Employer Holdback?s Archives

“Give 90 days resignation notice or repay bonuses – Is that legal?”

Published on July 29th, 2014 by Alan L Sklover

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.

“Can an employer just ‘hold back’ money it claims it is owed by an employee under a ‘claw back’ provision?”

Published on May 23rd, 2010 by Alan L Sklover

Question: Hi, Alan. My husband signed an offer letter in November, 2009 from his present employer. He started in January of this year.

The offer letter contained a paragraph that said that he would have to sign a “clawback” agreement which would require that, if my husband left the job, he would have to pay back to the employer the fees it paid to a recruitment agency. The offer letter did not provide any specifics, such as how long he would have to stay on the job to avoid having to repay those fees, or how much those fees were.

In January, when my husband started work, he was given the “clawback” agreement to sign. It said that if he left for any reason for two years, he would have to pay back 100% of the agency fees, which are a lot of money. My husband was very reluctant to sign the “clawback” agreement, and simply said “No, I won’t sign that.” 

Now, five months later, it turns out that the employer was not truthful about the job, and their management style is clearly not compatible with my husband’s way of doing business. He decided to resign, and gave them one month’s notice.

Now the employer is insisting that my husband pay back the agency fees, and that if he does not do so, they will deduct that amount from other monies they owe him.

Does the offer letter bind my husband to repay the monies, even though it did not say how much, when, or other specifics, and he never signed the “clawback” agreement?

         South Africa

Answer: Leverne, your husband’s dilemma is an interesting one. Unfortunately, the “answer” is not simple. However, let’s do our best; I think he’s in pretty good shape. (You know, of course, that I am not licensed to practice law in South Africa.) 

1. Material Terms Must Be Known: First, as a general rule, a person cannot be bound to honor the terms of a contract if the “material terms” of that contract were not made available to him or her when he or she signed it.

Imagine that you sign a contract to buy a house; can the homeowner later tell you the price is $1 billion? I don’t think so; that would not be enforceable.

On the other hand, not every detail of an agreement can be inserted into a contract. Thus, if you agreed to buy a house, and one brick in the foundation was cracked, is that enough to cancel the deal? No. That detail would not be considered “material” enough to break the deal.  

2. Breach of Contract by One Party Frees the Other:  Second, as a general rule, if one person dishonors his or her obligations under a contract, the other person is not required to honor his or hers.  If the company never came through with the material aspects of the job he was promised and expected, then that, too, would release him from having to pay the “clawback.”

Imagine if the buyer of a house did not pay the purchase price; surely, the seller would not have to hand over the deed.

3. A Party Does Not Have to Perform a Contract He Was Tricked Into: I don’t know all of the facts, events and circumstances of the recruitment, the job offer, or the job, but if they seem to make out a case that your husband was “tricked” into taking the job, then what we lawyers call “fraudulent inducement,” may release your husband from having to fulfill any obligations he had agreed to, presuming, of course, he knew the material terms of those obligations.

Imagine if you agreed to buy a house, and it turned out the seller did not really own it, surely you would not have to pay the purchase price.

4. “Self-Help” is Frowned Upon; Local Labor Dept. May Help: Finally, the law generally frowns upon parties taking it upon themselves to “take” money they claim is due them without first going to court to prove that. If people did that, we would have a lawless society (and, besides, what would all the judges and juries then do with their free time – just kidding). I believe you would have a very good basis to get local Labor authorities to assist your husband in collecting his monies, taken without his permission, as the employer engaged in a “Self-Help” measure.

I suggest that your husband write a letter to his employer’s Board of Directors, or owners, or President, and express in his own words what we reviewed above. The letter should be sent in a “verifiable” manner, such as Federal Express and/or email, to prove its delivery. That letter should say the company (1) never told him the amount he would have to pay, (2) failed to honor its own commitments, (3) may have “tricked” him, and (4) is violating the law by taking money without a legal right to do so. The letter should be respectful. I think that might “do the trick.”

If it doesn’t, my suggestion is you contact your local Labor Department and request their assistance in collecting wages and benefits earned, but taken away from your husband illegally.

Last, you might consider meeting with a local attorney to review these thoughts. I’m hoping that this does not become necessary, because your husband is on the side of “right,” and you now have some good leverage to stand up. The letter to the Board would serve as proof that he acted in good faith, and they did not, which is always helpful if and when you go to court.

I’d love to hear from you on how things go. Hope this has been helpful. If it has, I’d appreciate it if you told other South African citizens about our blog.

          My best, 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!

©  2010 Alan L. Sklover, All Rights Reserved.

“My former employer took money out of my bank account. Is that legal?”

Published on July 31st, 2008 by Alan L Sklover

Question: I was an exempt, salaried employee. When I resigned my job, I gave notice of one month prior to leaving, in accordance with policy. It’s been two weeks since I left, and I was just advised that HR has begun an “investigation” of me. As a result, they have withheld my last paycheck, as well as my accrued-but-unpaid vacation pay. Most disturbing is that they actually went into my bank account and took back my last paycheck. Is that legal?

Luanne, from Tacoma, WA

Answer: I am not experienced in banking law; nor am I qualified to discuss the laws of the State of Washington. However, I can share with you my experience in these matters, and the lessons I have drawn from those experiences.

I have many times seen what has happened to you happen to other employees, in several states. That is, many times I have seen employers who pay their employees by means of “direct deposit” into their employees’ bank accounts, later turn around and withdraw from those employees’ bank accounts without authorization. I have seen these later withdrawals take place weeks, and even months, after the original payroll deposit was made. I have seen this take place with regard to (a) severance monies, (b) bonus monies, and (c) payroll monies. Each time, the employer claimed that the withdrawn monies had been “deposited in error.”

Is it legal? I believe it is probably legal for an employer to withdraw monies from an employee’s bank account that were truly deposited in error, such as two paychecks in one pay period, or two bonuses when only one bonus was earned.

However, I believe it is probably illegal for an employer to engage in “self-help” measures, by withdrawing monies that were deposited correctly, but now the employer believes it would like to take those monies back to reimburse itself for other items it claims it is owed. For example, it would be illegal for you to break into your neighbor’s house, and take money from his wallet just because he failed to return your lawn mower. That is what lawyers and courts call “self-help,” and it is frowned upon. Just think about it: you may be wrong that your neighbor didn’t return your lawn mower; maybe he put it in your garage. In the same way, if an employer believes you stole $1,000 from petty cash, it should not take $1,000 from your bank account; it should either call the police, or sue you; after an investigation, or a trial, it may just turn out that your employer may have been wrong.

It is for this reason that I urge all of my clients to take this precaution: if your employer direct-deposits monies into your bank account, make sure that bank account is always nearly empty; immediately remove all of the monies that go into that account into an account at an entirely different bank. Always do this, even in “happy” and “peaceful” times, for they could become “unhappy” and “adversarial” in “the blink of an eye.”

I don’t know all of the facts of the “investigation” you refer to, but if you believe your employer took monies that were not truly “deposited in error,” I strongly suggest you contact the Washington State Department of Labor and Industry. Their website is www.LNI.wa.gov. On their website you will find the forms to file a complaint. You might want to call them instead; their number is 1-800-547-8367. Even though you are an exempt, salaried employee, you should have them on your side.

Don’t be intimidated. Don’t be a victim. Stand up for what is right. You’ll be glad you did.

Best, 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!

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