Benefits received from restricted stock or RSUs may be considered part of the employment relationship and included in a severance payment if the awards are repeatedly granted to an employee. Upon involuntary termination of employment, an employee may be entitled to continued vesting and other rights with respect to his or her award. In order to reduce the risk of employee claims, the award agreement signed by an employee should provide, among other things, that vesting of restricted stock or RSUs ceases upon termination of employment, and that the plan and any awards under it are discretionary.

Upon involuntary termination of employment, an employee may be entitled to continued vesting and other rights with respect to their award depending on the terms of the award. In order to reduce the risk of employee claims, the award agreement signed by an employee should provide, among other things, that the vesting of restricted stock or RSUs ceases upon termination of employment, and that the plan and any awards under it are discretionary.

Benefits received from restricted stock and RSUs may be considered as part of the employment relationship and thus, included in a possible severance payment if restricted stock and RSUs are regularly granted to an employee. Upon termination of employment, an employee may be entitled to continued vesting and other rights with respect to his or her award. Such entitlement risks can be mitigated contractually by the parties for certain cases. In order to reduce the risk of claims, the award agreement signed by an employee should provide, among other things, that the vesting of restricted stock and RSUs ceases upon termination of employment, and that the plan and any awards under it are discretionary. In addition, anti-discrimination rules need to be considered when awarding restricted stock or RSUs. If the Austrian employer has a works council, prior notice should be given before an offer is made.

In order to reduce the risk of employee claims, the award agreement signed by an employee should provide, among other things, that vesting of an award is non-recurring, ceases upon termination of employment and that the plan, and any awards under the plan, are discretionary. Benefits that are exempt from the calculation basis of social security contributions are also exempt from the calculation basis of holiday pay; therefore, a dispute with the Belgian National Office for Social Security on whether social security contributions are due on a particular benefit may also result in the workers involved claiming holiday pay on the benefit in question.

In addition, anti-discrimination rules must be considered when awarding restricted stock or RSUs.

There is a link with the new position by the National Office for Social Security on social security contributions, as benefits that are excluded from the calculation basis of social security contributions are automatically also excluded from the calculation basis of holiday pay. If the position of the National Office for Social Security would be followed and social security contributions could no longer be avoided by the mere fact the financial burden of a benefit is on the parent company, the rationale of no holiday pay being due on RSUs no longer applies. Holiday pay equals 15.67 percent of the gross remuneration. This risk does now nevertheless seem lower in the light of the abovementioned Supreme Court judgement of September 5, 2022 and the judgement by the Antwerp Employment Appeal Tribunal of November 20, 2023.

Benefits received from restricted stock and RSUs may be considered part of the employment relationship and included in a severance payment. Labor court tends to consider that the RSU and restricted stock have commercial nature, and, as such, does not have salary nature. Caselaw is not firm on this, but Labor Courts may consider restricted stock and RSUs as salary if the employee does not participate in any risk of the transaction (eg, if the award is granted for free or with a very reduced cost). Upon involuntary termination of employment, an employee may assert that he or she is entitled to continued vesting and other rights with respect to his or her award, although the risk is low. In order to reduce the risk of claims, the award agreement signed by an employee should provide, among other things, that vesting of an award ceases upon termination of employment, regardless of the reason for termination, and that the plan and any awards under it are discretionary.

There is no at-will employment in Canada. Generally, if an employee is terminated without just cause, the employee is entitled to reasonable notice of termination of employment under the common law unless expressly limited to statutory or other minimums by contract, or pursuant to civil law in Quebec. Therefore, where an employee is offered restricted stock or RSUs as a term and condition of employment, if employment is later terminated without just cause and without reasonable notice of termination, the employee may be entitled to damages in respect of the loss of the restricted stock or RSU award over the reasonable notice period. However, employers may avoid such liability by eliminating eligibility for any unvested or future awards in the terms and conditions of employment and any applicable award policy or plan. To do so, employers must ensure that the terms and conditions of employment or of any award policy or plan expressly and unambiguously eliminate the employee’s entitlement to unvested awards after the effective date of termination (or as of the date the employee is provided with notice of termination) and provide that awards will not form part of nor be taken into account for the purpose of pay in lieu of notice of termination, termination pay, severance compensation or other compensation or damages in respect of the termination of the employee’s employment whatsoever (subject to the statutory minimum notice period during which participation may be required to continue). Employers who wish to limit employee entitlement to an award of restricted stock or RSU in the event of any termination of employment must clearly and unequivocally cover all possible circumstances and must not rely on overly generalized exclusions or limitations. Mere references to “active employment” are unlikely to pass muster.

