“Give 90 days resignation notice or repay bonuses – Is that legal?”

Published on July 29th, 2014 by Alan L Sklover

Question: I’ve been given an agreement to sign in order to get my future bonuses. This is what it says:

“In consideration of the above incentives, Employee agrees to provide 90 days notice if the Employee decides to leave the company. Should the Employee fail to provide 90 days notice, the Employee will have to pay back all quarterly bonuses for the past four calendar quarters.”

My fear is this: What new employer will wait three months for a new employee? Is this standard or legal?

Rachel A.
Philadelphia, Pennsylvania

Answer: Dear Rachel: Here are the simple answers, and some information to consider:

1. It is, indeed, legal for employers to require employees to agree to repayment conditions (such as this one) on bonus, commission or equity compensation. Employers are free to set conditions upon employees’ participation in bonus programs, equity programs, commission programs, and benefit programs.

This is the way the law looks at it: the employee is free to say, “No thanks, I’d rather not be required to give notice; I just won’t take a bonus, or equity, or commissions.” Going further, an employee can also say, and please excuse my vernacular, “Take this job and shove it.”

One limitation does exist, however: it must be prospective, not retroactive. That is, it can only affect monies earned in the future, not that have already been earned.

2. No, it is not “standard” to make employees agree to give back bonuses (or other compensation) if they do not give a lot of resignation notice, but it is becoming more common. Quite unfortunately, employers requiring employees to sign such agreements is getting more and more common every day. It seems to be a part of the worldwide trend toward employers trying harder and harder to control their employees, one of the ways they seek to gain the maximum possible benefit from them at the lowest possible cost.

By the way, in my experience only a handful of employees are successful in getting around such agreements. They are the few who are both (a) perceived as extremely valuable by their employers, AND (b) comfortable with negotiating for themselves, and so are able to say, in one way or another: “I won’t sign that agreement, and I want my bonuses anyway ”

This blogsite is devoted to making you one of those employees. We try in every way we can to help employees stand up to and counter that trend and – by gosh – we think it is working, slowly but surely.

3. (a) Long notice requirements (30, 60 or 90 days), and (b) repayment of monies if they are not complied with, both serve a number of employers’ interests. The reason we are seeing more and more of these very unfair, long pre-resignation requirements is that they work well for employers in a number of ways, all of them unfair, if you ask me:

(i) First, they make it virtually impossible for their employees to change jobs for the exact reason you mention: most other employers are not willing to wait 90 days for a new employee.

(ii) Second, they make it very “financially painful” for their employees to leave, because many do not have the money in their bank accounts to repay a year’s worth of bonuses, commissions, stock or benefits. This is getting a bit like what people used to call “indentured servants.” So, many employees simply “stay put.”

(iii) Third, it gives employers a chance to get employees who are leaving away from important clients, customers and accounts, and insert other employees into those valuable relations, so they do not lose customers or clients.  

(iv) Fourth, if and when employees do leave without giving 90 days’ resignation notice, the employers can collect an awful lot of money back from them.

By the way, tired of all this reading? Rather just sit back, relax, watch and listen? Consider Sklover Videos On Demand. See our Complete List. Just [click here.] 

4. If a prospective employer really wants to hire you, you can always ask them to help you with this repayment problem you face. Prospective employers see a lot of these repayment problems, yet they still have a need for new, good, hard-working employees with positive attitudes. If that’s what you are, a prospective employer who sees your potential value might just be willing to (a) lend you the money you need to repay the bonuses you owe, (b) share the cost of repayment with you, or even (c) repay you the full cost of repaying the bonuses. That is, IF YOU ASK.

Many of our clients have asked for such assistance, and many – more than you might think – have been successful in doing so. It can be part of the negotiations of salary, bonus and benefits that comes around if and when both employer and employee both decide they want to “get married” to one another. In fact, it’s one of the most common reasons new employers pay “sign-on bonuses.”

5. And, too, after you leave you can always try to negotiate with your former employer to waive or forgive the repayment obligation. If and when you leave your job, you are free – and I strongly encourage you – to seek waiver or “forgiveness” of the obligation to repay the monies you owe. There are many, many good reasons you might suggest that it would (a) only be fair and (b) be in the employer’s interests to do so.

As for just a few examples – and there are many, MANY more – if you left your job because (i) you were being severely sexually harassed or threatened with workplace violence, (ii) you were being urged to be deceptive or dishonest to customers, or (iii) you were being denied promotions because of your age, race, gender, disability, religion, pregnancy, or other illegal reason, then it surely might be best for your employer not to start a Court fight with you, which it could lose.

If you agreed to repay your former employer (a) tuition reimbursement, (b) relocation expenses, (c) a sign-on bonus, or even (d) a short-term loan, you may be able to have that obligation waived and forgiven. We offer a Model Letter for Repayment Obligation Forgiveness – with 18 Great Reasons, just [click here.] “What to Say, and How to Say It.™”  Delivered by Email – Instantly! 

And, hey, if your former employer refuses to waive and forgive your repayment obligation, you just might send all of its other employees our website address and suggest they read this article!! You even have my permission to do so!!

