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Deferred Compensation

We Counsel Executives on Deferred Compensation Agreements

Protecting special remuneration for corporate employees

Many corporations provide their officers and executives with special compensation packages in addition to their normal salaries. These include stock options, restricted stock units and convertible bonds, all of which are governed by agreements. Deutsch Atkins & Kleinfeldt, P.C. understands these sometimes intricate arrangements and we regularly assist in negotiating and/or reviewing compensation agreements to make sure our clients’ interests are protected. We also represent employees in dispute resolution or litigation when employers fall short of fulfilling their obligations.

Stock options give employees a stake in their company’s future profits

An employee stock option (ESO) grants an employee the right to buy a certain amount of the corporation’s shares at a predetermined price during a specific period in the future. The employee has the right to obtain the shares, either as a gift or by purchasing them, once he or she has worked at the company for a certain period of time or has satisfied a performance requirement. When that happens, the ESO becomes vested, allowing the employee to exercise the option at the grant price at any time until the option’s expiration date. The idea behind ESOs is to align employees’ incentives with those of the shareholders.

Restrictive stock units offer alternative form of deferred compensation

Restricted stock units (RSUs) became popular in the wake of accounting scandals involving companies like Enron and WorldCom that erupted in the mid-2000s. An RSU involves a promise by an employer to grant restricted stock at a specified time in the future, once the employee works at the firm for a certain number of years or meets a performance requirement. Upon vesting, the RSUs are assigned a fair market value and are treated as taxable income. If the value of the stock has risen, the employee must report the increased value as a capital gain. RSUs have the twin advantages of delaying the recognition of taxable income to the employee while maintaining the advantageous accounting treatment for the corporation. Unlike stock options, which must be recognized as expenses to the company immediately when issued, RSUs stay on the company’s books until they vest.

Deferred equity gives employees cash flow and expectation of stock

Another method of future compensation is deferred equity. This usually takes the form of a convertible bond issued to an employee that that can be exchanged for shares of common stock when the bond reaches maturity or when the stock value reaches a certain level. A convertible bond states a ratio that determines how many shares the holder will receive based on the bond’s face value. The bond usually includes a call provision allowing the company to repurchase the bond upon specified triggering events. Over the lifetime of the bond, the holder receives interest payments based on the bond’s face value. Upon redemption, the bond holder has the choice of receiving common stock or selling the shares for cash.

Contact an accomplished New Jersey employment lawyer to protect your rights

When you join a corporate team that offers any of type of deferred compensation, it’s important to have a legal adviser who can analyze the prospective economic advantages and detriments. Deutsch Atkins & Kleinfeldt, P.C. represents New Jersey workers in negotiating and reviewing deferred compensation plans and in enforcing employer compliance through dispute resolution and litigation. Please call 551-245-8894 or contact us online to schedule a confidential phone call or in-house conference at our office in Hackensack, New Jersey with one of our attorneys.

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Neil H. Deutsch

About Neil H. Deutsch has been practicing law for over 35 years and is known as a skilled negotiator in employment and discrimination law. He believes in a bottom-line approach of risk analysis and cost effectiveness for his clients. "Case evaluation is something we take seriously," says Mr. Deutsch who seeks top net dollar for…

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Bruce L. Atkins
Senior Partner

About Bruce L. Atkins is regarded as one of New Jersey’s premier practitioners of employment and civil litigation. He has been selected to the New Jersey Super Lawyers prestigious list every year since 2005.  This honor, bestowed upon a recipient by the votes of his peers, is a powerful nod to the skill Mr. Atkins…

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Adam J. Kleinfeldt

About Adam J. Kleinfeldt joined Deutsch Atkins & Kleinfeldt, P.C. in March of 2015.  He primarily represents individuals in employment litigations such as discrimination, retaliation, and whistle blowing matters.  He has extensive experience in all phases of the litigation process. Adam has obtained significant results for some of his clients, including a $525,000 jury verdict…

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Diane Englander Peyser

About Diane Englander Peyser joined Deutsch Atkins & Kleinfeldt, P.C. in September 2018 where she represents employees in wrongful termination, retaliation, harassment, and discrimination matters. Prior to joining Deutsch Atkins & Kleinfeldt, P.C., Diane represented clients in all aspects of employment law on behalf of employees involving unemployment appeals, claims of sexual harassment, LGBT discrimination,…

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Debra M. McGarvey

About Debra M. McGarvey joined Deutsch Atkins & Kleinfeldt, P.C. in December 2019. She has extensive experience defending employees and employers in state and federal court in employment litigation matters. She has represented clients on various issues arising out of the New Jersey Law Against Discrimination (NJLAD), the New Jersey Conscientious Employee Protection Act (CEPA),…

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