Uber Hit with Class Action Over Alleged ISO Scheme

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A proposed class action lawsuit filed this week claims Uber Technologies “devised a fraudulent scheme” to lure in big-time software engineers by promising investment stock options—the most valuable type of stock options—and then “systematically imposing a different exercisability schedule” than was outlined in proposed class members’ employment agreements. Doing so “months after the employees started work,” the 22-page lawsuit alleges, thereby disqualified most of the options from ISO treatment while lining Uber’s pockets with millions in tax deductions. Filed by a senior software engineer, the lawsuit further alleges Uber unlawfully imposed severe limits on the timeframes in which employees could exercise their stock options.

The suit describes investment stock options as “by far the most important recruiting tool for companies like Uber,” as they can eventually be worth millions of dollars. According to the complaint, Uber fraudulently offered prospective software employees ISOs “to stay competitive with or gain competitive advantage over” rival tech companies in recruiting. From there, the complaint summarizes the class’ allegations thusly:

“Uber knew at the time of recruiting candidates and at the time of entering into the employment agreements that it never intended to honor the agreement to compensate employees with ISOs to the maximum extent permitted by the tax code or pursuant to the promised four-year exercisability schedule.”