Offering restricted stock and RSUs may trigger certain employer obligations and employee claims. For instance, benefits received from an award may be considered part of the employment relationship and included in a severance payment if such benefits are routinely offered. Upon involuntary termination of employment, an employee may assert that they are entitled to continued vesting and other rights with respect to their award. In order to reduce the risk of employee claims, the award agreement signed by an employee should provide, among other things, that the vesting of an award ceases upon termination of employment, and that the plan and any awards under it are discretionary.

The payment of wages is restricted to cash, and employers are prohibited from paying wages in the form of negotiable securities.  As the universal practice is to explicitly and contractually define RSUs and restricted stocks as a discretionary, long-term incentive outside the scope of "wages" as defined in labor law, this restriction should not be problematic.

In addition to the concern about wages, benefits received from restricted stock and RSUs may be considered part of the employment relationship and may be included in a severance payment. In order to reduce the risk of entitlement claims, the award agreement signed by an employee should provide, among other things, that the stock award is not employment compensation, that vesting of restricted stock and RSUs ceases upon termination of employment, and that the plan and any awards under it are discretionary.

Restricted Stocks and RSUs could be granted as an extralegal benefit of the local company, even if the stock granted is issued by a foreign entity.

No notice or acceptance of the employee is mandatory.  This benefit could be managed as a unilateral extralegal benefit (non-salary payment) to reduce the risks regarding acquired (vested) rights from a labor standpoint in Colombia.

Nonetheless, the main risk is that employees could claim that this benefit in fact is an acquired right.  Appropriate labor provisions in the award terms and conditions and executing the grant through a unilateral document from the employer (instead of a negotiated bilateral agreement) may significantly reduce these risks.

Restricted stock and RSU benefits may be considered part of the employment relationship and included in an average earnings calculation if awards are granted to an employee directly by the employing entity.

In order to reduce the risk of employee entitlement claims, the award agreement signed by an employee should provide, among other things, that vesting of an award ceases upon termination of employment, and that the plan and any awards under it are discretionary.

Restricted stock

Restricted Stock is normally not regulated by the 2004 Danish Stock Options Act, and it is common that the employee is required to sell or give Restricted Stock back to the company in the event of termination of employment. The validity of such a term depends on whether the term is considered fair according to contractual law.

RSUs

Before January 1, 2019

RSUs are normally regulated by the 2004 Danish Stock Option Act. According to the Act, an employee has unwaivable rights to be granted RSUs in the event that his or her employment is terminated by the company, except in cases of misconduct. An employee may maintain the right to receive a proportionate share of the RSUs that the employee would have been entitled to, had he or she still been employed at the time of the allotment or at the end of the current financial year. The 2004 Danish Stock Option Act may apply to both Restricted Stock and RSUs depending on the nature of the agreement or scheme. If the Act applies, employers must provide their employees with a translated summary of their rights concerning restricted stock or RSUs. In addition, anti-discrimination rules need to be considered when awarding restricted stock or RSUs.

After January 1, 2019

The Danish Stock Option Act was amended in 2018 (applicable from January 1, 2019). The amendments entail that the good and bad leaver limitations no longer apply allowing for the employer and the employee to freely decide on the terms of RSUs in connection with a termination of the employment. The employer may therefore determine such terms to the effect that non-exercised RSUs will lapse in connection with a termination of the employment regardless of the reasons for the termination of the employment, ie, also regardless of the employee is a "good leaver" according to the current rules.

