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California Supreme Court Upholds Voluntary Stock Option Compensation Plan
In an important affirmation of voluntary stock option compensation plans, the California Supreme Court has ruled that when an employee opts to receive a portion of his or her wages in the form of non-vested stock (which the employee forfeits if he or she does not complete the vesting period), there is no violation of the state Labor Code which generally prohibits agreements that require an employee to forfeit earnings. The case is Schachter v. Citgroup, Inc. Under the plan in question, the non-vested stock plan was an option open to employees, and it was offered as an incentive for the employees to remain on the job rendering loyal service. As such, the court held that the plan did not violate Labor Code provisions that prohibit forfeiture of wages earned. A copy of the ruling is attached.