In Costa v. Apple, Inc., a federal court in California held that the value of restricted stock units (“RSUs”) should not be included in an employee’s regular rate of pay when calculating overtime under the Fair Labor Standards Act (“FLSA”). The decision provides the first clear judicial authority that properly structured RSU awards fall outside the FLSA’s overtime calculation, marking a significant development for employers offering this type of equity compensation to hourly workers.
While Costa offers persuasive authority for excluding RSU awards from overtime calculations, it also reinforces that the structure of the equity program matters. Employers seeking to rely on Costa should ensure that awards remain discretionary, unconnected to hours worked or productivity, and clearly characterized in award agreements as voluntary and exceptional, not guaranteed compensation. Because Costa is a single district court decision on a novel question and is currently on appeal, employers should expect continued development in this area and review their RSU program documentation periodically.
The opinion in this case is available here.