late 2020, the Supreme Court of Canada released its decision in Ocean Nutrition v. Matthews which confirmed that on termination the “purpose of damages in lieu of reasonable notice is to put the employee in the position they would have been in had they continued to work through to the end of the notice period.” This includes not only salary but bonuses and incentive payments. In this case, argued by my partner Howard Levitt, Matthews was awarded nearly $1.1 million for the loss of his long-term incentive plan (LTIP) payment.
Employees of all stripes and walks of life can be hamstrung during the termination process. When speaking to a lawyer remember to mention all of the perks, bonuses and benefits you received while working for your employer. You are almost never entitled to just your salary and depending on the offer, can negotiate for more.
On to your questions from this week:
Q. My daughter works in a hair salon on salary (no commission) and works two 10-hour days and two 8-hour days. She is expected to be at least a half hour early, does not get paid overtime, never gets lunch breaks because it is too busy, and I just found out that she does not get paid for statutory holidays. This is the second salon that she has worked in that doesn’t seem to pay their employees by the book. Is there a different industry standard for hair salons or are they all just cheating their employees?
A. Hairstylists do not belong to an industry that is exempt from minimum employment standards. Some, however, are not employees (i.e. rent a chair and work as sole proprietors). If your daughter is an employee, she is entitled to all of the rights any Ontario employee would be. Too often employees in service and hospitality don’t receive their minimum entitlements. Your daughter should register her concerns and ask to receive her minimums. She should get her regular breaks, paid statutory holidays and overtime if applicable. Many employers are not clear on what they are and that could be part of the reason she is being underpaid.
Q. I have been experiencing discrimination and bullying at work and have been asked to file a formal complaint through my employer, but I don’t feel comfortable as my previous attempts to bring forward issues that have not been dealt with appropriately. What is your advice?
A. When confronted with a toxic work environment it is difficult to trust your employer. Still, employees should exhaust every avenue within the workplace to report incidents of bullying and harassment. File a formal complaint with your employer. Use specific language to describe your complaint, including dates, witnesses and specifics of what happened. Your employer is legally required to investigate your complaint.
Have a workplace question? Maybe I can help! Email me at Sunira@Worklylaw.com and your question may be featured in a future article.
The content of this article is general information only and is not legal advice