PUTTINGIT INTOPRACTICE
Making Employment Decisions in Difficult Times
Gita Bhandari joined your high-tech start-up in 2006, immediately after graduating from Carnegie-Mellon University. She turned down better-paying consulting and investment banking opportunities to get in on the ground floor of a young, fast growing company. As compensation, Bhandari receives a nominal salary and stock options. Because the company's product will require three years to bring to market, the options do not vest for three years. This means that Bhandari forfeits all of the stock options if she leaves the company before 2009.In 2008, the company began having serious problems.
Even though the project is on schedule and is anticipated tobe a huge success, costs are skyrocketing, and your investors demand a significant reduction in operating expenses.
You are considering firing Bhandari. Although she has performed well, Bhandari was the most recent person hired.
She is an at-will employee, but, considering that she has less than one year to go until she can exercise her stock options, you fear a lawsuit, especially given the company's close-knit character. At this critical stage, the legal fees alone from a wrongful-termination lawsuit could bankrupt the company.
Should you fire Bhandari to reduce operating expenses? If Bhandari is terminated, on what basis could she sue the company?
Would she prevail? How could you have structured the relationship to avoid this potential lawsuit?