Bump in the Road to FIRE

[oldguy2014]

Hi. I've been a lurker for a couple of years, but this is my first post. I've gained a lot of insight from reading this forum, and I thought my FIRE plans were well on track. But, my plans have recently hit a potential bump in the road. I realize now that things can change pretty fast. Hoping that someone out there might have some good advice.

About three years ago, I was approached by Megacorp 2 which was in the process of recruiting a Major Capital Projects Team to take on a new grass roots mega-project (i.e., a multi-billion dollar project). Megacorp 2 is a well established, but mid-sized company in their industry. However, they traditionally have bought into or acquired established operations and thus did not have the staff capable of taking on the execution of a new project from the conceptual / front end stage. Thus, they were out in the market recruiting project professionals from other companies in the industry.

At the time, I closing in on FI after a long career with with Megacorp 1, but was very interested in the opportunity and Megacorp 2's offer. After a few months of discussions / negotiations, I decided to take early retirement from Megacorp 1 and join Megacorp 2.

The offer from Magacorp 2 involved a base salary / bonus / 401K / retirement plan that was only slightly more than I was receiving at Megacorp 1. On this basis alone, I would have never made the switch. What made the offer attractive, was their stock / equity plan. On top of base / bonus / 401K / retirement, they provided annual stock grants that equaled a substantial portion of my base pay. These stock grants vested at the rate of 1/3 per year, with full vesting after three years.

At the time I joined Megacorp 2, the project was expected to last about five years to completion. This fit well with my timeline for eventual full retirement, and I needed five years to fully vest in their 401K and retirement plans. As long as I stayed for at least five years, I thought I would be making a wise financial decision. If I were to RE before five years, it would not have made sense to switch.

After my arrival at Megacorp 2, the project began to encounter some "issues" which started to dramatically increase projected costs and schedules. This trend continued and eventually Megacorp 2 decided that the project was too costly and the anticipated revenues were too far down the road for a company of its size. Megacorp 2 recently decided to divest itself of the project as soon as it can find a buyer (assumed to be one of the major companies in our industry).

I think it is likely that Megacorp 2 will lay me off (as well as my fellow project members who are in the same situation) as soon as the sale is completed. We have inquired as to whether the company will provide us with a "package" in the event that they let us go due to their decision to exit the project. Thus far, they have only told us that no decision has been made, but they continue to stress that there is no obligation for the company to do anything other than pay us our salary up to the date of termination.

This has me extremely worried that they intend to do nothing for us. I currently have a substantial amount of unvested stock grants, 401K matching contributions and retirement plan contributions. I stand to forfeit all of these unvested amounts if I am terminated without a package. I, and others in the same situation, have made it clear to our management that we made the decision to leave our prior positions based on the full compensation package we were offered by Megacorp 2. If we are forced to forfeit these amounts, it would in effect be a major retroactive pay cut, based solely on their decision to exit the project. I told our management that, at a minimum, I would expect the company to fully vest me in all of these funds in the event of a layoff.

I'm not sure what, if anything, I can do at this point. In my opinion, the company has a moral obligation to keep us whole on the unvested amounts, but not a legal one. Has anyone ever been in a similar situation? I'm afraid that not only will I have to go look for another job (I thought this would be my last), but it could mean that I will have to work several years later than I ever planned.

[NgineER]

My Megacorp's 401(k) matching plan states that I forgo the unvested amounts if I retire. If I am laid off, I am fully vested. Have you looked carefully at your contract and 401(k) details?

[fh2000]

So sorry to hear that you got stuck in this situation.

I know in California, an "at will" state, there is no obligation from either party. I once took the same risk during dot com era, only to be laid off 2 months after that. They ran out of money. So, everyone's option went to 0.

California law, IIRC, protects mass layoff and company is to provide 3 months of severance pay. Since I quickly found another job, so for few weeks, I got paid double.

I would start looking for a new job at this time, if your funds are not enough for a full retirement yet. Good luck to you.

[Jager]

Sorry to hear.

I agree with molof - first thing I'd do is very carefully read the plan descriptions for your 401K, stock options, and anything else that hasn't vested. Usually when a termination without cause happens, those compensation vehicles are immediately vested.

If that's not the case here, then you are well and truly screwed. If I learned one thing across my long career, it is that companies will almost always do what is in their best interest.

Hope you find a pleasant surprise when you open up those documents...

Welcome to the forum.

[pb4uski]

See “When laid off, can I get my unvested options vested?” | Sklover Working Wisdom

Looks like good, practical advice to me.

[Katsmeow]

I would also say that the law can vary from state to state. I would suggest that at least part of what you are asking is a legal question. For legal questions, you should never rely on what people on the internet say. You should consult with a lawyer licensed in your state who is knowledgeable about the specific issues that apply to your situation.

