“Don’t tell me of deception.
A lie is a lie, whether to the ear or to the eye.”

– Samuel Johnson

ACTUAL CASE HISTORIES: Likely due to recent news about shortages of qualified employees, more and more employers are using retention agreements to retain their employees during periods of insecurity, such as mergers, divestitures of company divisions, periods of lowered revenue as well as in event of rumored layoffs.

In my decades of practice, I have negotiated many retention agreements. The essence of a retention agreement is pretty simple: It is “You stay, they pay.” Or, in more legal-sounding language:

“If (a) you promise to, and do, remain as an employee for a certain, specified period of time, then (b) the employer promises to pay you a certain, specified sum of money.”

Retention agreements do not contain “releases” or “waivers” of claims. There is no reason for them to contain releases or waivers of claims. Releases or waivers of claims have no place in retention agreements. The essential requirements are (i) you agree to stay, and if you do (ii) they pay you a specified sum of money. No releases. No waivers. No reason for them.

In my decades of practice, I have also negotiated many severance agreements. The essence of a severance agreement is also pretty simple: “You release them from claims and lawsuits, and they pay you a certain, specified amount of money and certain benefits.”

In severance agreements, there always needs to be a release or waiver of claims because that is a fundamental part of the severance transaction. You might say that is exactly what the employer is “buying” in the bargain. In more legal-sounding language, this is what a severance agreement says:

“If (a) you promise to, and do, release and waive your claims (and possible lawsuits) against your employer, and perhaps do certain other things, then (b) your employer will pay you a certain sum of money.”

It is here – in severance agreements – where we expect to see releases and waivers of claims because they are part of the very essence of a severance agreement.

Retention agreements and severance agreements are two different agreements, meant to accomplish two different goals, and each (i) rewards, and (ii) obligates employee in two very different ways.

There is no rule or law that says that retention agreements and severance agreements cannot be placed into one single “Retention and Severance Agreement.” I have seen just that, in which the two offers exist in the same document in a way that expresses:

(a) If you stay a certain period of time, we will pay you $25,000 for not leaving (retention); and

(b) If we should lay you off during that period of time, we will pay you a severance of $80,000 for signing a release of claims (severance).

Notice that you should be paid for staying put, and you should get paid additional monies for the release of claims provided. Notice, too, that you should not provide a release of claims for the retention, but for the severance.

I have no problem seeing a combined retention-and-severance agreement. I do have a big problem with a deception that gets the employer the right to lay you off with no payment, other than a payment that you have earned for agreeing to remain in place during insecure times.

In recent times, I have seen employers mix the two (retention and severance) together without telling the employee, and without paying the employee for the release, which is very valuable, and thus taking wrongful advantage of the employee. It’s like getting a release for free, under false pretenses. Lured by the sound of “free money” for the retention, the employees do not even realize they are effectively also signing a severance agreement.

The first time I saw this deceptive variation of a retention agreement, I said to myself, “What is this???” It took me a few minutes to figure out what it was, and what it represented to my client, what it offered my client, and more importantly, what it “took” from my client. Now I am seeing this “deceptive hybrid” retention agreement more and more, and I have come to understand their deceptive danger to employees.

LESSON TO LEARN: There are three important lessons to learn in this circumstance, one quite simple, and one quite sophisticated.

1. First Lesson: “Titles Don’t Count.” Just because a document’s title is “Retention Agreement” does not make it a Retention Agreement, or only a Retention Agreement. What is “inside” the document is what counts. You have to read every word of an agreement before you understand it, and you should never sign an agreement unless you fully understand it. If you don’t understand what it says, and understand what it both “gives” you and “takes from” you, keep your hands and your pen in your pockets.

2. Second Lesson: “True Retention Agreements Do Not Contain Releases.” If you are reviewing a document entitled “Retention Agreement,” and you see in it a release or waiver of claims in it, “beware.” It may not at all be what you expect. While retention agreements are often seen as positive opportunities to make extra money, severance agreements mean something far less positive: you will likely soon to be losing your job, and that is worrisome.

