Beach v. HSBC Bank USA, N.A.
1:17-cv-05153
S.D.N.Y.Nov 20, 2017Background
- Beach left Oppenheimer to join HSBC in January 2015 after HSBC offered a compensation package to replace forfeited bonuses and unvested Oppenheimer stock.
- The Employment Agreement included an "Incentive to Join Share Award": HSBC Holdings plc ordinary shares valued at $104,587, granted in January/May 2015 and vesting in three annual tranches (33%, 33%, 34%).
- The Agreement disclaimed vesting if Beach resigned or was terminated for cause before a vesting date.
- The first tranche vested in 2016; the second tranche was scheduled to vest in May 2017 but was unpaid because HSBC terminated Beach in February 2017.
- Beach sued under NY Labor Law § 193, alleging the unpaid second tranche constituted wages; HSBC moved to dismiss, arguing the award was an inducement/incentive, not wages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the restricted, deferred stock award qualifies as "wages" under NYLL § 190/§ 193 | The stock award was a non-discretionary, defined award (fixed number of shares determined at grant) and the second tranche had vested, so it is wages owed on termination | The award was an incentive to recruit/retain Beach, not compensation for labor; its value depended on firm performance and thus is not "wages" within NYLL | The court held the award is not "wages" under NYLL because it was equity-based incentive compensation tied to retention/firm performance, not earnings for services rendered; dismissal granted |
Key Cases Cited
- Truelove v. Northeast Capital & Advisory, Inc., 95 N.Y.2d 220 (N.Y. 2000) (equity-based compensation value contingent on firm performance and not wages)
- Guiry v. Goldman Sachs & Co., 31 A.D.3d 70 (1st Dep’t 2006) (deferred stock/options function as incentive compensation tied to firm success)
- Gilman v. Marsh & McLennan Cos., Inc., 868 F. Supp. 2d 118 (S.D.N.Y. 2012) (equity awards to incentivize retention do not constitute NYLL "wages")
- Ryan v. Kellogg Partners Institutional Serv., 19 N.Y.3d 1 (N.Y. 2012) (distinguishes earned bonuses deferred in time from contingent incentive awards)