Idaho Court Rules Stock Options are not Wages

January 30, 2007 ( - The Idaho Supreme Court ruled that stock options are not considered wages under state law, handing a defeat to a former Albertson's Inc. employee who claimed the company violated wage laws when it fired him for intending to exercise his stock options.

The 9th U.S. Circuit Court of Appeals asked the Idaho Supreme Court to rule on two questions of state law relating to whether the administrator of the Albertson’s stock option plan violated wage laws. The Supreme Court ruled that state law defines wages as “compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece or commission basis,” which would exclude stock options.

The second question of state law – on whether terminating an employee for trying to exercise the right to receive wages violates the state’s public-policy exception to at-will employment – was nullified by the decision that stock options are not considered wages.

The court further said that wages can only refer only to monetary compensation that is paid on a periodic basis, which excludes non-monetary compensation that is not payable in cash, with a check or by deposit into the employee’s account.

Bruce Paolini, a 17-year employee of Alberston’s, collected several thousand stock options under the company’s 1995 Stock-Based Incentive Plan, under which a change in control of the plan accelerated vesting of the stock options. Paolini believed a change in control had taken place in 2001 and attempted to exercise his options based on the accelerated vesting. The plan administrator denied the request.

The former employee then filed a suit in the Federal District Court for the District of Idaho in an effort to recover damages against the company, calling his discharge a retaliatory action in “violation of Idaho’s wage laws, public policy, and the covenant of good faith and fair dealing,” according to the opinion.

The federal court dismissed the complaint and Paolini appealed to the 9 th  Circuit.

The ruling in Paolini v. Albertson’s Inc., Idaho, No. 32495 (Nov. 22, 2006) is  here .