The Fourth Circuit Court of Appeals decided against an employee seeking to recover unvested stock options after her termination. The employee had sued under the Maryland Wage Payment and Collection Act. She contended that a portion of her deferred compensation should not have been withheld by her employer. Under an optional plan, the employee had agreed to defer a part of her compensation, which the employer matched. The matching portion, however, did not immediately vest. Unless the employee’s termination was caused by her retirement, death or disability, they did not vest for seven years. Therefore, upon her termination, the employee was paid only her portion of the compensation for the most recent years.
Although the court decided that New Jersey law applied, according to the parties’ contract, it also noted that Maryland law would not have given the employee her unvested stock options, since that is all she bargained for. In other words, this deferred compensation plan was designed to leave a lot of the compensation on the table, unless someone stayed with the employer for many years.
This decision does not bind a Maryland court from making a contrary decision, but to date these unvested benefit issues have not gone well for employees.