Schachter v. Citigroup, Inc., et al.

Case Updates

The California Supreme Court held that employers may allow employees to purchase company stock on the condition that the stock must be forfeited if the employee is terminated or resigns within a given time period. The court held that the stocks were not earned, unpaid wages, but rather incentive compensation designed to motivate and retain the employee. Because the employee voluntarily altered the terms of his wages and then resigned early, the court ruled that Citigroup owed him no additional wages.

NCLC urged the California Supreme Court to hold that employers may allow employees to use their earnings to purchase company stock at a reduced rate on the condition that the stock must be forfeited if the employee is terminated or resigns within a given time period. In this case, a Citigroup employee elected to receive restricted stocks as a percentage of his compensation, knowing that he would forfeit the stocks if he was fired or resigned within two years of the stock purchase. When the employee resigned within two years, Citigroup refused to pay him cash for the unvested stocks. The plaintiff argued that California law protects such discounted stock purchases as earned wages.