What is the meaning of . . .

“Gross Up”?

Everyone is legally permitted to try to avoid taxes – I did not say “evade” taxes – or to pay as little as permissible, in any legal way available to them.

For employees, the most common opportunity to do so is when they incur work-related expenses that may require them to pay taxes on some of the reimbursement.

Examples may include (a) relocation reimbursement, which is now fully taxable to the employee, (b) educational reimbursement that may be partially or fully taxable to the employee, (c) entertainment or travel reimbursement that may be partially or fully taxable to the employee, especially if in excess of certain allowable limits, and (d) automobile expenses.

So, for example, if an employee is asked to move his or her residence for a year or two from Boston to Belgium, moving expenses (for themselves and their family) is considered non-deductible for them, and if the employer reimburses them for that expense, all of the reimbursement is considered income to the employee, who must pay tax on it.

Here’s another example: if your employer asks you to take courses to enhance your work skills, and the cost in one year exceeds $5,200, the excess amount, if reimbursed by your employer, is considered income to you, and you must pay tax on it. There are many other real-life examples, too.

So what’s the solution? Ask your employer to not only reimburse you for the actual expense, but to also pay you the amount you will have to pay in tax on that reimbursement. That is called “Gross Up” for tax purposes, or “Tax Gross Up.”

While it takes a little “gymnastic arithmetic” to figure out exactly how much “Gross Up” payment to you is needed to precisely “Gross Up” tax that you will have to pay, that calculation can be done by your employer, its payroll service, or your own tax advisor.

The reason that it is a bit complicated to calculate “Tax Gross Up” is that the employer should not only (a) pay the additional tax due by the employee, but (b) should also repay the employee for the new tax to be due on the original reimbursement amount, as well.

As an illustration, if the employee incurs a relocation expense of $1,000, and the employer reimburses the employee the $1,000, the employee may have to pay income tax on the $1,000 received of about $300. But wait a minute: then the employee has to pay tax on that $300, as well, which might come to yet more income tax of $90. So, the employer should also “Tax Gross Up” that amount, too. (I told you it was a bit complicated.)

So, whenever a work-related reimbursement is taxable to you as income, or you believe it may be, ask for “Gross Up” for tax purposes, or “Tax Gross Up” as it is also commonly called.

If you do so, there will be more money in your pocket after tax time, and, hey, there’s nothing wrong with that!!

Be aware. Be alert. Look before you leap. That is to say, be “SkloverWorkWise.” You will be VERY GLAD you did.

Incidentally, we offer a Model Memo titled “Request for Tax Gross Up” to send to your employer. Like all of our Model Memos and Letters, it shows you “What to Say . . . and How to Say It.”™ To get yours, [click here.] Delivered in minutes to you by email.

(Please note: This email newsletter does not constitute legal or tax advice; for such advice or counsel, you need to consult a lawyer or tax adviser. In addition, laws change, and that may include the present tax treatments noted above, and, so, reliance upon this email newsletter must take these warnings into account.)

Need a model memo or letter to transmit a request or complaint? A good checklist or form agreement? For a complete list of our Model Letters, Memos, Checklists and Sample Agreements, Just [click here.]

Interested in Membership? It’s free, and has advantages, including discounts on our products. Just [click here.]

Need a private telephone consultation? Just [click here.] Evenings and weekends can usually be accommodated.

“Your Path to Dignity at Work”™

© 2019 Alan L. Sklover All Rights Reserved and Strictly Enforced.

Be on the lookout for . . .

“Voluntary,” as in “Voluntary Departure,” “Voluntary Resignation”
or “Voluntary Waiver”

You’re quite likely to find the word “voluntary” in several work-related legal documents. If you do notice it, that word may be very advantageous to you.

Generally speaking, “voluntary” means “done on one’s own free will.” It is synonymous with discretionary, unforced and optional. In legal documents, it often suggests that the act described was not required, not coerced, and not demanded.

Let’s say that, according to your employer’s Annual Bonus Plan, you are not entitled to your annual bonus if you “voluntarily” resign before the day it is paid. What if, two weeks before bonus payment date, you resigned and left your job in fear that your boss might beat you up in one of his infamous uncontrolled rages?

Was your departure “voluntary?” I’d say no. Are you entitled to your annual bonus? I’d say yes, although I’m confident that most employers would disagree.