3. Third Lesson: “A Retention Agreement Containing a Release May Be a Disguised Severance Agreement.” The fundamental reason an employer gives money to an employee who is being downsized or laid off is not love, and it is not concern for his/her well being. Rather, it is to “buy” a release or waiver of claims, to reduce the risk of a lawsuit to the employer. Now here is the thing I hope you will remember most: If the employee recently gave to the employer a release or waiver of claims, the employer does not need to give the employee any severance payments or benefits in return for another release: it just got what it needs and wants.

So, if by means of a retention agreement, an employee has unwittingly recently given an employer an release or waiver of claims, that retention agreement may just be a disguised or mislabeled severance agreement, and a layoff – without claims or defenses to it – may be “just around the corner.”

WHAT YOU CAN DO: We recommend consideration of these eight thoughts if you are given a document called a “Retention Agreement” that contains a release of claims or waiver of claims:
Read the rest of this blog post »

 
“When the devil loses his job, he becomes a tax collector.”

– Greek Proverb

ACTUAL CASE HISTORIES: It goes without saying: just as it is wise to look before you leap, when changing jobs, so too is it wise to consider the many steps you can legally take to minimize your future tax liabilities. Taxes are part of every employee’s life, but that does not mean that you must pay more than you need to. To the contrary, you can take into account the tax issues of a job change when (i) planning for it, (ii) negotiating it, (iii) taking steps during it, and (iv) even when completing your tax return.

Because I am not educated or experienced in tax matters, I cannot give tax advice or counsel on tax matters. That said, I can make certain suggestions regarding tax thoughts, and suggest – as I do with my clients – that employees consult with qualified tax counsel or tax advisor in contemplation, navigation and negotiation of job changes.

LESSON TO LEARN: Taxes are inevitable, but the amount you owe is capable of being legally reduced by taking appropriate steps to do so. But first, you must know what they are, and only then can you wisely navigate and negotiate to that end, after consultation with your personal tax advisor.

Note that, as I am not a tax law practitioner, this blog post cannot be considered tax advice. Additionally, this blog post is written and published in June, 2017. As tax-related laws change over time, you might want to ask your tax advisor whether the law has changed since this blog post was published.

WHAT YOU CAN DO: Paying taxes is required by law, but there is no law that requires you pay more taxes than you are required. Here are ten “tax thoughts” to consider, and to share with your tax advisor, when expecting, planning, and in the midst of a change of jobs:
Read the rest of this blog post »

“The second mouse gets the cheese.”

– Terry Pratchett

ACTUAL “CASE HISTORY”: These days, as employers are seeking to limit employee-related expenses, yet retain the services of valuable individuals, they are increasingly turning to the hiring of individuals not as employees, but as independent consultants.

The reduction in employee headcount provides employers with lower overall expense, especially as to benefits and legally-required payments, such as mandated contributions to healthcare under the Affordable Care Act, Social Security, unemployment benefits, and workers’ compensation plans. In addition, most of the many other laws that protect employees from discrimination, retaliation, harassment and non-payment of wages, are not applicable to independent consultants.

For this reason, we are seeing more and more people “selling their services” as consultants rather than as employees. The most common scenario is for a company to provide to a consultant its “standard form” of consultant agreement for signature. And just as commonly, important points in those “standard forms” are slanted heavily in favor of the interests of the company, and not the consultant.

But, “forewarned is forearmed.” You have every right, and an obligation to yourself and your loved ones, too, to request changes in the language and terms of any agreement. Here are the most important points to raise if it is a Consulting Services Agreement.

LESSON TO LEARN: Most employees do not have written contracts, for many different reasons, chief among them that employers commonly view written agreements as commitment they don’t want to make, and may be difficult to get out of. (That said, senior executives do commonly have written employment agreements that do protect them.)

On the other hand, most consultants do have written contracts, provided by the company, that lean heavily toward the protection of the rights and interests of the company. As a consultant, you look to your own resources – and not legal protections – to protect you and what should be yours. If you do not, you have only yourself to blame.

WHAT YOU CAN DO: In any Consulting Services Agreement submitted to you for your review and signature, look to see if these “21 Smart Points” are already provided and are clear, and in your interests. If not, consider asking that they be inserted to clarify and modify the consulting services agreement, either (a) incorporated into the main agreement given to you, or (b) set forth on a “Rider,” “Addendum” or “Amendment” in each instance to be signed by both sides when the main agreement is also signed.
Read the rest of this blog post »

Question: Business is really slow at my present employer, and my hours have been reduced. I did not sign a non-compete. A company that is a customer of my present employer would like to hire me, and I’d love to work for them, mostly because they are very busy right now.  

