Am I Obligated IF . . . Archives

“Claw-back: If no amount is stated, is it enforceable?”

Published on July 16th, 2014 by Alan L Sklover

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?

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.

“Repayment Obligations When Leaving a Job – How to Get Them Waived”

Published on July 30th, 2013 by Alan L Sklover

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 »

“If my employer aborts my relocation, do I still have to reimburse it if I leave?”

Published on December 21st, 2011 by Alan L Sklover

Question: I have worked for a bank in Austin, Texas (my hometown) for five years. A year ago they offered me a promotion that involved relocation to New York City, which I jumped on. In April, 2011 I signed the bank’s standard “Relocation Expense Reimbursement Agreement.” It covers actual costs of relocation, including any stays in hotels.

The Relocation Expense Reimbursement Agreement provides that if I voluntarily leave working for the bank before 24 months, I have to reimburse them 100% if I leave within 12 months of the relocation, and 50% if I leave after 12 months, but before 24 months, that is, to April, 2013.  

I moved to New York and was there for several weeks, living in a hotel, which cost almost $15,000, when the bank decided that it would rather have me relocate to Idaho. So, in November, 2011 for the move from New York to Idaho I was required to sign a second Relocation Expense Reimbursement Agreement, this one lasting to November, 2013.

So, here I sit with two signed Relocation Expense Reimbursement Agreements, and two very expensive relocation bills. When I recently spoke to my Human Resources representative, she told me, “Both agreements remain in force.” She agreed to elevate the question to the Head of HR, and came back with the same response.

Can this be? If I decide this bank is not for me, do I really have to pay the bank back for both moves?

Austin, Texas

Answer: Dear Shannon: What you describe is an example of “The agreement made sense originally, but doesn’t make sense now.” What you are really faced with is a circumstance that no one thought about when the agreement was written and signed.            

1. By the precise words of your two Relocation Expense Reimbursement Agreements, you will owe the monies for both agreements if you leave. If anyone reads your first repayment agreement, and then hears that you left the bank, they would say, “A simple reading of the agreement says you owe the bank the reimbursement.” However, we do not read agreements in a vacuum; rather, we read agreements taking into account other circumstances, especially new circumstances. And when those new circumstances came about by the decision of one of the parties, the other party is usually excused from his or her “performance.”      

2. However, a very good argument exists that, while there was no “expressed” provision that said “If the bank has you move away from New York, you don’t have to repay,” there was nonetheless such an “implied” provision in your reimbursement agreement. It is implied in every agreement, whether or not related to employment, that if one party materially changes the circumstances making the other party’s “performance” difficult, if not impossible, that may “forgive” the other party’s performance.

Let me give you a made-up example: Bob and Joe agree that Bob will paint Joe’s car blue for $100 by Tuesday, or pay a penalty of $50 per day for the delay. On Monday, Joe drives his car to an unknown location, and won’t tell Bob where it is. Surely Bob is excused from the penalty, because Joe acted on his own to make performance impossible. 

From my experience with agreements, and employment agreements, in particular, I believe there was implied in your Relocation Expense Reimbursement Agreement a clause that should have said: “If the bank moves you away from New York for its own purposes, you will not have to reimburse the bank for its moving you there in the first place.” It’s just that neither you nor the bank thought of that possible circumstance when it was given to you to sign.

3. Because the bank aborted your relocation, and moved you away from New York for its own purposes, common sense dictates that the agreement does not cover that situation, and therefore does not require you to repay those monies. Shannon, I have reviewed and negotiated many relocation reimbursement agreements over the past 30 years. I don’t think I ever thought to put such a provision into one, and I can’t fault you or the bank for not catching that possible circumstance, either. It’s my expectation that the first of the two Relocation Expense Reimbursement Agreements you signed would not be enforceable for this very reason.

4. Why not reach out – in writing – either to the Head of HR, or even to the Bank CEO, for a confirmation of my common-sense belief that the first reimbursement agreement is not effective. Frankly, I think you are dealing with a lower-level HR representative who is uncertain of what to do, so she is not doing anything. In a respectful email, I suggest you reach out to the Head of HR, yourself, or perhaps even the Bank’s CEO, for confirmation that the first agreement is not going to be held against you. Though it is “going over the head” of someone, I think it is entirely justified and reasonable that you do so.

5. It seems the bank wants to keep you; if so, they would likely want to keep you feeling that you’re being treated fairly, too. Being chosen for promotions and relocation is a sign you are viewed as a valuable employee. A Relocation Expense Reimbursement Agreement is meant only to prevent the bank from investing in you, and not being able to enjoy the return on its investment. Your move to New York was the bank’s decision, and apparently the bank’s mistake, and should not be something that you are held accountable for. I am fairly confident that you’ll find the bank actually agrees with that, even if it means going to the Head of HR, the CEO, or perhaps even the Board of Directors. Common sense almost always wins out.

