Massachusetts Court Rules Terminated Employee Can't Challenge Loss of Unvested Restricted Stock

In Harrison v. NetCentric Corp. (433 Mass 465, 2001), an employee and founder of NetCentric was forced to sell his unvested pre-IPO restricted stock back to the company when his employment was terminated. The company had a buy-back agreement for unvested restricted stock that specified the company would repurchase them for what the employee paid for them—in this case, one-tenth of one cent. Harrison claimed that the stock should have vested because it represented payment for services he had already rendered and that the buy-back provision was just a way to get around what would otherwise be an unlawful termination. He claimed the company fired him just so it would not have to deal with the costs of his stock. The company said unvested shares were payment for services to be provided in the future. Harrison was an "at will" employee and thus could be fired without cause. There was no resulting obligation to vest the stock or pay more than the buy-back amount. The court sided with NetCentric.