“Don’t save for retirement; invest in retirement.” This wry expression has become a practical motto for many salary-earners. In fact, according to the National Center for Employee Ownership, 13.9 million employees in the United States participate in an employee stock ownership plan (ESOP). Increasingly, companies big and small offer plans through which employees can purchase and own company shares. ESOPs benefit both employees, as a low-effort investment option that confers reduced taxes on a lower stated income, and employers, as a tax-deductible reinvestment vehicle.

But states are divided as to whether these stocks, vested or unvested, constitute wages. While federal law prohibits employers from improperly withholding employee wages, it does not protect equity compensation. An employer may structure the terms of an ESOP so that if an employee quits, the employer keeps all the employee’s shares—even if, as in Marsh v. Prudential Sec., 1 N.Y.3d 146 (2003), the employee already paid for them through deductions from his paycheck. If equity compensation does not constitute wages, the employee cannot recover this equity under wage theft law.

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