What Happens to Your RSUs and Stock Options When You Are Laid Off
A layoff splits your equity into what has vested and what has not. How RSUs, options and double-trigger units are treated, and which document decides.
When you are laid off, vested RSUs and vested stock options remain yours, while unvested awards are usually forfeited on your termination date unless the equity plan, award agreement or a severance agreement provides early vesting. Vested options must be exercised within a post-termination window. Your award agreement sets the exact dates and terms.
Equity terms are contracts, not statutes, so two employees at different companies can get very different outcomes from the same layoff. The tax law sets only a few outer limits, mainly for incentive stock options.
Do unvested RSUs vest if you are laid off?
Under a typical award agreement, no: unvested RSUs are cancelled when your service ends, and you receive nothing for them. A layoff one week before a quarterly vesting date costs that whole tranche.
There are exceptions, and they are always written down somewhere:
- Severance agreement: some employers offer partial acceleration or a few months of continued vesting in exchange for signing a release of claims.
- Plan or award terms: some agreements accelerate vesting on an involuntary termination without cause, or on death, disability or retirement.
- Change in control: a “double-trigger” clause can accelerate vesting if you are laid off within a set period after the company is acquired. Our guide to RSUs in an acquisition explains how those clauses work.
Which date counts: your last day of work or your termination date?
The date defined in your award agreement counts, and it is not always the day you stopped working. Agreements use terms such as “termination of service” or “active service,” and the definition decides whether vesting continues through a notice period.
Some agreements end service on the last day of active work and exclude paid notice or garden leave. Others use the date your employment legally ends, which can be weeks later if you stay on payroll during a notice period. If a vesting date falls between those two dates, the definition decides whether you get those shares, so it is worth reading that paragraph before your final day.
What happens to double-trigger RSUs at a private company?
Double-trigger RSUs vest only when two conditions are met: a time-based service requirement and a liquidity event, usually an IPO or a sale of the company. If you are laid off before any liquidity event, the outcome depends on how the agreement treats units whose service requirement you already met.
- Some agreements let those service-vested units survive after you leave, so they settle into shares if a liquidity event happens before the award expires.
- Others cancel all units that have not fully vested, including the service-vested ones, when employment ends.
- Units whose service requirement was not yet met are generally forfeited either way.
The expiration date matters. If no IPO or sale happens before the award expires, surviving units lapse with nothing paid. RSUs are taxed when shares are delivered, so a former employee whose units settle years later still owes income tax on their value at settlement.
How long do you have to exercise vested stock options after a layoff?
You have the post-termination exercise period stated in your option agreement, and three months is a common length. Unvested options are forfeited on the termination date, and vested options not exercised by the deadline expire.
For incentive stock options (ISOs), tax law adds its own limit. Under 26 U.S.C. 422, an option keeps ISO tax treatment only if it is exercised within 3 months after employment ends, or within 1 year if employment ended because of disability. A company can give a longer exercise window, but options exercised after the 3 months are taxed as nonqualified options. The differences in tax treatment are covered in our explainer on ISO vs NSO stock options.
Whether to exercise, and when, depends on cash, taxes and your view of the company, which is a decision to talk through with a tax professional before the window closes.
What happens to each type of equity award?
| Award | Vested part | Unvested part | Deadline to watch |
|---|---|---|---|
| RSUs at a public company | Shares already delivered are yours | Forfeited unless an agreement accelerates them | None for delivered shares; check the last vesting date before termination |
| Double-trigger RSUs at a private company | May survive until a liquidity event, or be cancelled, per the agreement | Forfeited | Award expiration date |
| Stock options (ISO or NSO) | Exercisable during the post-termination window | Forfeited | Window in the agreement; ISO status ends after 3 months |
| Performance shares (PSUs) | Paid if already earned and settled | Forfeited or prorated, per the plan | End of the performance period |
| ESPP | Shares already bought are yours | Payroll contributions for the current offering period are commonly refunded | Check the plan for the refund rule |
Where do you find your award agreement and equity plan?
Start with the equity portal run by the company’s stock plan administrator, where signed grant agreements, vesting schedules and exercise deadlines are posted. Download them before your last day, because portal access can change once you leave.
For a public company, the plan documents are also public. The equity plan is filed with the SEC as an exhibit to a Form S-8 registration statement or incorporated from the proxy statement that asked shareholders to approve it, and standard award agreement forms are often filed as exhibits to the 10-K or 10-Q.
- Open EDGAR full-text search and enter the company name.
- Filter by form type S-8 and open the most recent filing that covers your plan.
- Read the exhibit index; the plan is either attached or incorporated by reference from a named filing.
- Search the 10-K exhibit list for phrases such as “Form of Restricted Stock Unit Award Agreement.”
- Compare the public form with your signed agreement. Your signed version controls if they differ.
Severance terms for most employees sit in an HR severance plan or an individual agreement rather than in SEC filings. Our guide to severance pay rules covers what those documents usually contain and how long you have to review them.
Bottom line
Before your access ends, save three things from the equity portal: every grant agreement, the vesting schedule showing the next vest date, and the exact option expiration dates after termination. If a severance offer mentions equity, check whether continued vesting is stated in shares and dates rather than a general promise; an employment attorney can review the release before you sign.
FAQ
Can a company take back RSUs that already vested before a layoff?
Generally no; delivered shares belong to you. The main exception is a clawback policy, which at US-listed companies mainly covers incentive pay of executive officers after an accounting restatement, or an agreement that ties awards to obligations such as a noncompete.
Do I get paid for RSUs that were about to vest?
Not unless an agreement says so. Forfeited units carry no cash value, so any payment for them would have to be negotiated into a severance agreement.
Can I still exercise options after the 90-day window if the company allows it?
Yes, if the agreement or a company extension gives a longer window. Incentive stock options exercised more than 3 months after employment ends are taxed as nonqualified options, which changes when and how income tax is due.
