Wednesday, June 9, 2010

Catalyst Health Solutions, Inc. v. Magill (Ct. of Appeals)

Filed: June 2, 2010

Opinion by Judge Lynne A. Battaglia

Held: Unvested stock options are not protected wages under the Maryland Wage Payment and Collection Law.

Facts: A salesman was entitled to certain unvested stock options granted by his employer. The salesman tendered his resignation with the employer, because he accepted employment with a competitor company. He signed a separation and release agreement, which terminated his employment, eleven days before his stock options were scheduled to vest.

The employer filed a declaratory judgment action to, among other things, determine whether the employee had any claim with respect to the stock options. The trial judge entered judgment in favor of the employee in the amount of almost $850,000, stating that the employer granted the stock options for goals already achieved by the employee (even though the options had not vested).

Analysis: The Court of Appeals reversed. The Wage Payment and Collection Law (the “Act”) requires that employers pay all wages to employees for work performed before termination of employment. Maryland case law makes clear that the Act only protects wages if all conditions precedent to earning the wages have been satisfied. In the case at hand, a condition to earning the stock options was employment for a specific duration. Because the employee did not satisfy the condition, the Act did not protect the unvested stock options.

The full opinion is available in pdf.

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