Problem is that the customer-company has signed an agreement – they call it a “No Poach” agreement – that says that they won’t hire an employee of my employer for four months after the employee leaves the company for any reason.   

This is hurting my family livelihood. Please let me know if anything can be done, and if so, what that is. Is there any way around this?

Crystal
Atlanta, Georgia

Answer: Dear Crystal: Lately I am more frequently working with clients who are having difficulty with prospective employers having signed just what your prospective employer did: “No Poach” agreements. Your inquiry, though, is the first question any blog visitor has submitted for me on this subject. As you will see, the answer to your difficulty is not all that different from the answers I provide employees who have signed non-compete agreements, and want to get “around, over or out” of them. Here we go:      

1. “No-Poach” agreements are  increasingly common; they are essentially “no-hire’s” between two employers, and are as valid and binding as any other agreements. Nearly everyone is familiar with non-compete (often called “non-competition”) agreements, which employers use in an attempt to prevent employees from leaving and what they consider “stealing” their business secrets or business relations with customers, suppliers and other affiliates, and bringing them to their next employers. These efforts grow out of a view – mistaken in my own opinion – that employers have any real business “secrets” or “own” their relations with their customers, vendors, suppliers and affiliates. That is why so many Judges decline to enforce non-compete agreements, unless the employee has done some truly bad deed(s) either in planning or in making their departure. 

Regarding “No Poach” agreements, in a similar way, employers also don’t want their customers, vendors, suppliers and affiliates to “steal” their employees from them, either. So, with increasing frequency, employers are saying to their customers, suppliers and affiliates, “Please sign this agreement that says you won’t “poach” our employees.” This happens most frequently when the employer is in the business of providing to its customers the valuable business services of its employees, such as (a) computer programmers, (b) systems analysts, (c) researchers, (d) consultants, and the like, and know that it is tempting for some customers to think to themselves, “It sure would be cheaper to just hire the person directly, and “cut out” the middle-man costs of his or her present employer.”

2. Like non-compete agreements, “No Poach” agreements are not usually enforced by going to Court, but rather by the possible “Poacher’s” fear of litigation, and the attendant risks of litigation. As I often say about non-compete agreements, the most important thing to know about them is that perhaps 95% of the time they are not enforced in Court, but rather by the fear of going to Court. This distinction is a really important one, for it helps us better focus on how they are best handled, resolved, or defeated.  

You see, no one really wants to go to Court, due to the potential (a) disruption to daily business life, (b) cost of lawyers, (c) exposure of things that people really don’t want exposed, and (d) even a “runaway” jury verdict of hundreds of thousands, or even millions, of dollars. Remember: even Mafia chieftains usually take plea bargains, because they have the same exact fears. 

3. Your first step forward should be to see if the prospective employer would really like to hire you, and to work with you to do that by seeking to get the “No Poach” agreement waived. Nothing makes any real sense unless your prospective employer wants to hire you, and is prepared to confront the impediment to your hiring; the “No Poach” agreement. As I’m sure you are aware, most people shy away from anything that seems like confrontation. 

Determining whether that is the case is the first step to take. I suggest you request a short face-to-face meeting to determine what their answer is, and to explore their thoughts as to what the best avenue to take might be.   

If the answer is positive, then you might mention to the prospective employer that where you now work business is quite slow and even that your hours have been cut way back. That suggests to me, and it may well suggest to them, that your present employer might (a) be worried that that they could lose your prospective employer as a customer (or supplier, vendor or affiliate) if they don’t agree, (b) have no stomach for a Court fight and its expense, and (c) actually be fine with “letting you go,” to avoid the costs of (i) severance, (ii) unemployment, (iii) other sums it might owe you, and, too, (iv) any potential legal claim you might have that your reduction in hours or layoff were improperly motivated. 

You see, just as “the best way to fight fire is with fire,” the best way to fight fear is with fear. 

