“Legal-Sounding” Words Archives

Fiduciary – Key Words & Phrases

Published on May 10th, 2013 by Alan L Sklover

Key Words

What is the meaning of:

FIDUCIARY”?

Fiduciary” means “relation of utmost trust, care and confidence.” It refers to both (a) the relation of utmost trust, and (b) the person who assumes the relation of utmost trust. Fiduciaries must protect the interests of another person or organization, commonly called the “beneficiary.”

Common examples of fiduciaries include a Board Member of an organization, an Attorney for a client, a Guardian for a child or legally incompetent person, an Executor of an estate, or Trustee of a trust fund.

Trust: The fiduciary relation is the most highly trusted – and strictly scrutinized – relation there is in the law. It is so trusted and scrutinized by the law that a fiduciary must even ignore his or her own interests whenever they are in conflict or potential conflict with the interests of those served. Fiduciaries are held personally accountable to their beneficiaries if they fail to fulfill their fiduciary duties.

A central duty of a fiduciary is to avoid any conflict of interest with those for whom he or she is a fiduciary. For example, a Board Member of a not-for-profit organization should not engage in any business dealings, directly or indirectly, with that organization.

Care: Also, a fiduciary is not permitted to take unwarranted risks on behalf of beneficiaries he or she serves as a fiduciary. A fiduciary should never make risky investments, or mix his or her own monies with monies of those he or she serves.

A fiduciary must be duly diligent, watchful, protective and risk-averse, similar in many respects to the way a parent of a young child must be.

Confidence: A fiduciary must honor and fulfill a “duty to know” the important facts regarding the beneficiary’s affairs. Thus, a fiduciary cannot plead “I did not know” facts he or she should have known.

Nor can a fiduciary keep secrets from his or her beneficiaries and his or her co-fiduciaries, but has an absolute duty of candor with them. If facts pertain to the affairs of those the fiduciary serves, they must be disclosed, both to the beneficiary and to all co-fiduciaries. Thus, there can be no “secrets.”

In the employment context, “fiduciary” obligations arise when the employee is assigned the task of overseeing funds or requested to act on behalf of the interests of the employer outside the employment, for example, to represent the employer’s interests in a trade organization or on the Board of another organization.

Since fiduciaries voluntarily take on very significant obligations, it is not at all unreasonable for a fiduciary to request insurance from claims, or indemnification from lawsuits, or other protections from potential fiduciary-related claims or expenses that might arise. This is especially the case when employees are asked to take on a fiduciary role as part of his or her job. Paying premiums on a fiduciary “bond” obtained from an insurance company is the most common way this is achieved, although nothing – not the law or any insurance – will protect a fiduciary from gross negligence, willful ignorance or dishonest acts.

P.S.: If you would like to speak with me directly about this or other workplace-related subjects, I am available for 30-minute, 60-minute, or 120-minute telephone consultations. (Even 5-minute “Just One Question” calls). Just [click here.] Evenings and weekends can be accommodated.

© 2013 Alan L. Sklover. All Rights Reserved. Commercial Use Strictly Prohibited

Recoupable – Key Words & Phrases

Published on April 19th, 2013 by Alan L Sklover

Key Words

What is the meaning of:

RECOUPABLE”?

Basically, it means “capable of being taken back.”

In the employment context, “recoupable” is most often used in commission plans, bonus plans, or other compensation plans that pay employees according to their success in bringing in business or revenue. The word “recoupable” means that the Employer is permitted, even after payment
of the compensation to the employee, to demand the payment be repaid, or to withhold other monies due the employee if repayment is not made.

Here’s an example: suppose a salesperson earns a 10% commission on sales. Often the employer will provide the salesperson some money “up front” to give him or her a head start on earnings. This is commonly called an “advance against commissions,” or a “bonus advance.” If it should turn out that, after a period of time the employee does not earn all of the “advance” payments, if the “advance” is a “recoupable” advance, then the employee would have to repay the employer the amount not earned.

So, if the advance is $1,000, and the amount actually earned after the designated period of time is only $800, then the extra $200 is recoupable.

Incidentally, the opposite of “recoupable” is “non-recoupable,” which means just the opposite: any “advance” not earned is kept by the employee, and not required to be paid back to the employer.

If you are the recipient of commissions, bonuses, or other compensation, especially compensation based on financial performance, and if you are
entitled to upfront payments, usually called “advances,” make sure you ask “Are these recoupable, or non-Recoupable.” The answer is important to your financial planning and future.

© 2013 Alan L. Sklover. All Rights Reserved. Commercial Use Strictly Prohibited

Clawback – Key Words & Phrases

Published on March 22nd, 2013 by Alan L Sklover

Key Words

What is the meaning of: “CLAWBACK”?

In the employment context, “clawback” means exactly what it sounds like: “an employer taking back from the employee monies, benefits, stock or other things of value in the event certain conditions or circumstances take place.” 

“Clawback” provisions are found in many bonus plans, stock plans, benefit plans and severance plans. Recently some laws have required “clawbacks.”    

A common example of a “clawback” would be the following provision in a bonus plan: 

“If an employee receives a bonus, and within two years it is determined that he or she engaged in financial wrongdoing of any kind, while employed by the company, the employer has the right to ‘claw back’ from the employee the entire bonus paid, without any credit to the employee for taxes paid on the bonus.”

A second example of a “clawback” would be a law that provided, “A senior executive of a public company who has engaged in behavior that resulted in a restatement of earnings shall have his or her entire bonus and stock awards for five previous years clawed back in their entirety.”

A “clawback” refers to a return of monies or benefits already paid or delivered, while a “forfeiture” refers to a loss of the right to later receive the monies or benefits.                                                              

P.S.: If you would like to speak with Al Sklover directly about this or other subjects, I am available for 30-minute, 60-minute, or 120-minute telephone consultations. Just [click here.]

© 2013 Alan L. Sklover. All Rights Reserved. Commercial Use Strictly Prohibited


Alan L. Sklover

Alan L. Sklover

Employment Attorney
and Career Strategist
for over 35 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™".

Receive All Our Posts - It's Free!

Monthly Newsletter, Discounts, Events