Rachel, thanks for writing in, and for giving me an opportunity to address this issue. As I say time and time and time again, employees have more options available to them, and more leverage, than they tend to believe. The same holds true in this circumstance, as well. And, too, I hope it gives you a sense that (a) you are not alone in “this,” and (b) you have leverage and ways to “stand up” and “fight back.” That’s what this blog is all about.

My Best to You,
Al Sklover

P.S.: Post-employment, employers might use a Collection Agency to collect sums. To thwart those efforts we offer a Model Letter in response to Collection Agencies. Not guaranteed, but almost always works. Just [click here.] “What to Say, and How to Say It.™” – Delivered by Email – Instantly! 

 Repairing the World,
One Empowered – and Productive – Employee at a Time™

© 2014, Alan L. Sklover All Rights Reserved. Commercial Use Prohibited.

Sklover’s Thought for the Work Week

Published on July 28th, 2014 by Alan L Sklover

Featured Coffee Cup

“War is fear cloaked in courage.”

– Gen. William C. Westmoreland

I surely don’t recommend “war” in any aspect of the workplace. But, sometimes confronting issues is necessary. Confrontation is hard, as it often upsets others, it might entail some degree of disruption or emotional pain, and could even result in retaliation. But even surgery – with its pain, blood and uncertainties – is sometimes necessary. Don’t fear confronting issues. Instead, cloak your fears in courage.

© 2014 Alan L. Sklover. All Rights Reserved

[If you would like to contribute a favored quote, saying or proverb, please submit it to us at info@SkloverWorkingWisdom.com].

 

Sklover’s Thought for the Work Week

Published on July 21st, 2014 by Alan L Sklover

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“Don’t play what’s there, play what’s not there.”

– Miles Davis

Should you develop skills for today’s world, or the world you believe will be here next year, and the year after that? Should you focus on the kind of business partnerships that others have in place, or perhaps business partnerships no one else has thought of? Even in target practice, people are taught to aim not where the moving target is, but where it will be. Don’t play what’s there, play what’s not there. Yes, yes, yes.

© 2014 Alan L. Sklover. All Rights Reserved

[This great quote was contributed by Marlene T. of Temecula, California. If you would like to contribute a favored quote, saying or proverb, please submit it to us at info@SkloverWorkingWisdom.com].

 

The Future of Work – Anyone Want a Raise Every Month?

Published on July 18th, 2014 by Alan L Sklover

raise monthly
What would motivate you more: A raise once every three years, or a raise once every three months? Did I really need to ask you that question? A recent trend finds employers providing more frequent raises for a good number of reasons. Most of all, it seems to work!

Regardless of business, industry or geographic area, all employers need to attract and retain the best-qualified, most productive and dependable employees. And, so, ways to do just that are always under review. Many employers continually experiment with employee-motivation techniques, from “Casual Friday’s” to “Departmental Adventure Outings” to the old-fashioned “Employee of the Month” awards. Smaller companies, especially, need to find ways of holding on to their “keeper” employees.

A recent trend in employee motivation is to provide more frequent raises, promotions or bonuses. The reasons for this are many. First, studies show that quarterly rewards are an unusual, and attractive, recruitment tool. Second, many believe that more frequent “encouragement” boosts employees’ “Three E’s” - Excitement, Engagement and Effort. Third, the practice of more frequent rewards lets poorer performers know how they are perceived and “where they stand” earlier, and thus provides an impetus to the employee either to correct the shortcoming or to leave, before problems fester.

Employees of Shutterfly, Inc. – the popular internet-based image publishing service based in Redwood, California – are eligible for bonuses four times a year and salary raises twice a year.

Those who work for Epsilon, a provider of loyalty marketing services and programs headquartered in Plano, Texas, receive a salary review every six months for their first two years. The program has become a big selling point when interviewing prospective employees in good part because many recent hires can attest to having won all four of their first semi-annual raises, and at least one promotion, in their first two years of employment.

Quarterly raises of 2% to 15% are the norm for employees of Zulily, Inc., a web-based designer and retailer of clothing for moms, babies and kids, headquartered in Seattle, Washington.

The practice of more-frequent employee “rewards” is not yet widespread. A recent study by benefits-consulting firm Aon-Hewitt of 1,147 companies found that only 5% engage in the frequent-rewards practice. But many think that, if it works, it will be seen more and more, as the competition for top-notch talent, attitude and engagement intensifies, which it most surely will.

Show your value, and collect the job security and employee rewards you’ve earned. Makes sense to us. In fact, that is what SkloverWorkingWisdom™ is all about.

© 2014 Alan L. Sklover. All Rights Reserved. Commercial Use Prohibited

“Claw-back: If no amount is stated, is it enforceable?”

Published on July 16th, 2014 by Alan L Sklover

Question: My employer has a “claw-back” agreement that extends 24 months beyond my repatriation from my expatriation in China.

While the items to be repaid are defined in the agreement, there is no dollar figure associated with any of these items. Is this still enforceable?