The amendments also entail that in the award agreement it can be agreed that the employer is entitled to repurchase awarded RSUs and Restricted Stock at a "fair market value" when the employee leaves the employer.

Restricted stock and RSUs are considered part of the employment compensation and may be included in a severance payment, if restricted stock and RSUs are repeatedly granted to an employee. In order to reduce the risk of claims, the award agreement signed by an employee should provide, among other things, that the award is not employment compensation, that vesting of an award ceases upon termination of employment, and that the plan and any awards under it are discretionary.

Although it is not common, restricted stock and RSU benefits may be considered part of the employment relationship, and may be included in the end-of-service entitlement, if awards are repeatedly granted to an employee. In order to reduce the risk of employee entitlement claims, the award agreement signed by an employee should provide, among other things, that the award is not employment compensation, that vesting ceases upon termination of employment, and that the plan and any awards under it are discretionary.

Restricted stock and RSU benefits may be considered part of the employment relationship and may be included in a severance payment for unlawful termination if restricted stock and RSUs are repeatedly granted to an employee. In order to reduce the risk of employee entitlement claims, the award agreement signed by an employee should provide, among other things, that the awards of restricted stock and RSUs are not employment compensation that vesting of an award ceases upon termination of employment and that the plan and any awards under it are discretionary. In addition, anti-discrimination rules must be considered when awarding restricted stock or RSUs.

Shares benefits may be considered part of the employment relationship and may be included in a severance payment if options are repeatedly granted to an employee.  In order to reduce the risk of employee entitlement claims, the award agreement signed by an employee should provide, among other things, that the award of an option is not employment compensation, that vesting of an option ceases upon termination of employment and that the plan and any awards under it are discretionary.  In addition, equality of treatment between employees must be considered when awarding options.

If the employee is terminated without cause and consequently loses their right to receive shares, they will be entitled to specific damages compensating for this prejudice.

Restricted stock and RSU benefits may be considered part of the employment relationship, and, depending on negotiations between the parties, may be included in a severance payment. However, please note that there are no mandatory severance payments in Germany. In order to avoid the fact that the benefits are considered part of the employment remuneration, we recommend that they are not granted by the German employer, but by a foreign company, in which case it is also possible to agree that the contract shall be governed by foreign law (eg, benefits being granted by a US parent company and choice of law being US law). If German law governs the agreement, it will not be possible to grant the benefits on a discretionary basis. In addition, anti-discrimination rules need to be considered when awarding restricted stock or RSUs. Also, if German law applies and if one exists, the German works council has to be notified in advance of the planned offering's terms and conditions. The works council has an enforceable co-determination right with respect to the way the benefits are granted. This can also be avoided if the restricted stock and RSUs are being offered by a US parent company and the transaction documents are governed by US law.

Restricted stock and RSU benefits may be considered part of the employment relationship and may be included in a severance payment if restricted stock and RSUs are repeatedly granted to an employee.  In order to reduce the risk of employee entitlement claims, the award agreement signed by an employee should provide, among other things, that the award of restricted stock or RSUs is not employment compensation, that vesting of an award ceases upon termination of employment and that the plan and any awards under it are discretionary.  In addition, antidiscrimination rules must be considered when awarding restricted stock or RSUs.

Payroll deductions are not permitted, except with the written request of the employee and approval of the Commissioner of Labor. Benefits under restricted stock and RSUs are generally considered part of the employment relationship.  They are normally counted towards wages and all related benefits of employees (including the Mandatory Provident Fund).

To decrease the likelihood of employee entitlement claims, employees should expressly agree in writing that:

• Participation in the restricted stock or RSU plan is discretionary
• Termination of employment will result in the loss of unvested rights

In addition, anti-discrimination rules need to be considered when awarding restricted stock or RSUs.

