In Schachter v. Citigroup, Inc., 47 Cal.4th 610 (2009), the California Supreme Court held that a voluntary bonus plan provision that effects a forfeiture if the employee was terminated for cause or voluntarily resigned within two years of purchasing company shares did not equate to an unlawful conversion of wages under California Labor Code §201, §202 and §219.

The court reasoned that unvested shares of company stock did not amount to unpaid or deferred wages. The controlling factor in the decision was that the employer and employees had entered into an agreement after the employees had been hired and the employees were fully aware of the risks involved with entering into the voluntary bonus plan. Because no unpaid wages remained outstanding when the employees were terminated according to the terms of the inventive plan, the forfeiture provision enforced by the employer was permissible.