Vesting and Bad-Leaver Clauses for German Startups After BAG 10 AZR 67/24

If you handed out virtual options before March 2025, your bad-leaver clause is probably invalid. Since the BAG decision of 19 March 2025 (10 AZR 67/24), a clause that forfeits already vested virtual options when an employee resigns does not survive § 307 BGB. The same is true for any clause that lets options expire faster than they vested.

This article walks through what vesting actually does, where the BAG ruling bites, and how to redraft.

What Vesting Actually Does

Vesting splits the grant into a promise (the full options or shares earned over time) and the earned portion at any given moment. The market standard for German employee VSOPs is four years with a one-year cliff. Nothing vests in months 1–12; at month 12, one quarter of the total vests in one block; thereafter options vest monthly or quarterly until month 48.

For founder vesting in the shareholders' agreement, three to four years is typical, sometimes as reverse vesting (all shares are issued at signing but subject to forfeiture if the founder leaves early).

Vesting makes the grant meaningful as a retention tool. The cliff is a probation period in disguise; the gradual schedule keeps the incentive alive.

Founder Vesting and Employee VSOP Vesting Are Two Different Legal Worlds

This is the distinction founders consistently get wrong, and it is the one thing this article wants you to take away cleanly.

Founder vesting lives in the Gesellschaftervereinbarung (shareholders' agreement) or the articles. It is a contract between shareholders, individually negotiated, with investor and founder both represented and counsel on each side. § 310 Abs. 4 BGB excludes corporate-law (gesellschaftsrechtliche) contracts from full AGB control under §§ 305–310 BGB, so the standardised-terms scrutiny that bites a VSOP plan does not bite an SHA in the same way. SHA vesting is still subject to a Treuepflicht and § 138 BGB sittenwidrigkeit review, but the threshold is materially higher.

Employee VSOP vesting lives in a standardised plan rolled out to all hires. The same boilerplate goes into 20, 50, 200 grant letters. That makes the plan an Allgemeine Geschäftsbedingung under § 305 BGB and brings it squarely into § 307 BGB AGB-Inhaltskontrolle.

	Founder vesting	Employee VSOP vesting
Document	Shareholders' agreement / SHA	VSOP plan + grant letter
Subject of vesting	Real GmbH shares (Geschaeftsanteile)	Virtual options (contractual cash claim)
Legal regime	Corporate law / freedom of contract	Labour law + § 307 BGB AGB control
Negotiated individually	Yes (with investor counterparty)	No (boilerplate to all hires)
Hinauskündigung default rule	Vesting clauses fall outside the BGH prohibition where the trigger is an objective service-related event (KG Berlin 2 U 94/21)	n/a (not a shareholder issue)
Key 2024–2025 case	KG Berlin, 12.08.2024, 2 U 94/21	BAG, 19.03.2025, 10 AZR 67/24
Outcome of bad-leaver	Loss of shares at acquisition cost	Loss of payout claim on liquidity event

The KG Berlin held that a founder vesting clause that pulls the founder out of the company in year one can be valid if there is an objectively justified investor interest, which there usually is when a meaningful round has closed. The BAG, by contrast, looked at a virtually identical mechanic in a VSOP and said: this is AGB, vested means earned, and earned options cannot be revoked just because the employee resigns.

The same word, two different rulebooks.

Good Leaver, Bad Leaver: The Standard Structure

Most VSOPs split departing employees into three buckets. Good leaver: termination by the company without cause, mutual termination, end of fixed term, retirement, incapacity, death. Vested options preserved, unvested forfeited. Bad leaver: termination for cause, material breach, fraud, sometimes voluntary resignation in older templates. Employee loses everything. Grey leaver: voluntary resignation without cause. Older templates parked grey under bad; modern templates often offer partial preservation.

The standard pre-2025 architecture stuck voluntary resignation in the bad-leaver bucket. That was the configuration the BAG looked at in 10 AZR 67/24. It did not survive.

What the BAG Ruling Changed

In BAG, 19 March 2025, 10 AZR 67/24, an early-stage startup employee held vested virtual options, resigned voluntarily, found his options expired immediately under the plan, and sued. The court held two things.

