This week, in a case of first impression, a U.S. District court ruled in favor of Apple in a closely watched class action lawsuit alleging that the value restricted stock units (RSU) need to be included when calculating overtime.
The court found the RSUs qualified for two FLSA exclusions from the regular rate of pay, the equity and gift exclusions, so their value did not have to be counted when calculating overtime.
Why this matters to CHROs: Whether equity compensation must be included in the “regular rate” can materially affect overtime calculations, wage-and-hour litigation exposure, and the design of equity programs—particularly with non-exempt employees. As more employers look to broaden access to equity compensation, clarity on RSU treatment is increasingly important.
Background: Employees in Apple’s class-action lawsuit allege they were owed additional overtime wages because Apple left RSU compensation out of the regular-rate calculation. Background reporting is available here. Plaintiffs' attorneys have threatened or filed similar lawsuits arguing more overtime is owed for RSU grants.
What the court decided: The court ruled the RSUs counted as excluded equity and, in part, as gifts, not wages that factor into overtime. As a district court decision, it could be appealed.
On summary judgment, which means neither the company nor the plaintiffs disputed the facts at issue, the court ruled that RSUs should be treated as equity and gifts, not wages, so they cannot be counted in overtime calculations. Because this is a district court's decision, it may be appealed.
CHRO Association advocacy and federal legislation: Due to demand letters and lawsuits, The CHRO Association has been advocating for a federal bill to amend the Fair Labor Standards Act (FLSA) to provide clearer rules on the treatment of RSUs in overtime calculations. Through the Association’s advocacy efforts, the Valuing Employee Stock Today Act (H.R. 8660) was introduced by Representative Ryan Mackenzie (R-PA).
Read Rep. Mackenzie’s press release with additional details and our story on this development.
The court’s summary judgment in the Apple case could help signal congressional action. We will keep ypu updated.
