The standard amount of time that departing employees have to exercise their stock options is 90 days. However, some well-known companies have chosen to diverge from this usual path. Companies like Pinterest, Square, and Coinbase offer employees who have worked for a minimum period of time an extended window in which they can choose to exercise options. Triplebyte, a tech recruiting website, recommends that companies implement a 10-year exercise window instead, which could become the next industry standard.
The market for employees in the tech field is extremely competitive. Companies should aim to retain their talented and vital team members by incentivizing them as much as possible, and their hard work will ultimately be rewarded if their employees stick around long enough for a liquidity event. However, more employees are changing jobs as companies are staying private longer. As they leave from one company to the next, their previous options typically need to be exercised within 90 days of their termination date, or they lose the right to exercise their vested options. It is a big investment decision whether or not to exercise these options, so the more time the employee has to decide the better. Still, choosing to extend this exercise period is a serious and tricky decision for companies themselves. There are quite a few things to look out for when making a decision.
With the technology industry growing so rapidly and their market for employees being in such high demand, there will always be need for more and more incentives to retain the most talented workers. However, there must be a balance between keeping the workforce happy and actually running a successful operation. Every startup is different, and every approach to how to incentivize their team must also be unique.
The United States Citizen and Immigration Services (USCIS) proposed a rule on August 26, 2016 that would grant qualified foreign entrepreneurs temporary immigration relief. This immigration relief would be a two-year period of “parole”, in which the entrepreneur could immediately start working upon approval. The rule would also allow for up to three additional years of renewed parole period as long as the business continued to be active for the first two parole years and certain other qualifications were maintained. Under this rule, the foreign entrepreneur’s spouse and children may also be eligible for the parole. While present in the U.S. as parolees, spouses may apply for work authorization.
This rule, which was originally formed during the last days of the Obama administration, was initially met with opposition from the current Trump administration. This new International Entrepreneur Rule (IER) was set to start being effective on July 17, 2017. However, on July 11, 2017 the Department of Homeland Security (DHS) sought to rescind the rule, delaying its effective start date until March of 2018. The National Venture Capital Association (NVCA) then challenged the delay by the DHS. On December 1, 2017, Judge James Boasberg of the U.S. District Court for the District of Columbia ruled in favor of NVCA stating that there had been a violation of the Administrative Procedure Act when the IER regulation’s implementation was delayed without full notice and comment from the public.
The IER regulation is currently effective and applications for parole are now being accepted and processed. However, while the DHS is complying with the court decision and is implementing the parole program, they are also in the process of proposing the IER’s removal completely. Now is the opportune time to take advantage of this immigration opportunity while the window is still open.
To see if you may be eligible for applying, following are the eligibility requirements:
The USCIS’s proposal has been an enormous advancement for foreign entrepreneurial immigration in the U.S. Currently, there is no similar law in place that would help alleviate the large number of foreign entrepreneurs who are desperately looking for a way to continue working for U.S. start-ups. While the IER does have a strict criteria for eligibility, it presents another potential opportunity for the entrepreneurial community to work in the U.S. on their start-ups. Right now would be the best time for good candidates to get started on taking this opportunity while the DHS is still deciding whether or not to remove the IER regulation.
In 2016, the Antitrust Division of the Department of Justice (DOJ) published the Antitrust Guidance for Human Resource Professionals. It was released to “alert human resource (HR) professionals and others involved in hiring and compensation decisions to potential violations of the antitrust laws”. Prior to its release, violations of antitrust laws were met only with a civil punishment. However, the DOJ and Federal Trade Commission (FTC) is now enforcing these laws much more seriously, with both civil and criminal consequences.
It is important to note that violations may be explicit (e.g., two companies enter into a formal agreement not to hire each other's personnel) or implicit (e.g., two companies agree to share wage data and reset their compensation packages to align with the market or create a maximum wage to be paid to specific skillsets or roles). In other words, if there is any kind of agreement that include fixing wages, enacting a no-poaching arrangement, or other anti-competitive pacts, then there is definite risk of serious punishment by the DOJ for violation of antitrust laws. Even discussions in public or private forums on related topics is also prohibited and may lead to both civil and criminal penalties. Such discussions are not only prohibited among the decision makers and/or hiring managers but really by anyone who deals with hiring, compensation or other activities, such as HR personnel, salespersons or even third party headhunters.
Some wrongfully believe that this kind of misconduct would be unlikely to happen in their own workplace. Many big-name companies have already been caught up in antitrust lawsuits or proceedings with the DOJ, Adobe Systems Inc., Apple Inc., Google Inc., Intel Corp., Intuit Inc., and Pixar. Not just large technology companies, but even smaller businesses and institutions are at risk of violating these 'no-poaching' antitrust laws.
The Antitrust Guidance details things to look out for in a company’s hiring practices. These red flags include:
With these red flags in mind, it becomes much more obvious how easily a manager or an HR professional may put their company at risk for criminal or civil liability. If a no-poach agreement is made between any two entities, this is regarded as a per se (automatically illegal) violation of the antitrust laws. The DOJ and FTC are aggressively cracking down on obstructions of competition in the employment market. With every company being at risk, it is highly recommended to start educating your HR and other employees in charge of hiring and compensation on proper hiring procedures to be followed in compliance with the DOJ guidelines.