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IANAL.

They are talking about unvested shares. The employees do not own them or have a right to exercise them yet. Every standard contract I've ever seen also includes a clause that shares stop vesting upon employment termination for any reason.

So, they are basically saying "give up unvested shares, or else we'll make you give them up by firing you".



Law student about to graduate, but not yet admitted to the bar/not giving legal advice/etc:

The law does draw distinctions based on the circumstances surrounding a termination, even in an at-will state. The employee does not yet own the unvested shares, but they do have a contractual right to them. Terminating someone just to screw them out of a contractual right you agreed to in a contract is going to give someone ammo in a lawsuit.

Given its pre-IPO situation, Zynga is in a bad leverage position in the face of such a lawsuit. They're going to have an incentive to settle just to get the claims to go away. What they probably should have done instead is to terminate the employees for performance up front with a generous severance package and a contractual agreement to not sue the company for improper termination. But they probably couldn't handle these employees leaving right now. They wanted to have their cake and eat it too.


Interesting, in that case would it not be wise for all of the disgruntled employees who are about to be screwed over to just refuse to give back the stock, get themselves fired and then start a lawsuit and assuming they win use all the money from selling the IPOd stock to start a business that directly competes with their previous employer?


It really depends on the probabilities of settlement versus winning a suit versus the costs of litigation, etc. It's probably best for them to just lawyer up and take their advice. This sort of tactical strategy is what they're paid to do.




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