1. Total forfeiture of vested options on voluntary resignation is invalid. A standardised plan clause that revokes vested virtual options on the employee's own termination unreasonably disadvantages the employee under § 307 Abs. 1 S. 1 in connection with Abs. 2 Nr. 1 BGB. Vested options are consideration (Gegenleistung) for work already performed; once earned, they cannot be revoked simply because the employee leaves.

2. Accelerated de-vesting is also invalid. Plans that softened the original architecture by letting vested options decay post-departure faster than they vested (a four-year vester losing everything in two years) are the same problem in slow motion. A de-vesting period faster than the original vesting period is itself unangemessene Benachteiligung.

The decision explicitly overturns BAG, 28 May 2008, 10 AZR 351/07. I see founders and HR teams reach for the 2008 case in conversations even now, a year after the new ruling. The reflex is to assume that any compensation tied to continued service can be clawed back when service ends. After 10 AZR 67/24, that reflex is wrong for vested portions of a VSOP.

What a Post-BAG Bad-Leaver Clause Looks Like

The court did not say all forfeiture is dead. It said unangemessene forfeiture is dead. Three structures still work:

Forfeiture of unvested options. The employee never earned them. Forfeiture on any departure is fine.

Forfeiture of vested options on hard bad-leaver triggers. Termination for cause, material breach, fraud. The court did not address these directly, but the AGB analysis turns on whether the disadvantage is unreasonable. Forfeiture tied to the employee's serious misconduct is much harder to attack than forfeiture tied to a clean resignation.

Gradual de-vesting at no more than the original vesting rate. A four-year vesting period followed by a four-year phase-out after departure is the post-BAG consensus structure. The BAG only struck down accelerated de-vesting; it has not yet ruled on mirror-rate de-vesting itself. Some commentators argue any time-decay on already-earned compensation is at risk, since vested options are Gegenleistung; pure preservation of vested options is the more conservative position.

A workable post-BAG architecture: four-year vesting with one-year cliff (unchanged); on voluntary resignation or termination without cause, vested portion preserved and unvested forfeited (either exercisable at next liquidity event without time decay, or one-to-one mirror de-vesting); on termination for cause or material breach, total forfeiture in the narrow bad-leaver bucket that survives.

Preservation versus one-to-one de-vesting depends on cap-table mechanics. Preservation is simpler for the employee but leaves the company with an open option pool for years; one-to-one de-vesting caps the trailing claim at the original vesting horizon, which most investors prefer.

Audit Checklist for Existing Grants

The clauses that survive are the ones whose disadvantage to the employee is proportional to the actual reason for departure. Forfeiture on serious misconduct is fine. Forfeiture on a clean resignation, after the employee has worked the vesting period and earned the options, is not.

What Counsel Cannot Save You From

Even with a redrafted plan, two operational issues remain. Cap table: a VSOP that preserves vested options across many former employees creates a long tail of trailing claims; investors at the next round will want to know how big it is. Tax timing: vested virtual options become taxable as wage income only at the payout event. The marginal rate is up to 45 % under § 19 EStG, plus 5.5 % Soli on the tax, plus 3 % Reichensteuer above the § 32a Abs. 1 EStG threshold; cash payouts are also subject to social security up to the Beitragsbemessungsgrenzen if the recipient is still SV-pflichtig. The VSOP structure avoids the dry-income problem under § 19a EStG that hits cash-poor employees with real shares.

Bottom Line

The BAG ruling is not subtle. Vested means earned, and earned compensation cannot be revoked because the employee resigns. If your VSOP plan was drafted before March 2025, the bad-leaver clause is almost certainly invalid in its current form. The fix is not complicated: preserve vested options on voluntary resignation, or apply a one-to-one mirror de-vesting period after departure. Reserve total forfeiture for the narrow bad-leaver bucket of for-cause terminations and material breach.

Founder vesting in the shareholders' agreement lives in a different legal world and survives the BAG ruling intact, provided the investor interest is real and proportionate. Do not transplant employee VSOP language into the SHA, and do not transplant SHA founder-vesting language into your VSOP. The same word means different things in each document, and the rules are not the same.

If you handed out grants before March 2025 and you have not audited them since, do it before the next liquidity event. After a sale, fixing this gets harder and more expensive.