6. That said, you may end up needing the assistance of an attorney. I do expect you will be successful by the “informal” approach above. If that does not work, you may need to have an attorney assist you in correcting this problem.

You can locate an experienced employment attorney from the Legal Services section of our blogsite by simply [clicking here.]

Shannon, I suggest you be proactive, and go “higher up” to get peace of mind on this issue. You surely deserve it. I hope you will let us know how your attempt to do that meets with  success.                                                                                                 

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!

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

© 2011 Alan L. Sklover, All Rights Reserved.

“Can I be forced to repay commissions I never received?”

Published on October 25th, 2011 by Alan L Sklover

Question: Can my employer take commissions away from me that were paid to another sales representative prior to me even working for the company?

This is the situation: my employer is clearing up old debts, and writing them off before the end of the year. Each territory will be responsible for the commissions already paid even if you were not the person who was paid the commission. This seems very unfair to me since I never got the money in the first place.

Thanks for your help.

(City and State Not Listed)

Answer: Dear Melissa: While on the surface, the answer to your question seems quite simple, it may not be as simple as it seems.     

1. While what is happening to you sure feels unfair, feelings don’t matter: what was agreed previously by you and your employer, if anything was agreed, is what matters. So very often I am presented with situations – like yours – that makes my blood boil, but the “feelings” don’t matter so much as what was agreed to by you and your company. That is the first place to start. Courts say, in effect, “Hey, it’s not for us to decide what is fair, if the employee and the employer previously agreed on what they thought was fair.” So, was anything agreed?

2. The next step is this: is there any written document that shows what you and your employer decided was fair? Employees and employers sometimes decide what is fair in a written document, and that is the kind of evidence we all – including courts – would like to see first. Such written documents may be: (a) an employment agreement; (b) a “welcome aboard” or “offer” letter; (c) a commission plan or agreement that you indicated, by signature or email, was acceptable to you; (d) a company policy book that you agreed to abide by; (e) an Employee Handbook that you confirmed receiving; or (f) something else in writing, even an email. Consider asking Human Resources in an email something like “Did I ever agree to repay monies I never received? If so, was it in writing? If so, can I have a copy?” That’s one place to start.   

3. Read your company’s Commission Plan especially carefully. It is possible that the wording of your company’s Commission Plan, which you agreed governed your commission payments, did say that “a territory is responsible for repayment at a later date.” If so, then it is a bit “gray,” as it said “a territory” and not “you” or “the sales representative for that territory.” And, to my mind, if this is what the Commission Plan says, that “grayness” is still in your favor, because in law, there is a legal principle that says, in effect, “If something is not clear, then it is interpreted against the interests of the drafter, as almost a penalty for being sloppy.” And, too, if it is not “crystal clear” that you understood this provision, then odds are you would not be legally bound to it.   

You might want to quickly read an article I wrote entitled “Commission and Sales Bonus Plans – Read Them or It Will Cost You” by clicking on that title. 

4. If neither you nor HR can find any agreement in writing, consider whether it was agreed to in spoken words; even spoken agreements can be enforceable. Though it is hard to establish if something was agreed to in a spoken conversation, and even harder to determine the precise details of a spoken conversation, sometimes it is possible to do so by, for example, witness, tape recordings or subsequent confirmation in writing.

5. If you did not previously agree to repayment of monies you never received, either in writing or in conversation, then your employer cannot take from you monies you never agreed to pay or repay. The law is quite clear that you must be paid what you have earned. Not less, and surely not less because someone else was paid it. I suggest that, if this is the case, you have a respectful conversation about what happened, and using this information, respectfully request you be paid all you have earned, and not less.

We also offer a Model Letter entitled “Memo Requesting Monies Not Yet Paid by Present Employer.” To obtain a copy [click here].

A thought: You did not mention in your email in what state you live. In most states, the law would provide you with six (6) years to sue on a debt due you; you might consider waiting until either you leave, or it’s “the right time” to make such a request, if you truly fear negative repercussions.

Melissa, it’s hard enough to earn money these days; you should never have to repay money that you never received in the first place . . . unless, of course, you agreed to do so.  

Sorry for your difficulty. I truly hope this helps. Thanks for writing in; please help us by telling others of our blogsite.   

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.

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

Published on September 22nd, 2011 by Alan L Sklover

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.

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™".

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