Virtual Share Options and Employees’ Rights

Sept 5, 2025 Benn-Ibler Rechtsanwälte

Virtual employee share options are a common component of contemporary remuneration structures, particularly in new companies. This brings up a labour law question regarding whether these options can be forfeited if an employee resigns voluntarily. The German Federal Labour Court (Bundesarbeitsgericht, hereinafter BAG) has recently addressed this matter.

Virtual stock options as a component of contemporary compensation strategies

The plaintiff had been employed by the defendant from 2018 to 2020. In 2019, he was granted virtual stock option rights as part of an employee participation programme, with these options becoming exercisable incrementally following a four-year vesting period. The vesting period allows employees to progressively obtain rights to the options, provided certain conditions—such as ongoing employment—are met. No issues arise if the employment continues until the vesting completion and the respective triggering event occurs. However, in this instance, only 31.25% of the options had vested at the time of the plaintiff’s resignation. The employee participation programme stipulated that vested options would expire immediately upon resignation or, under alternative circumstances, within two years through accelerated expiry. After the employment relationship ended, the plaintiff sought to exercise his rights concerning the vested options, but the defendant maintained that the options had expired. The lower courts dismissed the claim; however, the plaintiff's appeal to the BAG was upheld.

Expiry of vested options upon voluntary resignation is not permitted

The BAG clarified that the terms and conditions of the employee participation programme are general terms and conditions (GTC). The expiry clauses contained therein are therefore subject to GTC review. According to the BAG, the clauses of the employee participation programme that stipulate the immediate or accelerated devaluation of already "vested" options after termination of the employment relationship place the employee at an unreasonable disadvantage. This is because they do not take into account that vested options represent consideration for work already performed during the vesting period. The vested options allocated to the employer are therefore not forfeited due to the termination of the employment relationship by resignation.

BAG 10 AZR 67/24 (19 March 2025)