By Harry Prabandham · Updated September 27, 2026
Equity Compensation
Stock Options and RSUs After a Layoff: Deadlines and Decisions
After a layoff, unvested equity is usually forfeited and vested options must be exercised within a set window, often 90 days, or they expire.
Stock Options and RSUs After a Layoff: Deadlines and Decisions
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What happens to my equity if I'm laid off?
- Unvested options and RSUs are usually forfeited at termination unless the plan, grant, or a severance agreement provides acceleration.
- Vested options stay exercisable only for a post-termination window, commonly 90 days, though some companies allow months or years.
- Shares you already own, including settled RSUs and exercised options, remain yours.
- At private companies, some double-trigger RSUs survive termination until a liquidity event while others lapse, so the grant terms decide.
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What happens to my equity if I'm laid off?
- Unvested options and RSUs are usually forfeited at termination unless the plan, grant, or a severance agreement provides acceleration.
- Vested options stay exercisable only for a post-termination window, commonly 90 days, though some companies allow months or years.
- Shares you already own, including settled RSUs and exercised options, remain yours.
- At private companies, some double-trigger RSUs survive termination until a liquidity event while others lapse, so the grant terms decide.
What happens to ISOs after three months?
- ISOs keep their tax treatment only if exercised within three months after employment ends, or one year if you leave due to disability.
- Exercised later under an extended window, they are taxed as NSOs, meaning the spread is ordinary income at exercise.
- The grant itself doesn't change type; it simply stops qualifying for ISO tax treatment.
- Companies that offer long windows often accept this loss of ISO status as the trade-off for more time.
Can severance terms be negotiated?
- Severance offers sometimes include extra vesting, a longer exercise window, or paid COBRA premiums, and terms can often be discussed before signing.
- Workers 40 and older generally get 45 days to consider a release in a group layoff and seven days to revoke after signing.
- Before deciding, it helps to request the equity plan, grant agreements, latest 409A value, and any buyer or tender history.
- An employment attorney can review the release and equity terms; Rubric does not provide legal advice.
What does exercising cost now?
- The cash needed is the strike price times shares, plus ordinary income tax on the NSO spread or possible AMT on ISOs.
- Without a paycheck, that cash competes with living expenses during a job search of uncertain length.
- Former employees exercising NSOs may need to pay withholding to the company at exercise.
- Money spent exercising is at risk if the company never reaches a sale or IPO.
How can an exercise be funded?
- Personal savings are the simplest source; exercising only part, such as the lowest-strike grants, limits cash at risk.
- Non-recourse exercise financing leaves you owing nothing if shares become worthless, but costs can include interest, fees, and a large share of any gain.
- Some companies allow secondary sales or run tender offers that can fund exercises; plan documents set the limits.
- Recourse loans, margin, or home equity lines put personal assets on the hook if the shares fail.
The rest of the checklist
- ESPP contributions not yet used to buy shares are usually refunded, while purchased shares stay in your account.
- Vested 401(k) balances stay yours; an unpaid plan loan is often offset at separation and taxed unless rolled over by the tax-return due date, including extensions.
- Health coverage options include COBRA and an ACA marketplace plan, which offers a 60-day special enrollment window after losing coverage.
- Former employees of public companies can still be barred from trading while holding material nonpublic information.
Key takeaways
- Find the exact exercise deadline for each grant on the first day; plan terms vary widely.
- The three-month ISO rule and the exercise window are different clocks, and both matter.
- Exercising after a layoff is an investment decision made with less income, so the amount at risk deserves extra thought.
- Tax and legal outcomes depend on your situation; confirm with a CPA and attorney, since Rubric does not prepare returns or give legal advice.
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