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?
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,
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.