Although unlikely, in order to reduce the risk of employee claims, the award agreement signed by an employee should provide, among other things, that vesting of restricted stock and RSUs ceases upon termination of employment, and that the plan and any awards under it are discretionary. Restricted stock and RSU plan benefits are shown separately from the usual income of the employee, as the same is received from the parent company. Keeping the award plan and agreement distinct from other employment benefits and documentation would mitigate the risk of employees potentially claiming the awards as part of the damages calculations made in cases of unlawful termination. To decrease the likelihood of employee entitlement claims, employees should expressly agree in writing that:

• Participation in the plan is discretionary and
• Termination of employment will result in the loss of unvested rights

Offering restricted stock or RSUs may trigger certain employer obligations and employee claims. Upon involuntary termination of employment, an employee may assert that they are entitled to continued vesting and other rights with respect to their award, if not regulated clearly under the award and/or employment agreement. In order to reduce the risk of employee claims, the award agreement signed by an employee should provide, among other things, that vesting ceases upon termination of employment and that the plan and any awards under it are discretionary.

Restricted stock and RSU benefits may be considered part of the employment relationship and may be included in the calculation of severance or retirement payments. To reduce the risk of claims, employees should be notified in writing that:

• Participation in the plan is discretionary
• Termination of employment will result in the loss of unvested rights and
• That the plan does not form part of the employee’s terms and conditions of employment 

In addition, anti-discrimination rules must be considered when awarding restricted stock or RSUs.

Although not common, restricted stock and RSU benefits may be considered part of the employment relationship and may be included in the calculation of severance or retirement payments. To reduce the risk of claims, employees should expressly agree in writing that:

• Participation in the plan is a conditional and/or discretionary increment and not a salary component for any intent or purpose, including for the purpose of severance pay.
• Termination of employment will result in the loss of unvested rights.

The chances of an employee making a successful claim are also reduced if the award is contingent upon, for instance, the performance of the employee or the company and if the awards are not regularly granted.

Restricted stock and RSU benefits may be considered part of the employment relationship and may be included in the calculation of severance or retirement payments.  However, a case-by-case analysis is recommended.  To reduce the risk of claims, employees should agree in writing that:

• Participation in the plan is discretionary and
• That termination of employment will result in the loss of unvested rights.

In addition, anti-discrimination rules must be considered when awarding restricted stock or RSUs.  Further specific requirements are provided for in case of restricted stocks and RSUs granted to certain categories of employees of banks, financial intermediaries and asset management companies.

Although not common, restricted stock and RSU benefits may be considered part of the employment relationship and may be included in the calculation of severance or retirement payments. To reduce the risk of claims, employees should agree in writing that:

• Participation in the plan is discretionary and
• Termination of employment will result in the loss of unvested rights.

In addition, employers should prepare documents concerning the plan separately from employment contracts and work rules.

Employment "at will" is not applicable in Malaysia. Generally, if an employee is terminated from employment, the employee has the right to make representations of unjust dismissal to the Industrial Relations Department and such cases are eventually heard by the Industrial Court. Where entitlement to restricted stock and RSUs are incorporated as part of the employee's benefits in the employment contract, the employees would generally have a right to make claims for the value of the stock as part of the compensation to be awarded by the Industrial Court. As the Industrial Court of Malaysia has no extra-territorial jurisdiction, there may be difficulties for an employee to make such claims if the stocks are in a foreign parent company. 

In this regard, employers in Malaysia are advised to be cautious about various aspects when issuing stock options or rights to employees. Some of the more critical areas to take note of are:

• Corresponding with employees via the correct entity. Where stock entitlements are in relation to a foreign based parent company, correspondences about entitlement should be between that foreign company and the employee. This is to ensure that the local employer is not seen as the entity that is making promises for the entitlement that would in turn render the claim enforceable against the local employer
• Carving out the stock entitlement. The stock entitlement where possible should not be made part of the employment contract but granted through separate agreements or correspondences that are separate and distinct subject to the relevant stock entitlement documents
• Making forfeiture rights clear. The plan documents for the stock entitlement should always make clear the parties' rights upon termination of employment. This can include forfeiture in the case of dismissal with cause, accelerated vesting upon retirement or termination without cause or even call options exercisable upon termination

Wage deductions to fund purchase of shares/stocks

Where an employer offers its employees the opportunity to purchase its stocks (ie, a Malaysian company offering its employees the opportunity to purchase its shares), wage deductions to fund the purchase are permitted as long as the employee has provided written consent. Wage deductions to purchase stocks in a foreign parent company will however require prior approval of the Director General of Labour. This has become relevant since January 1, 2023 as the Employment Act 1955 which sets out conditions for deductions of wages is now applicable to practically all employees in Malaysia.

