(CN) – Answering a certified question, the Massachusetts Supreme Court found that the forfeiture provision of Citigroup’s employee-stock plan, which lets employees use up to 25 percent of their paycheck to buy company stock, does not violate the Massachusetts Wage Act.
Under Citigroup’s Capital Accumulation Plan (CAP), participants buy restricted stock at a 25 percent discount from its fair market value.
The plan contains a forfeiture provision, which states that in the event of voluntary resignation or firing, the employee forfeits all unvested stock.
Employees claimed that the provision violates the Act because it sometimes requires them to forfeit a portion of their wages.
Citigroup argued that the restricted stock is “contingent compensation” and not “wages” subject to the Act.
The high court agreed that the Act does not apply to Citigroup’s CAP, because a state law specifically excludes certain types of wage deductions made at the employee’s request, including deductions used to buy company stock.
“Employee stock purchase plans are explicitly excluded from the Act,” Justice Ireland wrote. “Defenses to the Act are thus immaterial.”