California Supreme Court Holds That Earned Wages Can Be Transformed Into Unvested Future Compensation in Schachter v. Citigroup, Inc.
On November 2, 2009, the California Supreme Court issued an opinion in Schachter v. Citigroup, Inc., __ Cal.4th __ (2009), holding that an employment incentive provision calling for the forfeiture of restricted company stock if the employment relationship was terminated before vesting did not run afoul California Labor Code sections 201, 202, and 219. The Court’s opinion turned largely on the conclusion that the employee had voluntarily entered into the Plan, which provided employees with shares of restricted company stock at a reduced price in lieu of a portion of the participating employee’s annual cash compensation. According to the Court, the employee was not entitled to return of monies paid into the Plan in exchange for the unvested company stock at the time of termination because the employee had renegotiated the terms of employment by entering into the Plan, and had received the benefits promised by the employer (i.e. the restricted company stock).
In light of the Court’s decision, an employee must be mindful in when agreeing to trade vested compensation (i.e. compensation already earned) for future unrealized compensation such as restricted stock.
Further discussion of this case may be found at the Bailey Class Action Daily.