Although not common, restricted stock and RSU benefits may be considered part of the employment relationship, and may be included in the calculation of severance or retirement payments. To reduce the risk of claims, employees should expressly agree in writing that:

• Participation in the plan is discretionary and
• Termination of employment will result in the loss of unvested rights.

In order to reduce the risk of employee claims, the award agreement signed by an employee should provide, among other things, that vesting of restricted stock and RSUs ceases upon termination of employment, and that the plan and any awards under it are discretionary. In addition, anti-discrimination rules must be reconsidered when awarding restricted stock or RSUs.

If the Dutch employer has a works council, it may be necessary to notify the works council prior to an award. The approval of a works council may be needed to terminate a plan.

In order to reduce the risk of employee claims, the offering document signed by an employee should provide, among other things, that participation in the plan ceases upon termination of employment, and that the plan and any awards under it are discretionary.

It will be fact-dependent as to whether the benefit is deemed as "salary" for employment law purposes and/or "gross earnings" for calculating holiday pay. The benefit should not give rise to additional superannuation / KiwiSaver contribution obligations.

In Nigeria, participation in any employee stock award or scheme is discretionary, and termination of employment typically results in the loss of unvested rights and the provisions of the scheme subject to the terms of the contract of employment or instrument granting the option to the employee.

We recommend including the conditions of the awards in a separate plan rather than in the employment agreement. In such cases, it is less likely that the awards will be considered to be individual rights of the employee. The employer will have more flexibility to adopt changes. In order to reduce the risk of employee claims, the plan should provide, among other things, that participation in the plan ceases upon termination of employment, and that the plan and any awards under it are discretionary. In addition, anti-discrimination rules must be considered when awarding restricted stock or RSUs.

In order to reduce the risk of employee claims, the award agreement signed by an employee should provide, among other things, that vesting of restricted stock and RSUs ceases upon termination of employment, and that the plan and any awards under it are discretionary.

Although uncommon, in order to reduce the risk of employee claims, employees should expressly agree in writing that:

• Participation in the restricted stock or RSU plan is discretionary
• Termination of employment will result in the loss of unvested rights

In addition, anti-discrimination rules need to be considered when awarding restricted stock or RSUs.

Plan benefits may be considered part of the employee’s remuneration.  To decrease the likelihood of claims for employee entitlements, in the award agreement evidencing the grant, employees should expressly agree that:

• Participation in the restricted stock or RSU plan is discretionary and may be revoked at any time by the employer, without the need to present a justification and
• Termination of employment will result in the loss of unvested rights.

In addition, anti-discrimination rules must be considered when awarding restricted stock or RSUs.

Although not common, plan benefits may be considered part of the employment relationship, and may be included in the calculation of severance or retirement payments. To reduce the risk of entitlement claims, employees should expressly agree in writing that:

• Participation in the plan is discretionary
• Termination of employment will result in the loss of unvested rights

If stock awards are provided by an affiliated company of a Russian employer, it is essential to ensure that the employment agreement entered into between such Russian company and its employee does not contain any references to the stock awards.

Although unlikely, in order to reduce the risk of employee claims, the award agreement signed by an employee should provide, among other things, that vesting of restricted stock and RSUs ceases upon termination of employment, and that the plan and any awards under it are discretionary. Restricted stock and RSU benefits could possibly be characterized as salary for damages calculations in the event of unlawful termination.

In order to reduce the risk of employee claims, the award agreement signed by an employee should provide, among other things, that vesting of restricted stock and RSUs ceases upon termination of employment, and that the plan and any awards under it are discretionary. Restricted stock and RSU benefits could possibly be characterized as salary for damages calculations in the event of unlawful termination.

