The Court of Appeal upheld a stock option plan against a claim that it worked illegal forfeitures under the California Labor Code. The Court held that Citigroup's stock option plan was valid because, in a "two-step" transaction, it gave employees cash with the right to buy options at a heavily discounted price. The catch was they forfeited it if they did not remain employed.
The Court held this plan, as drafted, was not an illegal forfeiture.
The Court also noted even if the options were granted directly, the forfeiture would be valid because it was express and clear.
Of significance to wage and hour wonks, like me, the court also addressed whether payment in stock options was a violation of the Labor Code's requirement of the form of payment. I once posited that issue to a DLSE official and received a chilling answer. But no. The court said Section 212 does not apply when payment is made in stock options. That should give everyone a sigh of relief. ::Sigh::: The case is Schachter v. Citigroup and the opinion is here.