Incentive or Equity compensation has become an increasingly common benefit in California, especially in the tech and startup sectors. Instead of offering only salary and traditional benefits, many employers provide stock options, restricted stock units (RSUs), or other equity-based incentives as part of an employee’s compensation package. Research shows that a lot of inequities exist for BIPOC employees and women in incentive compensation.

What Is Incentive or Equity Compensation?

Incentive or Equity compensation refers to non-cash payment that represents ownership in a company. Common types include stock options, restricted stock units (RSUs), stock appreciation rights (SARs), and employee stock purchase plans (ESPPs). The purpose of such compensation is to align employees’ interests with the company’s success and encourage long-term commitment. However, equity compensation also comes with conditions, such as vesting schedules and restrictions on when stock can be sold.

What Rights Do I Have to Equal Incentive or Equity Compensation in California?

California has some of the strongest equal pay laws in the nation, and these laws extend to all forms of compensation, including incentive or equity compensation packages. The key law is the California Equal Pay Act (CEPA), which has been significantly strengthened over the years.

The CEPA requires equal pay for “substantially similar work,” which is a broader standard than the “equal work” standard in the federal Equal Pay Act. This means that two employees don’t need to have the exact same job title or duties to be compared.

The determination of “substantially similar work” is based on a “composite of skill, effort, and responsibility,” and whether the work is performed under “similar working conditions.” This allows employees to compare their pay, including their incentive and equity compensation, with colleagues who may have different job titles but perform similar roles.

What do I do to find out if my incentive or equity compensation is equal to my peers’ comp for doing a similar job?

Ask your manager, ask HR at hiring, and ask your peers.  The point is to ASK.  California law prohibits retaliation for discussing your terms and conditions of employment and raising equal pay concerns. There should not be pay secrecy in work cultures, as that just serves to perpetuate pay inequities.

What Other Rights Do I Have With Equity Compensation in California?

Your rights depend largely on the type of equity you receive and the terms of your agreement. In California, employees generally have the right to:

• Clear disclosure of the equity compensation terms, including vesting schedules and restrictions.
• Access to relevant company information that affects the value of their shares.
• Protection from unlawful practices such as discrimination, retaliation, or wrongful termination related to equity benefits.

California law also provides employee-friendly rules around noncompete agreements, which can sometimes intersect with equity arrangements if employers attempt to restrict post-employment opportunities.

Can I Negotiate My Equity Compensation?

Yes. Employees often assume equity compensation terms are fixed, but many aspects are negotiable. You may be able to negotiate for a shorter vesting schedule, partial acceleration, or a larger equity percentage. Before signing, it is wise to have an employment attorney review the agreement to ensure your rights are protected and the terms are fair.

Common Disputes Over Incentive Equity Compensation

Because equity is tied to ownership and value, disputes frequently arise. Common issues include:

• Unequal Pay Claims.
• Claims of wrongful termination to avoid vesting.
• Breach of contract in failing to honor equity payout terms.
• Retaliation claims connected to advocating for pay equity and transparency 

Resolving these disputes often requires legal intervention, as the financial stakes can be significant.

When Should I Contact an Employment Attorney?

You should consider speaking with a lawyer in situations such as:

• Before signing an employment contract that includes equity compensation.
• If you suspect your employer terminated you to prevent vesting.
• If you think your incentive compensation is unequal relative to your peers of a different gender or racial, or ethnic background

An attorney can help you negotiate fair terms, challenge unlawful practices, and protect the compensation you have earned.

Protecting Your Rights in Equity Compensation Agreements

Equity compensation can be an exciting opportunity, but it is also one of the most complicated areas of employment law. If you have questions about equity compensation or are facing a dispute with your employer, contact Valerian Law so we can help you protect your interests and secure the compensation you deserve.