Uber Lawsuit Alleges Employees Were Misled On Equity Compensation

An Uber employee has filed a lawsuit accusing the company of misleading employees about their equity compensation. Uber "devised a fraudulent scheme to recruit highly sought software engineers," according to the case. From a report on TechCrunch: The lawsuit claims that Uber promised a more tax favorable type of options at the time employees were hired and then later changed the plan. The case alleges that at least 100 others on the Uber staff may have been impacted and that these stock options can potentially be worth "hundreds of millions of dollars" to employees and also save Uber "millions of dollars of tax deductions." The plaintiff, Lenza McElrath, who was previously a lawyer and is now an engineer at Uber, says that he was under the impression that all his shares could be treated as ISOs, which do not require an upfront tax bill. He said he was later given a notice about a change to the exercisability schedule, that effectively turned most of his shares into NSOs, which are taxed at the time they are exercised. While many startups allow their shares to become exercisable over the course of a four-year vesting agreement, Uber has share agreements that become exercisable after just six months. In other words, Uber employees can buy the stock they are entitled to shortly after they gain employment.

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