Increasingly, multinational companies are choosing to include stock option plans as an incentive within their executive compensation programs.
Different variables are usually included in stock option plans that differ between companies. Still, in general, it can be established that it is a way through which employees are offered the option to exercise a right to purchase shares from the company itself or another related company at a pre-established price at a specific time in the future.
In this sense, what said plans grant is a right but not an obligation; Therefore, once the requirements have been met, the employee who owns the purchase option may or may not exercise the acquisition of shares from his employer under the previously agreed conditions. On the other hand, it is common for such rights to be conditioned to specific parameters such as seniority of the employee in the company, the performance of the company and the worker, price and number of shares that can be acquired, prorated time and expiration date in which it is you can exercise the purchase option, etc.
Therefore, stock option plans are intended to strengthen the worker's loyalty to the company's commercial operation since the employee will become part of the company's share capital.
Non-salary nature of stock option plans
According to the jurisprudence of the Second Chamber of the Supreme Court of Justice, stock option plans do not constitute a salary item.
In this sense, regarding the non-salary nature of said plans, it is essential to mention resolution No. 94-2008 of the Second Chamber, which has served as the basis for the judicial resolution of various subsequent matters. Accordingly, in the following resolution, the legal position already adopted in the previously mentioned resolution of the Second Chamber was reiterated:
"This Chamber, in resolution n ° 94 at 9:30 am on February 13, 2008, stated:" Regarding the option to purchase shares, they have usually been denied a salary nature, much less in kind, in the meantime they represent a profit generated by the stock market activity and not as a product of the intellectual or physical effort deployed by the worker. Among the circumstances for which the nature of salary has been denied are: a) the reward is potential, possible and not certain, b) it can generate losses or gains, c) there is no regularity, d) it is variable according to the offer and market demand, e) the profit is variable, f) it is not necessarily of a food nature, g) it is convertible and h) through them speculations are made to profit". From the foregoing it follows that the claim is not admissible since it is not related to the employment contract executed by the plaintiff. On the contrary, it is closely linked to the commercial transaction that the plaintiff carried out at a certain point" (Second Chamber, resolution 502-2011).
Consequently, the jurisprudence has denied recognizing stock option plans as a benefit of a salary nature, among other reasons, because they are an expectation of the right that may or may not be exercised by the worker, and also because the potential benefit is not certain since it does not depend on the intellectual or physical performance of the worker but on the economic forces of the stock market.
On the other hand, vote 94-2008 was again adopted to support resolution 856-2016, in which the Second Chamber analyzed the case of a worker who requested recognition as salary the value of the shares that were granted to him free of charge by the company. However, according to the previously mentioned criteria of the Second Chamber, once again, the salaried nature of the stock option plans was denied, based on the following additional arguments:
"Although the appellant says that the delivery of the stock package appears in the contract, once it has been reviewed (folios 554 and 5 55), this does not conform to the truth. It is also not found in the Compensation and Benefits Package (folios 67 and 68). Thus, even when it is intended that what must be recognized is the value of the shares at the time of delivery, the plaintiff having admitted that they were granted to incentivize the employee in relation to his performance or results, this implies that it was a potential reward, possible and not certain, that was not usual, and that the losses or gains that it can generate depend on the supply and demand of the market, and that through them speculates with the intention of making a profit. Furthermore, it should be noted that the appellant did not reproach the Court's assertion that what the plaintiff received was an expectation of obtaining participation when a maturity period arrived, which the evidence indicated was five years ... a kind of option for action always and when it exceeds a maturity period which was not met due to being fired. In such a way that it cannot be taken as salary in kind as the appellant claims" (Second Chamber, resolution 856-2016).
Thus, even though it is not analyzed whether the purchase of shares entailed a determinable profit for the worker as the sale of the stocks for a price greater than that which was acquired was not made effective, one of the most determining criteria to deny the salaried nature of the stock options plans so far is that the value and profit associated with the shares depend on fluctuations in the stock market and not directly on the productivity or performance of the employee.
On the other hand, since the stock options plans are a non-salary item, one of the important implications derived from said consideration is that they should not be taken into account for the calculation of labor rights that are set according to salary, as are overtime pay, Christmas bonus, vacations, notice, and unemployment.
Despite the preceding, as compensation is a subject of constant conflict within labor matters, it is always necessary to examine each specific case and the nature and characteristics of the items that constitute it to determine if they should be considered part of the salary or not.
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