In April 2017, the Irish Employment Appeals Tribunal ruled that unvested stock options granted by a US parent company to an Irish subsidiary employee, which were later forfeited due to termination of employment with the Irish employer, did not form part of their compensation for purposes of determining the amount owed by the employer to the employee under relevant Irish unfair dismissal legislation.
In the case, the stock options were mentioned in the employee's offer letter but not in their employment agreement. The offer letter contained the language "As a separate matter to your employment…," when mentioning the opportunity of stock option grants by the US parent. The court determined that the proper remedy to be paid by the employer to the employee due to the unfair dismissal was an amount calculated based only on the elements that consisted of the employee's compensation prior to termination. The court ruled that, in part due to the specific language contained in the offer letter, the stock options did not form part of the employee's compensation for purposes of the calculation.
This decision supports the practice of using equity side letters when notifying newly hired employees of their equity award grants as opposed to mentioning the awards in the employment contract. Further, the letters should clearly state that the awards are not connected to the individual's local employment with the employer.