VEST Act
- Sponsor
- Sen. Moody, Ashley [R-FL]
- Committees
- Health, Education, Labor, and Pensions Committee (primary)
- Last action
- Sep 30, 2026
Bottom line
The VEST Act clarifies federal labor law to ensure that Restricted Stock Units (RSUs) are not counted towards an employee's regular rate of pay for overtime calculations, aligning them with other forms of employer-provided equity.
What it actually does
This bill amends the Fair Labor Standards Act of 1938 (FLSA) to explicitly exempt Restricted Stock Units (RSUs) from being included in an employee's 'regular rate' of pay when calculating overtime compensation. It clarifies that the value or income derived from RSUs, similar to stock options or employee stock purchase programs, should not increase the base hourly rate used for overtime calculations. The bill also includes provisions for an effective date and limits employer liability for past RSU grants under certain conditions.
Proponents argue
Supporters argue that this bill corrects an outdated aspect of the FLSA, as Restricted Stock Units were not a common form of compensation when the original exemption for other equity awards was enacted in 2000. They contend that the original intent of the Worker Economic Opportunity Act was to broadly encourage employee equity participation, and this bill simply updates the law to reflect modern compensation practices, allowing more workers to share in company success without inadvertently increasing employer overtime liabilities.
Opponents contend
Critics might argue that by excluding RSUs from the regular rate calculation, the bill could potentially reduce the effective overtime pay for employees who receive a significant portion of their compensation in RSUs. They may contend that this primarily benefits employers by lowering their labor costs, especially for highly compensated employees, rather than genuinely benefiting workers, particularly lower-wage workers who might rely more on overtime.
The bill is very short and straightforward, making it highly accessible for any reader to understand its core provisions within the time typically given for legislative review.
Section 3(a)(1)
Exemption of Restricted Stock Units from Regular Rate Calculation
This provision amends Section 7(e)(8) of the Fair Labor Standards Act of 1938 (FLSA) to include 'restricted stock unit program' in the list of employer-provided grants or rights whose value or income is exempt from an employee's 'regular rate' for overtime compensation purposes. This means that if an employee receives RSUs, the value of those RSUs will not be factored into their hourly rate when calculating overtime pay.
Supporters argue
Proponents argue that this clarification aligns the FLSA with modern compensation practices, encouraging companies to offer RSUs to a wider range of employees without fear of complex and potentially costly overtime calculations. They believe it removes a disincentive for employers to provide equity compensation, ultimately benefiting employees by allowing them to share in company growth.
Critics contend
Opponents might argue that this provision could lead to lower overtime pay for employees whose total compensation, including RSUs, is substantial. They may contend that by excluding a significant component of total compensation from the 'regular rate,' the bill undermines the intent of overtime rules to provide enhanced pay for work beyond standard hours, especially for those who rely on equity as a substantial part of their income.
Tradeoffs
The provision balances the goal of encouraging broad-based employee equity participation with the principle of ensuring fair overtime compensation. While it simplifies compliance for employers and may encourage RSU offerings, it could also lead to a lower effective overtime rate for some employees compared to a scenario where RSU value was included.
Section 3(a)(2)
Clarification of Acceptance Language
This provision amends Section 7(e)(8)(C) of the FLSA by striking 'exercise' and inserting 'exercise or acceptance'. This minor change broadens the scope of the exemption to cover not just the 'exercise' of an equity right (like a stock option), but also the 'acceptance' of an equity award, which is more relevant for RSUs that vest and are accepted rather than actively exercised.
Section 3(b)
Effective Date and Employer Liability Limitations
This section sets the effective date for the amendments at 90 days after the Act's enactment. Crucially, it limits employer liability under the FLSA for past failures to include RSU income in regular rate calculations if the grants were obtained before the effective date, or within 12 months after if the program existed at enactment and requires shareholder approval for modification, or if the program is under an existing collective bargaining agreement.