4. The second step: seek a negotiated waiver of the “No Poach” agreement, noting the reasons above and other “perceptions of risk” to your present employer. With these thoughts in mind, either you or your prospective employer might approach your employer to see if it might, for these reasons or for others, agree to waive the “No Poach” agreement. Bear in mind, as your hours are already being cut back, the value in keeping you as an employee might just be diminished in your employer’s mind, and the “risk” of losing you might be less important to it than if business was quite busy. 

Something else to consider: if you are not a source of revenue to your present employer – that is, not someone whose services they sell to customers – and are more administrative in nature, your gaining the waiver you seek will likely be easier.

In my experience, this second step forward is usually best taken by the prospective employer, the party who signed the No Poach agreement with your present employer. That said, if they don’t want to proceed for any reason, there is no reason you cannot “carry the negotiation ball” yourself.   

5. A potential third step you might take is to request your present employer consider agreeing to a “buy-out” of the “No Poach” agreement. If a business is having financial difficulties, as your employer seems to be experiencing, they may be amenable to a cash payment “up front” to waive the “No Poach” agreement. Typically, the payment of the equivalent of a few months pay to a former employer is sufficient to convince them that this is a good deal. I have seen “No Poach” agreements bought out for anything ranging from one month’s pay to one year’s pay. However, if you are a source of revenue to your present employer, as noted above, then their calculation of lost profits that you represent to your present employer would likely be the key to the negotiation: for example, something like six month’s of  “lost profits,” payable up front, might be the way to negotiate. 

Who should pay that sum? Well, your first suggestion to your prospective employer should be your prospective employer pay that sum, because (i) they are the ones bound by the “No Poach” agreement, (ii) they are the ones who will benefit most by your services, and (iii) they are the ones who surely have more money in their pockets and can afford such a sum. 

If your prospective employer doesn’t buy into that, you might suggest that you will contribute, perhaps, one half of the necessary sum, over time, out of your future pay. Another common resolution is for the prospective employer to agree to pay the sum, and for the employee to agree to contribute a portion over time, but for the employee’s portion to be forgiven if he or she remains employed by the prospective employee for a set period of time, usually one full year.

6. One important caveat: Do not threaten to do any type of harm to your present employer’s relation with the prospective employer, divulge or use secrets, or to damage any other aspects of its business or reputation. In discussions and negotiations such as these, sometimes tempers flare, “hot words” are used, and people say things they should not. You must be very careful not to threaten the interests, reputation or relations of your present employer unless you get the waiver you seek. That could be viewed either as (a) a breach of your duty of loyalty to your present employer, for which you could be sued, or (b) even extortion, which is a threat of harm unless something of value is surrendered, and that could even get you arrested. Though these events are very, very rare, carefully avoiding threats of any kind is the way to make sure they don’t take place.

7. A second important caveat: get both the waiver, and any agreement with  your prospective employer, in writing, before resigning  your present position. Being mindful and careful in all you do is a good habit, especially when your employment, your career and any payment of money is concerned. No agreement needs to be complicated; in fact, all agreements should be kept quite simple. But any waiver, and any agreement as to contribution to any buy-out, should be in writing, so that (a) all are clear as to what has been agreed to, (b) there is a clear record for future reference, and (c) all parties are discouraged from violating those agreements, knowing a clear record exists. No one – not you, least of all – wants or needs to needlessly get involved in a dispute.     

I hope this has been helpful. In my experience getting a (a) waiver or (b) buyout of a “No Poach” agreement is not as difficult as you might think, especially with a business that is having enough difficulty that it is cutting back employee’s hours.

Good luck, and thanks for writing in. Please tell your family, friends and colleagues that we are here to help them, too.

My Best,
Al Sklover

P.S.: Don’t forget: we offer Model Letters, Memos, Checklists and Form Agreements for almost every workplace issue, concern and problem that show you “What to Say, How to Say It.™” Want to see our Entire List? Just [click here.] Delivered by Email – Instantly! 

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

© 2013 Alan L. Sklover, All Rights Reserved.

Here are 10 Ideas to Guide You

“To achieve anything, you must be prepared
to dabble on the boundary of disaster.”   

–       Stirling Moss

ACTUAL “CASE HISTORIES”: Bernie was both proud and pleased when, after 24 months of extra effort, he obtained his Executive MBA in Finance. Though it was 24 months of both full-time work and part-time study, requiring time away from his family and hobbies, he was certain it would be worth it in the long run. And, too, he was fortunate that his employer covered two-thirds of the costs of tuition and books, which came to their contributing almost $70,000. 

