Employee excluded from ESOP distribution due to illness.

Hello,
I am an employee of the company which few years ago introduced ESOP plan and I was a part of it since day one. Now by the end of 2019 company approached all share holders saying that there is a good buyer for the company and the price is right. Then we all could vote in favor of sale or against it. Sell was accepted and all calculations  and testing started. There was a huge amount of unalocated shares that should be fairly redistributed between all ESOP participants and due to sale all participants were 100% vested. Here my case started. In December 2019 I was injured in a car accident and forced to go for surgery, which put me out of work for 7 months.  During that time I was  on short term disability provided through company's benefits since company did not wanted to adjust my work to lighter duty to allow me to earn my income and recover at the same time.   I was recently released to work by doctors just to find out that I am getting only 100% of my share value which I owned till end of 2019. The big pool of unalocated shares was distributed on the beginning of 2020 and I was told that since theoretically I did not get any pay stub in 2020 I am not eligible for distribution of the most valued shares. In that case I lost 2/3 of predicted after sale payout. Is there any law, rule or regulation that is protecting me in this case? I never quit the company nor was fired. I was told to go on disability which I did. It was not my choice, just unfortunate accident which can happened to anyone and any time. Now it feels like double loss to me since I worked hard many years just to be left like that. Thank you all for any comment, opinion etc.     

As I tell my clients all the time I am going to tell you the correct answer and not the answer you want to hear.  

There is a good chance you are out of luck. 

If the short term disability payments wasn't compensation for plan purposes, and there is a good chance it wasn't, you didn't have any compensation for ESOP purposes in 2020.  If they allocated the suspense shares on compensation and you didn't have any compensation the result is you get none of those shares.

It will be hard to give you a complete 100% answer without getting into the weeds of the plan document but I (anyone on this board) can only give general insights.

If you feel strongly about this I would recommend the following.

Find a copy of the plan's Summary Plan Description (SPD).  You should have gotten a copy of it at some point.   In it there are instructions on how to a make a formal written claim to the plan that will trigger a requirement they make a formal written reply to you.  You can try and make a claim and see what they say.  These formal claims tend to get their lawyers involved so don't be shocked if they lawyer up.  But that will also result in someone who knows the document really making sure it is/was followed. 

To answer you question directly...

No, there is no law I can think of that requires them to give you an allocation of the suspense shares. 

1 hour ago, ESOP Guy said:

Find a copy of the plan's Summary Plan Description (SPD).  You should have gotten a copy of it at some point.   In it there are instructions on how to a make a formal written claim to the plan that will trigger a requirement they make a formal written reply to you.  You can try and make a claim and see what they say.  These formal claims tend to get their lawyers involved so don't be shocked if they lawyer up.  But that will also result in someone who knows the document really making sure it is/was followed. 

You might also focus on the definition of "compensation" that is/should be included in the SPD.

Thank you all for your input. I will look into SPD as you suggested. I also requested a copy of the regulation that was used to exclude me from distribution. For me it was more like discrimination towards temporary disabled employee, but obviously if  ESOP rules are clear about cases like this,  than I understand I may be out of luck here. Thanks again.

Unallocated shares can be allocated based on current compensation, as earnings on the shares, or any other method that is non-discriminatory.  You should request the termination amendment which would include language regarding the allocation of the unallocated shares due to a sale.  It would have the language that you are seeking. 

6 minutes ago, Degrand said:

Unallocated shares can be allocated based on current compensation, as earnings on the shares, or any other method that is non-discriminatory.  You should request the termination amendment which would include language regarding the allocation of the unallocated shares due to a sale.  It would have the language that you are seeking. 

What would be "any other method that is non-discriminatory" in this case? ( please use some example, I am not sure I understand it correctly, Thanks).

47 minutes ago, shareholder said:

What would be "any other method that is non-discriminatory" in this case? ( please use some example, I am not sure I understand it correctly, Thanks).

I am not trying to dodge your question but it is any method the Plan Administrator wants as long as they can show it doesn't favor a class of employees known as the Highly Compensated Employees (HCE).  There is a precise legal definition of who is an HCE. 

It would have to be written in the termination amendment. 

In all the decades I have worked on ESOPs  based on compensation and based on shares as earnings is easily 99.99% of the methods. 

You could give the compensation method some kind of years of service weighting I guess to reward people who worked at the company a long time and not just look at compensation for example since you asked for one.  I don't think I have ever seen it done.  You would have to test it to not discriminate as noted. 

To be very clear just because you can present the company with a method you like doesn't obligate them to use it at all.  

You can ask for the amendment but it isn't clear to me they are obligated to give it to you.   I don't see a real good reason to say "no" as it isn't some deep, dark secret but don't be shocked if they don't give it to you. 

As I said before the odds of you getting shares is very low at this point.  This part of the plan operation was almost certainly reviewed by the plan's attorney and the plan trustee.  

The ESOP plan document and amendments are required by law to be available to you.  Otherwise, I agree with the ESOP guy.  Compensation is usually a reasonable approach to allocation of unallocated shares.