Are Stock, or Stock Options, Considered the Same as Salary or Wages?

Stock options can be a better, more profitable payment than salary in the long term than simple wages. Many people retire as millionaires, after working at the same company for many years, and accumulating stock options over that time period.

But when it comes to wages, and the laws that affect wages, are stock options the same thing as wages? So, as an example, could your employer pay you less than minimum wage, but give you stock options to make up the difference, and say you were paid in full?

Options Aren’t Wages

The answer is generally no, at least, not in California.

California requires that wages be “fixed or ascertained,” which generally means that you need to know exactly what your wages are, and you need to have immediate access to those wages, if you want them–neither of those applies to stock options. In fact, courts have found that although stock can, eventually be turned into money, and have a value–stocks themselves are not money, and thus, not wages.

Courts have found that stock options, and their value, are contingent–their value, if any, depends on how the company does, and the employee remaining with the company. Neither of those applies to actual wages.

What Does That Mean?

That can have good and bad consequences.

The good, for an employee, is that no, the employer can’t just give you a bunch of stock options, and then not pay you enough, and claim that you were paid.

No matter how many stock options you are provided, if you are entitled to overtime, or you’re not being paid minimum wage, or tips are being taken from you–anything that would violate federal or state wage and hour laws–the stock options cannot be counted, and you must still be paid in full with actual currency.

Furthermore, the value of stock options cannot be used in calculating what you get for overtime pay. Overtime pay is 1.5 times your normal pay–not 1.5 times your normal pay plus the value of any stock options. So, it does lessen (or at least, doesn’t increase) what a worker gets, as overtime pay.

If You’re Terminated

Because stock options are not wages, should your employment with the employer end, the employer can deny you your stock options (if they haven’t already vested, and if there is no employment contract saying otherwise).

Normally, when you’re paid with money, whatever you previously earned but were not yet paid is yours, and must be paid to you, even after your employment ends.

But because stock options aren’t wages, your employer can take them back, and refuse to provide them to you, after your employment ends.

Options vs. Vested Shares

Note that everything here applies to stock options. But there are times when an employee actually receives stock shares or is promised shares as opposed to just a future option. That is a different scenario, and those may be, in some cases, considered wages, unlike stock options.

Are you being paid fully and fairly? Contact the San Jose employment attorneys at the Costanzo Law Firm today.

Source:

dol.gov/agencies/whd/fact-sheets/56-flsa-stock-options