You have a strong, reasonable and likely winning argument that the bonus is yours, so long as you spot, appreciate and point to the word “voluntary.”

In Repayment Agreements, you might promise to repay your employer in, as examples, a Sign-on Bonus Agreement, a Relocation Expenses Policy, or a Tuition Assistance Plan if you “voluntarily” leave before two years of service. What if you left earlier than that because, all of a sudden, your salary was reduced by 40%, and your family likes to eat three meals a day? (Some kids demand 4 or 5!!)

Is feeding your hungry family “voluntary?” I’d say No. Was your departure to take a better paying job truly “voluntary?” I’d say No. For this reason, you have a very good, and probably winning, basis to argue, with likely success, that your repayment is not required.

So, in this circumstance, too, you may very well not have to repay any sign-on bonus, educational assistance, etc., so long, that is, as you spot, appreciate and raise in your defense the word “voluntary.”

The same goes for whether a Non-Compete Agreement is valid or void, according to its own words. If the non-compete says it is valid if you “voluntarily” leave your job, and you can show that you are allergic to the new paint used throughout the office, then it is void as to you, so long, that is, as you spot, appreciate and raise the word “voluntary.”

There are many other legal documents that may contain the word “voluntary.” Look for “voluntary” in any and every workplace document, whether in an agreement, a company policy, an Employee Handbook, Stock Award, or other document.

You may be VERY GLAD you did.

Need a model memo or letter to transmit a request or complaint? A good checklist or form agreement? For a complete list of our Model Letters, Memos, Checklists and Sample Agreements, Just [click here.]

Interested in Membership? It’s free, and has advantages, including discounts on our products. Just [click here.]

Need a private telephone consultation? Just [click here.] Evenings and weekends can usually be accommodated.

“Your Path to Dignity at Work”™

© 2019 Alan L. Sklover All Rights Reserved and Strictly Enforced.

“I busted a mirror and got seven years bad luck, but my lawyer thinks he can get me five.”

– Steven Wright

ACTUAL “CASE HISTORY”: Charlene, a furniture designer, had been with her employer for seven years. She was happy in her job, was well-liked, and quite productive. Her job was a short commute from home, and her manager was family-friendly. All was good.

One morning she received an email from the Human Resources Director, addressed to all of the company’s 150 employees, advising them that the company was updating all of its employment practices, and for this reason all employees were required to sign an updated “Confidentiality and Inventions Agreement” to safeguard the company’s trade secrets and proprietary information. (Rumor had it that a private equity firm might be interested in buying Charlene’s employer, and it was for this reason that a new, revised Confidentiality and Inventions Agreement was being required.)

The agreement was six pages long and contained a lot of complicated legal language. Charlene thought she understood it, but there was a lot “legalese” in it. She considered having our firm review it with her, but knew it would cost her a consultation fee of hundreds of dollars. When she called, she mentioned the unfairness of her employer requiring her to pay to review a document that they needed, not her.

We suggested she simply ask for the cost to be reimbursed. Sure enough, she did. After a few emails back and forth, her employer agreed to treat it just like any other business-related expense. Charlene was pleased. We were pleased, and now we suggest all employees in this situation do so. You never know. Sure is worth a shot.

LESSON TO LEARN: If you don’t ask, you won’t get. So long as any workplace request has the “Three R’s,” that is, it is (i) Respectfully presented, (ii) Reasonable in what is sought, and (iii) is based on a sound and logical Rationale, there really is no downside to making it.

The logic is simple: When someone wants something from you, and even moreso when they need it, there is nothing wrong with asking for something in return, especially the amount of money it will cost you to provide it for them.

Who knows? You might just get what you want. In this context, your chances are pretty good. Why not give it a try?

WHAT YOU CAN DO: In most – but not all – workplace instances of your employer asking you to sign an agreement, consider asking, in return, before you sign the agreement, that your employer agree to reimburse you the cost of an attorney’s review and consultation. Here are some tips in doing so:
Read the rest of this blog post »

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?

Rachel A.
Philadelphia, Pennsylvania

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 12-minute Sklover-On-Demand Videos. 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,
Al Sklover

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.

Question: My employer has a “claw-back” agreement that extends 24 months beyond my repatriation from my expatriation in China.

