Ruling: BAG decides on vesting clauses in VSOP programmes
1. initial situation
In its ruling of 19 March 2025 (case no. 10 AZR 67/24), the Federal Labour Court (BAG) made a landmark decision on vesting clauses in employee participation programmes based on virtual stock option plans (VSOPs).
In the case in question, a former employee brought an action against a company that had set up such a VSOP programme to establish the continued existence of vested virtual stock options.
The terms of the VSOP programme stipulated that virtual options would be vested over a period of four years (vesting period). In the event of an employee's own termination (so-called bad leaver), all options were forfeited, including those that had already vested.
In addition, a so-called de-vesting was provided for, i.e. after termination of the employment relationship, the virtual options were to expire twice as quickly as they had been vested.
2nd decision of the Federal Labour Court
The BAG classified the conditions of the VSOP programme as general terms and conditions in continuation of its previous case law (BAG, judgement of 28 May 2008 - 10 AZR 351/07). As such, they were subject to clause control.
Although the above-mentioned clauses were neither surprising nor intransparent, they were invalid pursuant to Section 307 (1) sentence 1, (2) no. 1 BGB. The BAG assumed an unreasonable disadvantage contrary to good faith due to the bad leaver clause, as it - in contrast to the wording of the VSOP programme - regarded the virtual options as consideration for work performed, which could not be withdrawn without further ado in the event of self-termination.
The BAG also considered the de-vesting clause to be invalid due to unreasonable discrimination against employees.
3 Consequences for practice
3.1 Transferability to other regulations
Firstly, the judgement should serve as a reminder that VSOP programmes are general terms and conditions within the meaning of Sections 305 et seq. BGB and, as such, are subject to special content control and special attention should be paid to their transparency when drafting them. In particular, frequently encountered written form clauses should be reconsidered against this background.
3.2 Regulatory options
The BAG does not declare bad leaver clauses to be invalid in principle, but rather describes a constellation in which they can be valid - namely in the case of clauses according to which the shares vested by bad leavers only expire after a longer period of time after leaving the company.
In future, attempts will also have to be made to achieve the regulatory objective of bad leaver clauses - to promote the employee's loyalty to the employer - through other mechanisms. This could include longer cliff periods (periods after which options are vested), non-linear vesting, which allocates more options towards the end of the vesting period than at the beginning, or grey leaver provisions.
In addition, the BAG judgement has removed an important argument against performance vesting. Performance vesting does not link the vesting of virtual options to the passage of time (so-called time vesting), but rather to the achievement of certain targets. In practice, this has often been discouraged in order to prevent the virtual options from appearing as a vested salary component. However, if this argument now also applies to time vesting, performance vesting can also be recommended in many cases with a clear conscience, in which employees are rewarded not just for not terminating their employment contract, but for the genuine added value they bring to the company.