Lee
Shanghai, PRC

Answer: Dear Lee: The simple answer is “Yes,” but the best answer is “Yes, But.” Please remember that difference while I explain:

1. It is not at all unusual to find a financial obligation described in words without a corresponding amount set forth next to it. This is most often the case because, at the time that the agreement is written, the amount of the obligation has not been determined.

As one example, if your employer is entitled to “claw back” from you the value of any stock grant given to you if you should leave the company within 24 months of your repatriation, at the time of the agreement no one might have known the value of any such stock grant to be made.

As another example, if the “claw back” is for commissions paid during a certain calendar quarter, or relocation expense, the amount of such commissions or the amount of the relocation costs might not be known at the time of the signing of the agreement.

Look Before You Leap!! Get a copy of our 138-Point Master Guide and Checklist for Employees Contemplating Expatriate Assignments. Everything you forgot to ask about, and for, and then some! To obtain a copy, just [click here.] Delivered by Email – Instantly!

2. In fact, every lawsuit and arbitration has two phases: (i) first, it is determined whether or not a debt or obligation is owed; (ii) then, and only then, is it considered how much that debt or obligation might amount to. Lawyers and Judges call these two distinct stages of litigation (i) the “liability” phase, and (ii) the “damages” phase. And, as might be expected, the “liability” phase of a lawsuit involves “words,” “ideas,” and “concepts,” while the “damages” phase of a lawsuit requires numbers, calculations and simple arithmetic.

Let’s say your car and another car collided. The first question is “Whose driving caused the collision?” The second question is “How much – if anything – does the driver at fault have to pay the faultless driver?”

And in lawsuits or arbitration, it is often more difficult for a jury or an arbitration panel to decide the “damages” (or amount to be paid) than it is to decide the “liability” (or whether or not any obligation exists in the first place.)

3. Remember that, above, I said “The best answer is ‘Yes, but’?” Well, this is why: There are many defenses to “claw back” agreements, in fact, many more than you might imagine. In the law, we have what are technically called “Affirmative Defenses.” This means, quite simply, (i) “YES, I signed that agreement, (ii) BUT there is a good reason (or good reasons) I should not have to pay those monies back.” Hence the title “(i) Affirmative (ii) Defenses.”

Here’s a few of the many, many “affirmative defenses” that may be available to you: (i) YES, I agreed to pay the money back if I resigned, BUT I was really laid off and Human Resources let me tell people it was a resignation. (ii) YES, I did sign the agreement, BUT the reason I resigned was that I was almost raped by my supervisor one evening at the office. (iii) YES, I did agree to repay that money if I left the company, BUT the company required I work in China and my daughter’s asthma doctor told us she could die if we remained in China, so surely I couldn’t do that.”

If you agreed to repay your former employer (a) tuition reimbursement, (b) relocation expenses, (c) a sign-on bonus, or even (d) a short-term loan, you may be able to have that obligation waived and forgiven. We offer a Model Letter for Repayment Obligation Forgiveness – with 18 Great Reasons, just [click here.] “What to Say, and How to Say It.™” – Delivered by Email – Instantly! 

4. By the way, although “claw back” and “repayment” are actually different, they are commonly used interchangeably. Technically speaking, “claw back” refers to “taking back” a payment of money made to you, such as (i) bonus, (ii) commissions, and (iii) leave of absence payments. Technically speaking, “repayment” refers to “reimbursement” of monies paid not to you, but paid to someone else on your behalf, such as (a) relocation costs, (b) tuition reimbursement, and (iii) your legal fees related to, for example, immigration issues.

That said, these days almost everyone uses the two terms interchangeably, and you should not be concerned if you or others use them incorrectly in a technical sense. To my mind, the ultimate test of word use is overall communication not technical accuracy.

5. In my experience, almost every employee has one or two good “Affirmative Defenses” to repayment obligations and, in any case, there is no downside to seeking either forgiveness or negotiated settlement. Claw backs and repayment obligations are good examples of how very “negotiable” employment and employment-related matters are. Employers do not want to spend many thousands of dollars to collect a rather small sum. Nor do employers want to let it get around that employees can – in fact – defeat collection efforts. And, too, some employers understand that you might one day be a prospective customer. This is one area in which I have found employers often negotiate or waiver in their efforts against employees much easier and more quickly than in many other situations.

Lee, thanks for writing in. I hope your employment transition is a smooth one, and that you consider challenging your possible – but not definite – claw back obligation.

My Best to You,
Al Sklover

P.S.: Post-employment, employers might use a Collection Agency to collect sums. To thwart those efforts we offer a Model Letter in response to Collection Agencies. Not guaranteed, but almost always works. Just [click here.] “What to Say, and How to Say It.™” – Delivered by Email – Instantly! 

 Repairing the World,
One Empowered – and Productive – Employee at a Time™

© 2014, Alan L. Sklover All Rights Reserved. Commercial Use Prohibited.

Alan L. Sklover

Alan L. Sklover

Employment Attorney
and Career Strategist
for over 30 years

Job Security and Career Success now depend on knowing how to navigate and negotiate to gain the most for your skills, time and efforts. Learn the trade secrets and 'uncommon common sense' of Attorney Alan L. Sklover, the leading authority on "Negotiating for Yourself at Work™".

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