In short -- talk to a lawyer to find out what your rights are.

[MichaelB]

Quote:

Originally Posted by oldguy2014 I'm not sure what, if anything, I can do at this point. In my opinion, the company has a moral obligation to keep us whole on the unvested amounts, but not a legal one. Has anyone ever been in a similar situation? I'm afraid that not only will I have to go look for another job (I thought this would be my last), but it could mean that I will have to work several years later than I ever planned.

Typically, equity awards, stock options, RSUs and such are tied to continuing employment and forfeited on separation unless the equity agreement specifically state otherwise.

Quote:

Originally Posted by Katsmeow I would also say that the law can vary from state to state. I would suggest that at least part of what you are asking is a legal question. For legal questions, you should never rely on what people on the internet say. You should consult with a lawyer licensed in your state who is knowledgeable about the specific issues that apply to your situation. In short -- talk to a lawyer to find out what your rights are.

+1

[soupcxan]

First, there is nothing to be gained by worrying about things that haven't happened yet and that you can't control.

Second, unless the entire company is in bad financial shape and they are laying off a lot of people, I would be very surprised if they kick you out with your last paycheck and nothing else. If they are still hiring in other departments, they don't want your team telling the whole internet (glassdoor) that you were hired for a new project then got the shaft on your way out. Unless they are very short-sighted (which is always possible).

Third, my megacorp's RSU plan says that unvested RSUs are lost when employee terminates for any reason other than death. However, the company has the discretion to override this forfeiture, if they want. If I were laid off then I expect they would give me something for goodwill, unless the whole company was really tanking.

Fourth, if you do get laid off with a crappy severance package, DON'T SIGN ANYTHING despite the pressure they will put on you to accept it - until you've talked to an employment lawyer. Everything is negotiable, including severance, and they may come back with a better offer if you have a decent case against them. Which, if they went out of their way to recruit you from a competitor, you may have. It would certainly be bad PR for them if you go away disgruntled.

[wingfooted]

Acquisitions are strange beasts and you may well find out the acquirer will want to keep you after sale, and offer significant retention benefits to make sure you stay with the new company. Why ? Continuity and otherwise they will need to start from scratch.


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[2B]

Quote:

Originally Posted by oldguy2014 After my arrival at Megacorp 2, the project began to encounter some "issues" which started to dramatically increase projected costs and schedules. This trend continued and eventually Megacorp 2 decided that the project was too costly and the anticipated revenues were too far down the road for a company of its size. Megacorp 2 recently decided to divest itself of the project as soon as it can find a buyer (assumed to be one of the major companies in our industry).

Why would anyone want to buy your project? Any buyer would still be stuck with the higher cost and extended schedule. Is Megacorp 2 stopping all work or is the project moving ahead while they search for a buyer?

Are you in a position to truly retire?

[someguy]

Keep in mind you essentially took on more risk in exchange for a shot at a major payday. In a lot of ways, this is no different than if you took a conservative AA portfolio and exchanged a nice chunk of the "safe" portion for stock of a single company you thought would take off. It sucks that your gamble may not pay off, but at least you've been getting paid the same salary as Megacorp 1. And, as others have pointed out, things are still unfolding.

I also mirror others' comments to talk to an employment attorney as things start to happen.

[robertf57]

Definitely look at the stock options contract. I once worked for a small startup IT concern that went public and was eventually bought up by a MEGAcorp. The options grant explicitly stated that my options would mature if I was terminated without good cause or with a change in ownership. That's where I would go first. The 401K matching is probably immutable, as vesting is element of the approved plan.

[txtig]

L


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[Cobra9777]

Quote:

Originally Posted by oldguy2014 I think it is likely that Megacorp 2 will lay me off (as well as my fellow project members who are in the same situation) as soon as the sale is completed...

Quote:

Originally Posted by wingfooted Acquisitions are strange beasts and you may well find out the acquirer will want to keep you after sale, and offer significant retention benefits to make sure you stay with the new company. Why ? Continuity and otherwise they will need to start from scratch.

Agree. I'm quite certain your management is working to find a buyer quickly who will offer positions to you and the others, thus avoiding severance and other ongoing costs. I was on the buying side of many such failed projects. We were frequently able to negotiate a very favorable price if we agreed to take X number of employees. We generally offered employment to most of the key people to ensure a smooth transition. This often included 2-3 year retention bonuses and honoring all compensation promises made by the seller, including everything from accrued vacation days to pension obligations.

Unfortunately, at some point, if no buyer is found, they will cut their losses and let you go. However, most large, reputable companies offer severance, extended benefits, and will vest your options, 401K match, etc. I'm sure there are exceptions, but as others have said, find your actual plan documents and read them carefully. And talk to an employment attorney about anything you still aren't clear on.

