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Barbara Klementz

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US companies have been granting various forms of share-based awards to employees around the globe for many years, and companies in other countries are increasingly following suit.

Because share-based awards are ubiquitous, and for many companies an important part of the total pay package, we are now also seeing an increasing number of lawsuits and other disputes involving such awards.

Broadly, these disputes can be categorized as follows:

Entitlement Claims

These can arise if a company is eliminating or paring back a previously offered share program. In this case, employees who are no longer eligible for awards or receive less/reduced awards may claim that they have become entitled to the awards, such that the company cannot unilaterally eliminate/reduce the program without otherwise compensating the employee. Employees may also try to raise constructive dismissal claims.

A related issue in this situation is whether a company has to notify or consult with existing Works Council or other employee representative bodies regarding the changes to the share program. If Works Council is found to have a consultation right, implementing the change without such consultation can be very problematic and Works Council can take the company to court.

Increased Severance Pay

If an employee is involuntarily terminated, they are often entitled to statutory severance pay. Severance pay is typically calculated based on the employee’s salary paid during a certain period prior to termination. If share-based award income has to be included as salary for this purpose, this can increase (in some cases, significantly) the amount of severance pay due to the employee.Continue Reading Mitigation Strategies for Claims Related to Share-Based Awards

When companies expand to new countries, they need to prioritize different legal and tax topics depending on whether they are just accepting orders from abroad (B2B or B2C), engaging with distributors, hiring contractors, or setting up formal presences. In this webinar, Baker McKenzie partners provide practical guidance on how to make decisions on going or…

US legislators and regulators are unleashing new compliance requirements for global equity programs at a dizzying pace and many companies are struggling to keep up. Global equity programs remain essential to compete for and retain top talent, but are also quite complex to structure and manage due to rapidly shifting laws and regulations around the…

Special thanks to co-authors Thomas Asmar, Victor Flores, Denise Glagau, Christopher Guldberg, Jen Kirk, Maura Ann McBreen, Lindsay Minnis, Kela Shang, Aimee Soodan and Brian Wydajewski.

As many readers likely know, last fall California doubled-down on the state’s hostility to noncompete agreements. Assembly Bill 1076 codified the landmark 2008 Edward v. Arthur Andersen decision that invalidated all employment noncompetes, including narrowly tailored ones, unless they satisfy a statutory exception.
   
AB 1076 also added new Business & Professions Code §16600.1, requiring California employers to notify current (and certain former) employees that any noncompete agreement or clause to which they may be subject is void (unless it falls within one of the limited statutory exceptions).

Individualized written notice must be sent by February 14, 2024 or significant penalties may apply.Continue Reading Don’t Miss California’s Noncompete Notice Requirement (Deadline 2/14/24) |Review Equity Award Agreements & Other Employment-Related Contracts ASAP

Special thanks to co-authors Glenn Fox and Paul DePasquale.

One of the biggest sleeper issues (in my opinion) for US companies when granting equity awards to non-US employees or other service providers is the fact that their heirs may be assessed with US estate tax and be required to file an estate tax return in the US if the individual dies while holding equity awards or shares.

US Estate Tax Exemptions

Individual US taxpayers (i.e., US citizens and non-US citizens who are domiciled in the US) can currently benefit from a significant estate tax exemption: no estate tax is due unless the value of the estate exceeds US$13,610,000 (this is the inflation-adjusted amount for 2024), reduced for taxable lifetime gifts, but doubled for married couples if both spouses’ estates qualify for the exemption. Accordingly, relatively few US estates currently are subject to estate tax. In any event, US employees and their heirs will most likely be well aware of possible estate tax consequences for their assets, including equity awards and shares acquired under a company share plan.Continue Reading A Cautionary Tale: US Estate Tax May be Due on Equity Awards/Shares Held by Non-US Residents

In 2023, we helped US employers overcome a host of new challenges across the employment law landscape. Many companies started the year with difficult cost-cutting decisions and hybrid work challenges. More recently, employers faced challenges around intense political discourse boiling over in the workplace. We’ve worked hard to keep our clients ahead of the curve on these…

In many cases, when a candidate is recruited, they offered a new hire grant of equity awards and (possibly) subsequent “refresh” grants. Depending on the company, this can be a significant component of the employee’s total compensation and may be the most important piece to get the candidate to accept the offer. 

So, naturally, companies tend to include information about the equity awards in the offer letter provided to the candidate, together with information about the employment terms (e.g., base pay, bonus eligibility, etc.). 

If the candidate is to be employed by an entity outside the United States that is different/separate from the company that will be granting the equity awards (typically the parent company), we strongly recommend changing this practice. In a nutshell, we would advise to delete any references to the equity awards from the offer letter (as well as from any employment agreement that may be provided later or at the same time) and to communicate information regarding the equity awards in a separate equity award side letter that is provided by the granting company. Continue Reading The Case for Not Mentioning Equity Awards in Offer Letters

The current increase in market volatility and heightened regulatory scrutiny has made for a treacherous landscape for multinational employers, and we’re here to help. Join us on October 18th in our New York office to connect on cutting-edge Employment & Compensation issues with a series of panel discussions, presentations and peer roundtables discussing the…

We are pleased to share a recent LegalDive article, “Why companies should review noncompetes in equity award agreements,” with quotes from Barbara Klementz.

Given increased government scrutiny, employers need to be mindful of the time periods noncompetes cover and review state-specific requirements.

In the light of the sharp focus the federal government and a growing…

Baker McKenzie’s annual Global Equity Academy is designed to provide stock administration, HR, legal, employment and tax professionals with a comprehensive training on the basics of global employee share plan offerings.

Our virtual series spans four 60-minute webinars, each followed by an optional 30-minute “study hall” for participants to ask additional questions of our presenters and discuss learnings…