Labor Court ensures compensation in Stock Options even after dismissal

In recent rulings, the Superior Labor Court (TST) ensured compensation to officers who were not able to exercise their right to Stock Options due to dismissal without cause. According to arguments adjudged by the TST, stock options plan clauses that prevent the purchase of stocks by employees dismissed, during the lock-up period, should be null and give cause to compensation to the employees.

That was the TST understanding in the decision of procedure ARR-10886-57.2015.5.01.0009, in which the panel decided that the company could not resort to unmotivated dismissal, that is, dismissal without cause, during the lock-up period, since it could be used as a method to prevent the employee from exercising his/her option.

The reporting judge on the abovementioned procedure, justice Augusto César, stressed that the lock-up period established in stock options   is a legal suspensive condition.  However, the specific clause that authorizes the company to terminate the employment contract without cause, frustrating the acquisition of stocks by the employee, would be a merely potestative condition, that is, a condition that only depends on the will of one side, of one of the parties, in this case deemed legal by the TST. 

With the TST understanding, it is important that companies review the current conditions of their Stock Options and grant agreements with the purpose of establishing clear rules and conditions that can ensure greater efficiency to the agreement signed between the parties. 

It is worth noting that, at present, for senior executive positions, the inclusion of an arbitration clause in employment contracts is allowed, which may result in increased legal certainty for companies.


Written by Daniel Rangel, Leticia Mariz and Julia Soares