Good luck.

[Milton]

Quote:

Originally Posted by soupcxan First, there is nothing to be gained by worrying about things that haven't happened yet and that you can't control.

+1.

You cannot do anything about corporate decisions to end projects and terminate employees, but you can start a proactive job search … it's usually easier to find a new position while you are still employed.

But do you really want a new job? As you were "closing in on FI" three years ago, presumably you are there now … in which case, dusting off your resume and seeking interviews may be an ordeal that you decide to forego (welcome to ER!).

Quote:

Originally Posted by soupcxan [U]nless the entire company is in bad financial shape and they are laying off a lot of people, I would be very surprised if they kick you out with your last paycheck and nothing else. If they are still hiring in other departments, they don't want your team telling the whole internet (glassdoor) that you were hired for a new project then got the shaft on your way out. Unless they are very short-sighted (which is always possible)…. It would certainly be bad PR for them if you go away disgruntled.

I wouldn't be surprised at all. There are always two sides to every story, and few people will be much interested in what one bitter ex-employee has to say … especially in an 'employer's market' when good jobs are relatively scarce.

Quote:

Originally Posted by soupcxan [M]y megacorp's RSU plan says that unvested RSUs are lost when employee terminates for any reason other than death. However, the company has the discretion to override this forfeiture, if they want. If I were laid off then I expect they would give me something for goodwill.

Sounds like you've never had the experience of being laid off? Absent unusual circumstances, your expectations would almost certainly be disappointed. Jager is quite correct that corporations do what is in their own interests and rarely extend themselves making gratuitous payments to terminated employees … they have fiduciary duties to their shareholders, after all.

Quote:

Originally Posted by someguy Keep in mind you essentially took on more risk in exchange for a shot at a major payday…. It sucks that your gamble may not pay off, but at least you've been getting paid the same salary as Megacorp 1.

+ 1,000.

[growing_older]

First, read all the plans and documents. You may get a pleasant surprise about vesting in case of termination, but that's unlikely. But you may also get much useful information you can use in case you do get terminated or transferred to yet another Megacorp.

Second, you've made your point about not wanting to lose various benefits. Now is the time to STOP being the squeeky wheel and start being the loyal indispensable guy that they will definitely want to keep on the payroll. Either at the new place who buys this deathmarch of a project, or at your current Megacorp doing something else because they see what a good corporate worker you are. Don't burn your bridges with being sour grapes about your compensation. They may do something to make the transition easier, but it will likely not be just because you complain alot. They might be scared of litigation but they are not scared of lots of complaining.

Lastly, this is also part of the nature of the risk you took. Going to a new place entailed risks, as do starting a new project that might not go well. Look, it didn't. That can happen. Unless your contract specified guaranteed payouts for you, you assumed that risk as part of your taking the job. Savvy executives have contracts that protect them from these kinds of outcomes, Regular employees almost never do. Making a risk/reward decision isn't only about the reward, there's actual risk too.

[clifp]

Quote:

Originally Posted by Katsmeow I would also say that the law can vary from state to state. I would suggest that at least part of what you are asking is a legal question. For legal questions, you should never rely on what people on the internet say. You should consult with a lawyer licensed in your state who is knowledgeable about the specific issues that apply to your situation. In short -- talk to a lawyer to find out what your rights are.

+2

If you get laid off and IF the company doesn't offer a decent termination package THEN consult with good employment lawyers. Personally I wouldn't bother to consult before this things happens, but if it is causing you stress I suppose you could talk to one now.

[Ronstar]

I agree with the others. Read all of your documents, hire a lawyer familiar with your issues, and look for a new job. I can see how collecting on the unvested stock grants could be problematic, but I don't see how matching 401k contributions could be kept by Megacorp2.

And keep your eyes and ears open at work for any new developments. Using all of this info, develop a plan of attack for each of the multiple scenarios that may play out. Be prepared for their next move. Good Luck!

[athena53]

Quote:

Originally Posted by growing_older First, read all the plans and documents. You may get a pleasant surprise about vesting in case of termination, but that's unlikely. But you may also get much useful information you can use in case you do get terminated or transferred to yet another Megacorp.

I agree. I worked for an insurance MegaCorp that offered the chance to buy "phantom stock" at a price fixed when you signed up. After 2 years the account was liquidated. If the stock went up you got the profit. If it went down you got your money back plus interest at a money market rate. If you quit during those 2 years that was also what you got, no matter what the stock was worth. OTOH, if you were let go and hadn't done anything awful like embezzling from the company, you got any profit as of the date you left.