Lost RSUs After a Layoff? When Unvested Equity Can Be Recovered

Last updated December 19, 2025

By Andi Mazingo, Esq.

Equity compensation is a central part of compensation in Big Tech. For many employees, restricted stock units (RSUs), stock options, and other equity awards make up a significant portion of total pay.

When a company terminates an employee, unvested equity is almost always forfeited automatically. Employers often present this as unavoidable: “Your equity stopped vesting when your employment ended.”

That statement is incomplete — and in many cases, legally wrong.

How RSU Forfeiture Typically Works

Most equity plans provide that:

• RSUs vest only while the employee remains employed

• Unvested shares are forfeited upon termination “for any reason”

• The company retains broad discretion over vesting schedules

  
  

On paper, these provisions appear absolute. In practice, they do not insulate employers from liability when a termination is unlawful.

When RSU Forfeiture Becomes Legally Actionable

Unvested equity may be recoverable when the underlying termination violated employment law.

Common scenarios include:

• Disability or medical leave discrimination: Employees are terminated shortly after disclosing a medical condition, requesting accommodations, or returning from leave.

• Pregnancy or parental leave: Employees are managed out, downgraded, or selected for layoffs after announcing pregnancy or taking parental leave.

• Retaliation: Employees are terminated after raising concerns about discrimination, harassment, or unlawful practices.

• Pretextual performance-based layoffs: Long-tenured or high-performing employees are suddenly labeled “low performers” to justify termination shortly before significant vesting events.

In these cases, lost RSUs are often treated as compensatory damages, not speculative future compensation.

Courts Do Not Treat RSUs as “Optional” Pay

Employers frequently argue that unvested equity is discretionary and therefore unrecoverable.

Courts and arbitrators increasingly reject this argument where:

• Vesting was scheduled and predictable

• The employee was performing satisfactorily

• Termination timing conveniently avoided vesting milestones

When an employee can show that they would have remained employed but for unlawful conduct, lost equity is part of the harm caused and may be recoverable. For more information about what constitutes an unlawful termination in big tech, read here.

How Companies Strategically Use Termination Timing

One of the least discussed aspects of Big Tech layoffs is timing.

Companies often:

• Terminate employees weeks or months before major vesting cliffs

• Schedule “performance” terminations just before refresh grants or bonuses

• Use opaque review cycles to justify exits before equity events

While employers rarely admit this motive, patterns across teams and cohorts can be powerful evidence.

Arbitration Does Not Eliminate Equity Claims

Many tech workers believe that arbitration clauses prevent recovery of equity losses. That is not necessarily true.

While arbitration changes the forum:

• Arbitrators can and do award damages for lost RSUs

• Equity losses are routinely litigated in arbitration

• Confidentiality often hides how frequently employees recover

The key question is not where the case is heard — but why the termination occurred.

Why “At-Will Employment” Does Not Defeat RSU Claims

At-will employment allows termination without a contract — not termination for unlawful reasons.

An employer cannot lawfully terminate an employee:

• To avoid vesting obligations

• Because of protected leave or status

• In retaliation for protected activity

If the termination itself was unlawful, the resulting forfeiture of equity is part of the damages.

What Employees Should Do After Losing RSUs

If you lost unvested equity after a termination:

1. Preserve equity documents and documents showing illegality of termination: Stock plans, grant notices, vesting schedules, communications (emails, Slack messages showing discrimination, retaliation, reliability of additional equity grants), performance reviews, peer reviews, and self-reviews.

2. Document timing: Note how close termination was to vesting events.

3. Compare treatment: Look at who else was terminated — and who was not.

4. Avoid assuming the loss is final: Many employees incorrectly believe forfeiture is automatic and irreversible.

5. Speak with counsel early: Equity claims are fact-intensive and time-sensitive.

Why These Claims Are Often Confidential

Employees are often surprised to learn how frequently equity losses are recovered. The reason this is not widely known is simple: most resolutions are confidential.

Confidential settlements and arbitration awards obscure:

• How often employers lose these claims

• How significant equity damages can be

• How fact-specific the outcomes are

  
  

This silence benefits employers — not employees.

The Bottom Line

Losing unvested RSUs after a layoff does not automatically mean those shares are gone forever.

When a termination is unlawful, equity forfeiture is not a technicality — it is part of the injury. Understanding that distinction can make the difference between accepting a loss and pursuing accountability.

Frequently Asked Questions About Lost RSUs After a Layoff

Can unvested RSUs be recovered after a layoff?

Yes. If a layoff or termination was unlawful—such as when it was discriminatory, retaliatory, or based on protected leave—lost unvested equity may be recoverable as part of an employee’s damages under employment law.

Does at-will employment prevent recovery of lost RSUs?

No. At-will employment does not permit termination for unlawful reasons. If an employee would have continued working and vesting equity but for unlawful conduct, equity forfeiture may be legally actionable.

Do arbitration agreements prevent recovery of unvested equity?

Not necessarily. Arbitration agreements may affect where a dispute is resolved, but they do not automatically eliminate an employee’s ability to recover lost equity caused by unlawful termination. Arbitrators routinely consider equity-based damages.

How close to vesting do I need to be to recover RSUs?

There is no fixed rule. Courts and arbitrators look at factors such as vesting schedules, performance history, employer intent, and whether vesting was reasonably expected absent the unlawful termination.

What documents should I preserve if I lost RSUs?

Employees should preserve equity grant notices, vesting schedules, offer letters, performance reviews, internal communications, severance documents, and any records showing the timing of termination relative to vesting events.

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