While the items to be repaid are defined in the agreement, there is no dollar figure associated with any of these items. Is this still enforceable?

Lee
Shanghai, PRC

Answer: Dear Lee: The simple answer is “Yes,” but the best answer is “Yes, But.” Please remember that difference while I explain:

1. It is not at all unusual to find a financial obligation described in words without a corresponding amount set forth next to it. This is most often the case because, at the time that the agreement is written, the amount of the obligation has not been determined.

As one example, if your employer is entitled to “claw back” from you the value of any stock grant given to you if you should leave the company within 24 months of your repatriation, at the time of the agreement no one might have known the value of any such stock grant to be made.

As another example, if the “claw back” is for commissions paid during a certain calendar quarter, or relocation expense, the amount of such commissions or the amount of the relocation costs might not be known at the time of the signing of the agreement.

Look Before You Leap!! Get a copy of our 138-Point Master Guide and Checklist for Employees Contemplating Expatriate Assignments. Everything you forgot to ask about, and for, and then some! To obtain a copy, just [click here.] Delivered by Email – Instantly!

2. In fact, every lawsuit and arbitration has two phases: (i) first, it is determined whether or not a debt or obligation is owed; (ii) then, and only then, is it considered how much that debt or obligation might amount to. Lawyers and Judges call these two distinct stages of litigation (i) the “liability” phase, and (ii) the “damages” phase. And, as might be expected, the “liability” phase of a lawsuit involves “words,” “ideas,” and “concepts,” while the “damages” phase of a lawsuit requires numbers, calculations and simple arithmetic.

Let’s say your car and another car collided. The first question is “Whose driving caused the collision?” The second question is “How much – if anything – does the driver at fault have to pay the faultless driver?”

And in lawsuits or arbitration, it is often more difficult for a jury or an arbitration panel to decide the “damages” (or amount to be paid) than it is to decide the “liability” (or whether or not any obligation exists in the first place.)

3. Remember that, above, I said “The best answer is ‘Yes, but’?” Well, this is why: There are many defenses to “claw back” agreements, in fact, many more than you might imagine. In the law, we have what are technically called “Affirmative Defenses.” This means, quite simply, (i) “YES, I signed that agreement, (ii) BUT there is a good reason (or good reasons) I should not have to pay those monies back.” Hence the title “(i) Affirmative (ii) Defenses.”

Here’s a few of the many, many “affirmative defenses” that may be available to you: (i) YES, I agreed to pay the money back if I resigned, BUT I was really laid off and Human Resources let me tell people it was a resignation. (ii) YES, I did sign the agreement, BUT the reason I resigned was that I was almost raped by my supervisor one evening at the office. (iii) YES, I did agree to repay that money if I left the company, BUT the company required I work in China and my daughter’s asthma doctor told us she could die if we remained in China, so surely I couldn’t do that.”

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! 

4. By the way, although “claw back” and “repayment” are actually different, they are commonly used interchangeably. Technically speaking, “claw back” refers to “taking back” a payment of money made to you, such as (i) bonus, (ii) commissions, and (iii) leave of absence payments. Technically speaking, “repayment” refers to “reimbursement” of monies paid not to you, but paid to someone else on your behalf, such as (a) relocation costs, (b) tuition reimbursement, and (iii) your legal fees related to, for example, immigration issues.

That said, these days almost everyone uses the two terms interchangeably, and you should not be concerned if you or others use them incorrectly in a technical sense. To my mind, the ultimate test of word use is overall communication not technical accuracy.

5. In my experience, almost every employee has one or two good “Affirmative Defenses” to repayment obligations and, in any case, there is no downside to seeking either forgiveness or negotiated settlement. Claw backs and repayment obligations are good examples of how very “negotiable” employment and employment-related matters are. Employers do not want to spend many thousands of dollars to collect a rather small sum. Nor do employers want to let it get around that employees can – in fact – defeat collection efforts. And, too, some employers understand that you might one day be a prospective customer. This is one area in which I have found employers often negotiate or waiver in their efforts against employees much easier and more quickly than in many other situations.

Lee, thanks for writing in. I hope your employment transition is a smooth one, and that you consider challenging your possible – but not definite – claw back obligation.

My Best to You,
Al Sklover

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.