Restricted stock and RSU benefits may be considered part of the employment relationship and may be included in the calculation of severance or retirement payments. Although uncommon, in order to reduce the risk of employee claims, employees should expressly agree in writing that:

• Participation in the plan is discretionary and
• Termination of employment will result in the loss of unvested rights.

In addition, anti-discrimination rules must be considered when awarding restricted stock or RSUs.

In order to reduce the risk of employee claims, the award agreement signed by an employee should provide, among other things, that vesting ceases upon termination of employment, and that the plan and any awards under it are discretionary.

Although not common, restricted stock and RSU benefits may be considered part of the employment relationship and may be included in the calculation of severance or retirement payments.  To reduce the risk of claims, employees should agree in writing that:

• Participation in the plan is discretionary and
• Termination of employment will result in the loss of unvested rights.

However, whether a benefit is discretionary depends also on the company’s actual practice and not just on the wording of the plan.  In addition, anti-discrimination rules must be considered when awarding restricted stock or RSUs.

Spanish labor courts have ruled favorably for employee claims for restricted stock and RSU benefits.  To reduce – not eliminate – the risk of claims, employees should agree in writing that:

• Participation in the plan is discretionary and
• Termination of employment will result in the loss of unvested rights.

In addition, anti-discrimination rules must be considered when awarding restricted stock or RSUs.

Spanish labor courts have added that the benefit derived from the exercised options must be considered salary in cash.  Due to the foregoing, the benefit for the employee derived from the exercised options must be included in the salary for the purpose of calculation of severance payments.

Restricted stock and RSU benefits may be considered part of the employment relationship and may be included in the calculation of severance or retirement payments. To reduce the risk of claims, employees should agree in writing that:

• Participation in the plan is discretionary
• Termination of employment will result in the loss of unvested rights

In addition, anti-discrimination rules need to be considered when awarding restricted stock or RSUs.

Although not common, restricted stock and RSU benefits may be considered part of the employment relationship and may be included in the calculation of severance or retirement payments. To reduce the risk of claims, employees should expressly agree in writing that:

• Participation in the plan is discretionary
• Termination of employment will result in the loss of unvested rights

Although not common, restricted stock and RSU benefits may be considered part of the employment relationship and may be included in the calculation of severance or retirement payments. To reduce the risk of claims, employees should agree in writing that:

• Participation in the plan is discretionary and
• Termination of employment will result in the loss of unvested rights.

Generally, restricted stock and RSU benefits will neither be considered part of the employment relationship nor be included in the calculation of severance or retirement payments. However, to reduce the risk of claims, employees should expressly agree in writing that:

• Participation in the plan is discretionary
• Termination of employment will result in the loss of unvested rights

There is a risk that the plan benefits may be considered part of the employment relationship, and included in the calculation of severance payments. In order to reduce the risk of employee claims, employees should expressly agree in writing that:

• Participation in the plan is discretionary.

• Termination of employment will result in the forfeiture of unvested rights.

In addition, anti-discrimination rules need to be considered when awarding restricted stock or RSUs.

Given that Ukrainian legislation contains no concept of stock-related incentives, restricted stock and RSU benefits may not be considered part of the employment relationship.

Restricted stock and RSU benefits may be considered part of the employment relationship and may be included in the calculation of severance or retirement payments. To reduce the risk of claims, employees should agree in writing that:

• Participation in the plan is discretionary and
• Termination of employment will result in the loss of unvested rights.

In addition, anti-discrimination rules must be considered when awarding restricted stock or RSUs and drawing Not Expanded by / Condensed by up plan rules.

In order to determinate the salary nature of this incentive, each situation must be analyzed on a case-by-case basis. Although not common, restricted stock benefits may be considered part of the employment relationship, and may be included in the calculation of severance or retirement payments. To reduce the risk of claims, employees should expressly agree in writing that:

• Participation in the plan is discretionary
• Termination of employment will result in the loss of unvested rights

Although not common, plan benefits may be considered part of the employment relationship and may be included in the calculation of severance or retirement payments. To reduce the risk of entitlement claims, employees should expressly agree in writing that:

• Participation in the plan is discretionary
• Termination of employment will result in the loss of unvested rights