Stock Options, Performance Awards and Commissions

In addition to salaries, many companies offer their employees other forms of compensation or perks in order to draw in and retain talent. These additional forms of compensation also might be used to inspire employees to work harder in order to be awarded for their efforts, or by giving the employee a stake in the company so that they feel that they will benefit directly from the company’s success. Here are a few offers that employers might make to employees or potential employees.

Stock options

A stock option gives an employee the opportunity to purchase shares of the company’s stock at the fair market value for the stock. An employer might also issue a restricted stock award, which would involve either giving an employee the stock, or selling it to the employee for a minimal or nominal price. Both of these options would vest after a set amount of time. If the employee leaves the company prior to the date the stock vests, they will likely forfeit their right to the shares.

Stock options might be used by start-ups or other closely held companies that might not be able to offer salaries that would compete with larger and more established corporations. The stock options can serve as an alternate form of compensation and a benefit to help find and keep quality personnel. Companies also view stock options and awards as a good way to create an incentive for employees to work harder.

Performance awards

Performance awards are company shares or units that a company offers to their employees on a performance based contingency. A period of time and a set of goals are agreed upon, and at the end of the period of time, if the employee met the goals that were set, then the units or shares will be awarded to the employee. There might also be a vesting period for the awards, and if the award vests the shares or units belong to the employee.  Like stock options, if the employee leaves the company prior to the vesting of the award, the award is likely forfeited.

Commission

Commission is money paid to an employee, usually for selling some specified amount of services or goods for a company. There is no requirement in the Fair Labor Standards Act (FLSA) to pay employees commission on sales that they make for the company, and in fact some employees working on commission might also be exempt from the FLSA overtime rules. Commissions are often used as a means of encouraging employees to put in extra effort to sell for the company by giving the employees a way to personally benefit from his or her sales.

When do employers have to give their employees stock options, performance awards, and commissions?

Stock options, performance awards and commissions are not required forms of compensation that employers are generally bound to pay to their employees. Nothing in the FLSA dictates that employers must offer any of these things to employees. That does not mean that an employee will never be entitled to these forms of compensations. This only means that if an employer is legally obligated to pay these things to an employee, it will be on the basis of a legally binding agreement with an employee, such as an employment contract. If you signed and employment contract that offered you stock options, performance awards or commission, and you have satisfied your terms of the agreement, then your employer must pay you what you are owed. If your employer has breached the terms of their agreement, they are in violation of the law.

Additionally, if you are laid-off just before your stock options, or award vests, or just before you are due for a commission, and you believe your employer terminated you in order to avoid the payout, you might have the ability to file a suit for wrongful termination based on a breach of good faith and fair dealing.

If you believe your employer has breached a contract with you regarding any form of compensation owed to you, you should speak with an employment attorney to discuss your options and the best way to seek the compensation you are owed.

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At Stern Law, PLLC, we have compassionate and caring attorneys ready to work with you to find the best solution to your employment law related legal issues. Contact Stern Law, PLLC today at (844) 808-7529 for a free consolation with an experienced employment attorney.