|
Recently, a Department of Labor opinion letter stated that in certain circumstances, the value of employee stock options must be factored into the employee's regular pay rate for determining overtime pay. The opinion was in response to a stock option program that was available to all full-time non-exempt employees who were employed for at least three months. All employees received options for the same number of shares. If an employee did not exercise his/her options by the end of a five-year period, the company automatically exercised the options for them at the end of that period.
The criteria examined to determine this opinion were as follows:
This stock option program...
- Applied to all employees
- Was set at a pre-determined amount
- Gave the employee control as to when the option would be exercised
- Was automatically exercised before the end of five-years if the employee did not exercise the option before that period
- Was guaranteed to be paid out before the end of a five-year period
- Was considered part of regular compensation
According to the Department of Labor, effective on the day the employee exercised his/her stock options, the employee's profit must be allocated over the period of time in which it was earned, ending with the workweek in which the option was exercised and going back to the date of the employee's right to purchase the shares.
Changed May 2000
Employers should carefully review any stock option program for non-exempt employees to be certain the overtime laws are not being violated.
|