To take advantage of his employer’s MBA Assistance Plan, Bernie had to sign a simple “Reimbursement Agreement” that required him to remain with the company for three years, so that the company would see a “return” on its “investment” in him. If he did not remain there for three years, he had to repay the $70,000. 

Bernie’s Repayment Agreement was rather standard, and read something like this: 

“(1) As a material condition to your eligibility for MBA Assistance Plan benefits  (hereafter called “Plan Benefits”), you promise that you will immediately repay to the Company all Plan Benefits you have received, or that have been paid on your behalf, if you should depart from the Company’s employment for any reason whatsoever, other than due to (a) death, (b) medically certified disability lasting more than twelve months, or (c) retirement under the Company’s Retirement Plan (which three events shall be called “Waiver Events”) within three (3) years from the last date you received Plan Benefits or Plan Benefits were paid on your behalf. 

(2) In the event of your failure to immediately repay the Company the Plan Benefits as required, other than in a Waiver Event, you will be liable for, and promise to repay, the Company for all of its reasonable legal expense incurred in its collection efforts.”

All Bernie had to do was remain with the company for three years, and the $70,000 repayment obligation would be entirely forgiven. He gladly signed, because he saw an Executive MBA in Finance, substantially financed by his employer, as entirely in his interests, and a mutual expression of confidence in his future. And his employer saw it in its interests, as well.

Fourteen months later, it didn’t seem so simple. Bernie was notified that his division was being relocated from Connecticut to Texas to consolidate operations and reduce overall costs. He was asked to relocate from Connecticut to Texas with the division. However, with two children in high school, and one in middle school, he was not keen on making the move. His wife, too, was strongly against it, as her mother was in a nursing home a few blocks away from their home, and she visited with her mother on a daily basis.

Through discussions with Human Resources, Bernie learned that, if he decided not to make the move to Texas with his division, he would be entitled to six weeks of severance. Though it seemed meager, it was, at least, something. However, he also learned that his failure to relocate would also entail his having to repay the company the $70,000 MBA assistance it had invested in him. How’s that for an unexpected “bump in the road?”

Bernie consulted us about his dilemma. His initial question was “Does my repayment duty really take effect in this situation? I mean, I’m not resigning to go work for another employer.” As is our usual role, we sought ways to assist in solving his problem. We read his Reimbursement Agreement, and found some of its wording helpful. We considered, too, other facts, events and circumstances which would be helpful in Bernie requesting a waiver of his reimbursement obligations.

With our assistance, Bernie “presented his case” to Senior Management regarding why his Reimbursement Agreement obligations should be waived. After a few weeks, and two meetings with Human Resources, Senior Management finally agreed; his repayment was waived. That $70,000 savings was surely worth the effort.

LESSON TO LEARN: It is a very good thing for everyone that employers invest in their employees. It may be by means of educational assistance, relocation assistance, loans to enable purchases of the employer’s stock, retention bonuses, emergency advances of salary or commissions, or even sign-on bonuses. And it is entirely appropriate for employers to want – and expect – to get a “return” on their “investment,” and for this reason to require written agreements that give both employer and employee a clear understanding of the terms of the employer’s “investment” and the employee’s obligations regarding it.  

But, in life, “stuff happens.” That is, unforeseen events unfold that bring about changes in circumstances that we were unable to predict, but must nevertheless respond to. That ability to predict what might take place “up the road, around the curve, and over the horizon” is not without its limits. As the old proverb goes, “Man plans, God laughs.”

Chances are you may one day sign a Repayment Obligation of one sort or another, and then be faced with a good reason to ask that your repayment be waived. If so, you owe it to yourself and your family to make that request. 

There are many good reasons upon which to support a request for a waiver of a Repayment Obligation. In fact the list is nearly limitless. And, too, there are better ways to request waiver of a Repayment Obligation. The important lesson is “If you don’t ask, you surely won’t receive.”      

WHAT YOU CAN DO: Many of our clients have been successful in getting Repayment Obligations of all kinds – including assistance for education, relocation, loans and sign-on bonuses – waived when they depart from their employers. Here are ten thoughts to guide you, as well, to that goal:   

Read the rest of this blog post »