“Can a resignation be made effective on a later date that avoids a repayment obligation?”

Question: Hi, Alan. I recently resigned from my job with a global investment bank. My contract specifies a notice period of three months. In my letter I did not specify a date on which my resignation would be effective, I just said I was resigning.

When I spoke to my manager, he stated that I would have to pay back my relocation costs. This is because my contract has a “clawback,” that is, if I leave within 12 months of joining the firm, I will have to repay the full cost of my relocation benefits, which is about US $40,000.

Two questions: Can I extend my notice period to the end of the year to avoid the clawback? Also, does my 2-1/2 years continuous service with the Company (but in different Countries and Branches) negate the 12 month clawback clause?

Hong Kong
Peoples Republic of China

Answer: Dear Stew: Two very interesting questions. I think you may be OK:

1. Whenever we are dealing with an agreement, the first focus must always be on the words of that agreement. Some repayment or “clawback” agreements say that you must repay relocation costs if you “give notice of resignation” within a certain period of time, regardless of when you actually depart. Some repayment or “clawback” agreements say that you must repay relocation costs if you “leave voluntarily” within a certain period of time, regardless of when you give notice. Some repayment or “clawback” provisions say that prior continuous service will relieve your obligations, and some do not say that. So, first and foremost, look at the words of your provision. If you don’t have a copy of the provision, ask HR for one, as soon as possible, and read it over carefully.

2. If you did not mention a “final day” in your resignation, it might be assumed to have been “effective immediately.” As both an attorney representing individual employees, and as an employer, myself, it is my view that generally speaking, when someone says “I resign,” without saying more, it sort of sounds like they are implying “as of today.” Of course, other people are free to have different views. If an employee told me “I resign,” I would ask, “When is your last day going to be?” Your not specifying a “last day” left the door open to different interpretations, some in your interests, and some against your interests. It seems that a clarification now – to a later date – would surely be in your interests.

3. That said, I would strongly suggest that you now “clarify” – in an email – that your resignation is effective AFTER the clawback period ends. Go ahead – as soon as possible – “clarify” that your last day is intended to be a week or so after your repayment obligation expires. In doing so, you might “motivate” your boss into accepting that more readily if you accompany it with good reasons why it is in his/her or the company’s interests for you to remain until that time, such as the necessity of your completing an orderly transition before departing. You might also emphasize that after your departure, you will continue to be available to assist in any ways that are needed, of course, within reason. And, ask your boss for a return email accepting your resignation as of that “no-clawback” date, for your records. 

4. Regardless of how your boss responds, by having a written record of your “clarification,” you stand a better chance that your employer (or its lawyers) will decide not to come after you for the US $40,000. Your email “clarification” will have two purposes: (a) to avoid the problem of attempted clawback, and (b) if clawback is attempted, to have evidence that it is without factual basis. For both these reasons, I suggest you attend to it as soon as possible, to “set the record straight” before your boss makes his or her own “clarification” that is not in your interests.

5. By the way, if your contract requires repayment if your leaving in less than one year is “voluntary,” then any “involuntariness” may negate your repayment obligation. As noted above, the precise words of an agreement are truly important, and often offer ways to negotiate for what you want. If any facts, events or circumstances have “made” you feel you “must” resign, on that basis you may avoid the imposition of repayment obligation, as well. These might include (a) lowering of compensation, responsibilities or resources, or (b) being told to do something that is improper, unethical or illegal.       

6. Lastly, I am confident that your contract requires a notice period of “at least” three months, which suggests that more is possible, too. In your email to me, noted above, you stated that your “contract specifies a notice period of three months.” I am confident that is incorrect, because most contracts would more likely be worded as “at least” three months. If this is the case, then you can cite in your “clarification” email that notice of more than three months is acceptable – and even contemplated – in your contract. Little words like “at least” can go a long way in helping us craft helpful arguments in negotiation and navigation of employment issues.

7. By the way, leaving after the new calendar year will make your resume appear to have less of a gap in jobs. I just thought I’d point out that, if you depart during 2012, and get a new job during 2012, it will appear like you had no gap in employment. If you leave in 2011, and your next job starts in 2012 – even if it is the next day – it will encourage the appearance of one full year of unemployment.

Stew, I hope this helps in your attempt to avoid the US $40,000 repayment. And thanks, too, for writing in from Hong Kong.  

And, too, don’t forget our many free SkloverWorkingWisdom YouTube Videos on numerous topics of employment rights, negotiations and law. [Just click above.]  

Al Sklover

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. To obtain a copy of our Model Memo entitled “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!

© 2011 Alan L. Sklover, All Rights Reserved.

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