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ARTICLE · 17 APRIL 2025

Virtual Employee Participation Programs (EPSPs): Important Developments In German Case Law Impacting Vesting Rules

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Employee participation programs are generally subject to sec. 305 ss. of the German Civil Code (BGB) governing the content control of general terms and conditions (GTC) if they are provided by the employer and were prepared for multiple uses, which is the case in almost all programs.

United StatesEmployment and HR
Carina Klaes-Staudt
Carina Klaes-Staudt
Alexa Serafin
Alexa Serafin

Key Takeaways

  • Employee participation programs are generally subject to sec. 305 ss. of the German Civil Code (BGB) governing the content control of general terms and conditions (GTC) if they are provided by the employer and were prepared for multiple uses, which is the case in almost all programs.
  • In its decision of March 19, 2025, the BAG has now consistently assessed the vesting provisions of the virtual employee participation program at issue in the proceedings on the basis of the strict requirements of sec. 305 ss. BGB. It rules that vesting provisions are invalid to the extent that (a) they result in the immediate forfeiture of vested options of an employee who resigns from employment (Eigenkündigung) or (b) virtual options that have already vested expire again after the end of the employment relationship due to the lapse of time with no trigger event (exit transaction or IPO) occurring.

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