Published on July 5th, 2012 by Alan L Sklover
Question: Hello – If you were offered a retention bonus package and after a time, you decide to take a position elsewhere, can you mention this retention bonus to your prospective employer and can they honor it? If not all, but a portion of it?
Answer: Dear D.D., Well, Hello to you, too. The answer is “Yes, Maybe, and Be Careful.” Let me explain:
1. First and foremost, a retention agreement is a contract, and thus every word and every punctuation mark must be read and considered. I’m sort of lucky – I am near-sighted. For this reason, I have always read every single word and punctuation mark of a contract, and for that reason rarely miss anything in interpreting them. You, or an attorney on your behalf, need to be similarly “near-sighted,” as well.
Look, especially, for provisions in the retention agreement that say you (a) have to repay monies or suffer some other forfeiture if you leave before the retention date, (b) have to keep the agreement – or the reasons for it – confidential, (c) cannot go to work for a competitor, and (d) have some other obligation under the agreement, such as giving at least a minimum resignation notice.
You need to find out both (a) if you promised to stay, and (b) if you leave early, what may be the penalty, if any, for doing so.
2. Second, if you have already received any of the retention monies, or “enjoyed” any other benefit as a result, such as receipt of shares of stock, to leave before the “retention date” may require that you return those monies, stock or other “benefit.” In my experience, most retention agreements say either (a) you get nothing of value until you stay the full retention period, or (b) you get the “thing of value” little by little, perhaps monthly, if you remain on board. If your agreement permits the latter – receipt of benefit, little by little – if the terms say so, you may have to pay back all of the money, stock, etc., you previously received if you leave early.
3. Third, it is entirely acceptable, appropriate and proper to request of your possible new employer that it “make you whole” on what you may lose if you leave now. I am a big believer that any request is a no-lose proposition so long as it is made with “The Three R’s” of a good request: (a) conveyed with Respect, (b) the request is Reasonable, and (c) the request is supported by a sensible Rationale. I am confident you can make your request with Respect. I am of the firm opinion your request is Reasonable. The Rationale is easy: “I will lose this if I come to you. Can you please ‘cover’ my risk in this regard?” Many employers will do that in this context, in the context of a bonus that will be lost, and the context of stock that has not vested. It is something of a “cost of acquiring” you, just as would be a fee paid to a recruiter. I encourage that way of thinking, so long as “The Three R’s” are followed.
4. However, above all be VERY careful not to share “confidential” matters; that could get you fired from your present job. Why do employers give retention bonuses in the first place? Almost always it is to retain employees during a time of job insecurity, to ensure that they don’t leave out of fear. It may be a merger of companies, when a lot of people believe they will be let go. It may be an upcoming downsizing in which a lot of people fear they will be let go. It may be when a company is sold, when a lot of people feel they might be let go. The retention agreement permits (a) the employer to keep the employees around for purposes of a smooth transition, and (b) the new employer to pick and choose who to keep on board. €
It is crucial that you do not (i) tell anyone about this retention agreement if the agreement, itself, says you cannot do so, or (ii) tell anyone about the reasons for the retention agreement, because it might give your employer’s competition a clue as to its strategic steps being taken, and why they are being taken. Doing either could get you fired for “cause,” which would be the worst of all events, in my view.
As you can see, D.D., retention agreements represent a whole lot of potential reward, and possible risk, as well. Be careful in how you read them, and in how you conduct yourself with regard to them. I am glad you are asking the right questions, and I truly hope my answers have been helpful to you, and others.
Best to you,
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