Apple employees seek overtime wages in class action over stock compensation policy

SAN FRANCISCO (CN) — A federal judge Tuesday tentatively ruled restricted stock units awarded to hourly Apple employees do not fall under federal exclusions that would allow the company to exclude the awards from employees’ regular rate of pay for the purposes of calculating overtime pay.

Restricted stock units (RSUs) are awards that give employees a contingent right to own company stock on a future date, subject to certain conditions. Vesting is the process an employee takes to earn ownership of the stock, such as waiting a certain amount of time or reaching a specific career level.

The plaintiffs, former and current Apple employees who were paid hourly and eligible for overtime, argue that, in addition to their hourly rate, they received restricted stock units as part of their compensation at Apple.

Under the Fair Labor Standards Act, and California and New York state law, employers are required to pay employees a higher rate of pay for overtime. The plaintiffs argue that employees’ regular rate of pay includes pay derived from other forms of compensation, such as restricted stock units.

They claim Apple’s policy of not including the value of restricted stock units in the regular rates of pay unlawfully underpays employees for overtime.

“When an employer pays employees with stock, unless it meets statutory requirements for exclusion, the value must be included in the regular rate when calculating overtime pay,” the plaintiffs say in their motion for summary judgment.

They add: “Apple does not do this, which gives it the benefit of paying overtime at a rate lower than the law requires. Apple cannot prove that vested restricted stock unit (RSU) remuneration qualifies for exclusion from the regular rate.”

In a hearing over the parties’ cross-motions for summary judgment, U.S. District Judge William H. Orrick said he doesn’t believe gift, discretionary bonus or other similar payment exceptions apply to restricted stock units.

Orrick, a Barack Obama appointee, said the only exception he could see applying would be the equity exception, which pertains to awards such as stock options, stock appreciation rights and employee stock purchase programs.

“I agree that it’s very similar to stock options. It’s treated the same for tax purposes, and I think it meets the criteria for employer-provided grants or rights. But it’s not a stock option, stock appreciation right, or a bona fide employee stock purchase program. Under the FLSA, that’s a big except,” he said.

“I can think of a lot of reasons why the exception should cover it," Orrick continued. “It seems like it should, but I don’t think your argument is how I can substitute my own understanding of the policy arguments for the law.”

Apple argued the judge should more heavily weigh the legislative history of the Fair Labor Standards Act, emphasizing restricted stock units did not exist at the time Congress amended the law to create the equity exclusion.

“It’s very clear Congress wanted this as broad as possible, and stock options have been taken over by RSUs,” Theane Evangelis of Gibson, Dunn & Crutcher, an attorney for Apple, said. “Congress’s intent was broad enough to cover what we have here. It would be pretty ironic for this broad equity exclusion Congress enacted not to cover the most ubiquitous stock option today.”

In response, plaintiffs’ attorney Michele Fisher of Nichols Kaster claimed Congress intentionally limited the equities exclusions to the three programs, and the court would be rewriting the law if it found restricted stock units were included.

“Congress had an intent that an employer could not just give employees something valuable like this for free. There has to be some type of payment for it, or else it should be included in their regular rates as part of their compensation,” she said.

As for the other exclusions, Apple argued that restricted stock units not tied to an employee’s hours worked or efficiency, are not contractually obligated and are fully within the company’s discretion to award to whomever, in whatever amount, at any time.

Evangelis claimed Apple’s conditions that an employee remain at the company and be in good standing to vest the restricted stock units are insufficient to tie the award to hours worked.

“Does this function as a payment or compensation for hours of employment? Here, all of the evidence shows that RSUs are not tied to how much you work. And we have a situation where you can be on leave and get them to vest,” she said, adding, “So how can they be tied to hours worked at that point?”

Evangelis additionally opined about the impact the court’s ruling could have on companies and employees, telling the judge that finding in favor of the plaintiffs would be the first time a court ruled companies excluding restricted stock units from the regular rate of pay “somehow got it all wrong.”

She further added that a ruling in favor of the plaintiffs may discourage companies from even offering restricted stock units to employees because of complications with overtime pay.

“I think the challenge with RSUs is that nobody knows what the stock value is going to be in,” she said. “So when those are granted by employers, there is no way to budget for that expense, to predict what it’s going to cost, to plan for the future.”

Orrick responded that Apple may be right, “this might be a lousy thing for employees,” but said he would not make a decision based on theoretical impacts.

“You don’t have to tell me RSUs are the greatest thing since sliced bread. You need to tell me why they fit under the FLSA,” he said.

Fisher pushed back on Apple’s claim that a ruling in favor of the plaintiffs could hurt employees, saying companies have made similar arguments over other bonuses, but have managed to adjust.

“Employers have argued in other cases that if the court makes this bonus part of the regular rate, the employer is going to stop giving the bonus. But what might happen is they may lose their employees by not giving that bonus,” she said. “Apple will have to decide, ‘Do we want to continue to give this bonus and include it in the regular rate, just like any other bonus that’s paid over a period of time?’”

Orrick found in favor of Apple on the plaintiffs’ claim the company had not acted in good faith and intentionally violated federal law by excluding restricted stock units from the regular rate of pay, saying the “area of law and the statutory interpretation is not clear.”

Evangelis called that decision “exactly right,” adding there was no way Apple could have predicted in the past two decades that they would be facing this potential ruling.

“Apple did everything right. It took proactive compliance measures, it conducted periodic, regular rate audits, it did all the right things,” she said.

However, Fisher argued Apple has refused to provide information on meetings the company held where they claim to have discussed restricted stock units, claiming privilege.

“You can’t just say I talked to a lawyer, I’m not going to tell you what it was and meet the good faith exception. They’ve claimed privilege. We haven’t been able to question them,” she said.

Orrick did not specify when he would release a final order.

A trial for damages is currently scheduled to begin on Sept. 14, 2026.

Representatives for either party did not immediately respond to a request for comment.

The plaintiffs filed their complaint against Apple in March 2023. That November, the court certified FLSA collective in the case composed of “all current and former employees of Apple, Inc. classified as non-exempt/overtime eligible who received restricted stock units that vested on or after March 23, 2020, and who recorded more than forty hours of work in a workweek after receiving an RSU but before the RSU vested.”

In February, the court certified two classes differentiated by state and date, for current and former employees from California and New York who are classified as non-exempt/overtime eligible and received restricted stock units that vested on or after June 14, 2020, for the California class, and Aug. 11, 2017, for the New York class.

Additionally, former or current employees who fall within the definition of one of the classes but have only worked as one of the 37 “exempt positions” do not qualify for the class. Those positions include data scientist 2, software development engineer 2 and test engineer 2.

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