Labour Court and WRC Confirm Restricted Stock Units May Be Excluded from Remuneration in Unfair Dismissal Claims
A significant decision of the Labour Court has provided guidance on the treatment of Restricted Stock Units (“RSUs”) in employment disputes. In this case, it was found that RSUs did not form part of the employee’s remuneration for the purposes of calculating compensation.
A recent decision in X Internet Unlimited Company v Gary Rooney highlights the importance of the contractual terms governing RSU arrangements and their treatment in employment law claims.
In the case of X Internet Unlimited Company v Gary Rooney, Mr Rooney brought an unfair dismissal claim against his former employer. The WRC made a determination in August 2024 that the employer must pay €550,131 to Mr Rooney by way of compensation. The employer appealed this determination to the Labour Court arguing that the Workplace Relations Commission (“WRC”) incorrectly included the value of RSUs in the calculation of the compensation awarded.
The Labour Court examined the terms of the RSU Award Agreements entered into between Mr Rooney and his employer. These agreements expressly provided that RSUs did not constitute remuneration and further stated that any unvested RSUs would be forfeited upon the termination of the employee’s continuous service.
Mr Rooney received eleven grants of RSUs between 2013 and 2022, and he had to sign a separate contract on each occasion. The Court found that nothing in the agreements excluded or limited the application of the Unfair Dismissals Act 1977 nor did they require the employee to waive any statutory employment rights.
It was noted that Mr Rooney benefitted financially from the awards and had the opportunity over a number of years to obtain legal advice in relation to them. He was therefore bound by their terms. The Court held that RSUs should be excluded in this case.
Commentary
It is clear from this decision that RSUs will not automatically be treated as remuneration simply because they form part of an employee’s overall compensation package. This provides important guidance on the treatment of RSUs in employment disputes.
The case highlights the importance of the contractual terms governing RSU arrangements. In Rooney, the Labour Court placed significant weight on the wording of the clauses in the RSU Award Agreements, which expressly stated that RSUs were not remuneration and that unvested awards would be forfeited on termination of employment. The Court considered that the employee had accepted these terms over a number of years and was therefore bound by them.
Employers should therefore carefully review their employment-related contractual documentation to ensure that it accurately reflects the intended status of RSUs.
