Uber is facing a lawsuit from an employee who contends the ride-hailing app startup mislead employees about the equity they would receive as compensation.
According to a TechCrunch report, the lawsuit contends Uber “devised a fraudulent scheme to recruit highly sought software engineers.” The lawsuit claims Uber promised employees options that were more favorable when they were hired, but once they came on board, the plan was changed. The lawsuit said there are 100 or more staffers at Uber that may have been impacted by the change in the stock option plans. What’s more, the lawsuit contends the harm could be worth “hundreds of millions of dollars” to employees but saves Uber that much in tax reductions.
Lenza McElrath, the Uber engineer behind the lawsuit, claims he thought all his shares could be treated as ISOs, which eliminate a tax bill upfront when they are exercised, but said he was later told a change to the exercisability schedule resulted in the majority of his shares converting to NSOs, which are taxed when they are exercised. In the lawsuit, the plaintiff said: “This tax is many times the strike price and can total hundreds of thousands of dollars, meaning that NSOs — unlike ISOs — can impede an employee’s ability to exercise the option depending on whether he or she has the financial resources to pay the tax,” reported TechCrunch.
In a statement to TechCrunch, Uber said: “We want our employees to have a real stake in Uber’s success, and we’re proud to offer equity compensation in service of that goal. Whereas our stock incentive plans are designed to work for all employees, we believe Mr. McElrath has misinterpreted his stock option agreement to benefit himself and his particular tax situation.”
TechCrunh noted that this isn’t the first lawsuit McElrath has filed against a company. He previously lodged a lawsuit against AT&T for poor service. That case was sent to arbitration, according to the report.