Union sues Intel over share options

In August 2001, Denmark's largest trade union, the Union of Commercial and Clerical Employees (HK) decided to sue the information technology group Intel, seeking to have it established by the courts that it is not lawful for a company to deprive dismissed employees of share options. In July, Intel had closed its Danish operation and dismissed 200 employees, cancelling or restricting the share options held by some of the staff. The case involves important matters of principle related to the connection between share options and the ordinary pay of employees.

In June 2001, the US-based multinational information technology group Intel closed down its Danish division and dismissed 200 employees. Some of them held share options – ie the right to buy company shares at a fixed, lower price with the prospect of substantial profits at a later stage. These options were provided as part of the remuneration of the employees concerned. After the closure, Intel announced that only so-called 'mature' options could be redeemed and then only within three months of the Danish operation's last working day on 31 July. This meant that employees with 'non-mature' options, which provide only a right to buy Intel shares at a future point in time, will lose part of their salary and indeed will essentially pay back a part of their salary. Intel's spokesperson in Europe has stated that Intel never comments on such cases.

In the course of July 2001, three trade unions - the Association of Computer Professionals, PROSA, the Union of Danish Engineers (Ingeniørforbundet i Danmark, IDA) and the Union of Commercial and Clerical Employees in Denmark (Handels- og Kontorfunktionærernes Forbund, HK) - threatened to take legal action against Intel over the share options issue. The case was further aggravated when it turned out that Intel – which was still silent on the issue – had included a clause in the employment contracts of it former employees to ensure that they could not talk about the matter. They had signed a contract which provided that they were not allowed to make any statements concerning Intel without the written consent of the company. This is an American practice, but not in line with Danish traditions, and this hardened the views of the trade unions even further.

In August, HK decided to have the case tried before a court of law, considering that Intel had failed to come up with a satisfactory proposal to solve the problem. It thus sued Intel in an attempt to have it established by the courts that it is not lawful for the company to deprive dismissed employees of their share options. IDA and PROSA will probably soon take similar steps. The ruling in this case will set an important precedent for the relationship between share options and ordinary pay. This is especially significant in the information technology sector, where this form of pay is very common.

A similar case had earlier been decided by the courts. In this case, an employee employed by Novo Nordisk had – like his colleagues – been granted 200 share options in 1998. It was a condition set by Novo Nordisk that the employees had to stay in employment at the company for three years in order to be able to use the options. The employee left the company shortly after the options had been granted and they were withdrawn by Novo Nordisk. Early in June 2001, the Danish Commercial and Maritime Court held that, under the Act on the Legal Relationship between Employers and Salaried Employees, share options are comparable with pay and that it is thus not lawful for a company to attach conditions to the award of share options. This judgment has been appealed to the Danish Supreme Court and this decision may turn out to be of decisive importance in the case brought by HK against Intel, if the Novo Nordisk case is decided before HK's case comes up for trial.

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