Early Retirement

Season’s greetings!  Now it’s December it is time for two things: Giving gifts and indulging in treats. Since tis’ the season we will be giving you two cases to satiate your appetite for employment law, think of it as a belated Black Friday. In an age where a film released at Christmas bans an advert containing the Lord’s Prayer we thought this week’s topic should cover the other side of Christmas. Money.

Our first case concerns age discrimination and stock options, it asks the question whether employees who take early retirement should be allowed to keep unvested stock?

Mr Cockram, the Claimant, had worked at Air Products Plc, the Respondent, for 25 years. The Respondent was a large multinational corporation and its Board of Directors offered certain employees stock options, under its Long Term Incentive Plan (LTIP), at their discretion. The LTIP was designed to reward loyal and experienced staff.

These options vested at various times and the general rule was that any unvested options would be forfeited if the employee left the company. The three exemptions to this rule were death, disability and retirement, which was defined as 55 under the rules of LTIP.

Unvested Stock

At age 50, the Claimant decided to take early retirement as he had reached a pensionable age. However, the Respondent did not allow the Claimant to keep his unvested options as even though he as retiring he had not yet reached 55. It accepted this was discriminatory for employees seeking to retire early but added that it was justified in doing so as it was the only way to be fair to employees who were ineligible for early retirement.

The Claimant thought he was entitled to the unvested shares which he believed were worth somewhere between £25,000 – £275,000 (The word guesstimate suddenly makes sense!). The ET ruled in favour of the Respondent stating that was acceptable to not allow the Claimant to keep his unvested shares and it was the only fair way to distinguish between employees who were not entitled to retire early.

The Claimant appealed and the EAT accepted his appeal stating that the ET had not justified its decision, meaning the ET’s reasoning was flawed but not necessarily the decision. The case was submitted to a fresh ET to decide and we will be sure to announce the verdict of its decision as and when it is published.

To answer today’s question it could well be discriminatory, those who are entitled to retire early are significantly worse off than those who work an extra five years. Therefore, early retirees may be allowed to keep unvested stock. Many would agree with the Respondent that the scheme was designed to reward loyal staff but thus far that isn’t the case so be careful if a similar situation arises.