Expiration of virtual shares: Federal Labour Court strengthens employee rights

Federal Labour Court declares forfeiture clauses for virtual share options invalid

In a landmark ruling on 19 March 2025, the Federal Labour Court (BAG) ruled that certain forfeiture clauses for virtual share options in employment contracts are invalid and unreasonably disadvantage employees.

The case: An employee terminated his employment contract himself and thereby lost his already ‘vested’ virtual share options. These were part of his remuneration package and were to expire immediately according to the employer’s general terms and conditions.

The judgement: The BAG found that such clauses violate Section 307 BGB. Options that have already been ‘vested’ represent consideration for work already performed. Immediate forfeiture following termination of employment is therefore inadmissible, as it:

Does not adequately consider the interests of the employee

Represents a disproportionate aggravation of the dismissal

Contradicts the legal concept of Section 611a (2) BGB

Clauses that provide for an expiry twice as fast as the original accrual period are also invalid.

Significance: The ruling significantly strengthens the rights of employees with virtual participation programmes and restricts employers’ options for structuring corresponding clauses.