Retention Bonuses & Agreements Archives

Retention Agreement Contain a Release? If So, It Just Might Be Your Severance

Published on August 22nd, 2017 by Alan L. Sklover

“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 »

“Employer Ask You to Sign an Agreement? Ask Your Employer to Pay Your Legal Cost”

Published on September 9th, 2015 by Alan L. Sklover

“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 »

“This Contract Must Be Kept Confidential” Clause – Seven Points to Ponder

Published on July 7th, 2015 by Alan L. Sklover

“I never understood why Clark Kent was so hell bent on keeping Lois Lane in the dark.”

– Audrey Niffenegger

ACTUAL “CASE HISTORY: Many employment-related agreements contain a clause in them that say, in one set of words or another, “You agree to keep the existence of this agreement, and the terms of this agreement, confidential.” Most commonly we see such clauses in (i) employment agreements, (ii) severance agreements, (iii) retention agreements, and (iv) bonus agreements (most commonly sign-on bonuses.)

What’s the purpose of the clause? This clause is most commonly inserted into agreements when in two situations: (a) when the employer does not want other employees to know that you received “special treatment,” in fear that the other employees will want the same “special treatment,” or (b) when the employer does not want you to find out that other employees received much better treatment than you are getting, in fear you will ask for what they received. If what you received, is kept secret, then no one will know the difference.

LESSON TO LEARN: It is always best for employees to “understand the game being played,” because “Forewarned is forearmed,” “Knowledge is power,” and “It’s good to know a lawyer.” If you encounter this contract clause, you would best served if you were aware of certain points, exceptions, and possible ramifications. Here they are.

WHAT YOU CAN DO: If you encounter the “You must keep the existence of this agreement, and the terms of this agreement, confidential,” in an agreement you are given to sign, bear these seven points in mind: Read the rest of this blog post »

“Responding to a Retention Bonus Offer” – Ten Wise Steps”

Published on January 6th, 2015 by Alan L. Sklover

“All I’ve ever wanted is an honest week’s pay for an honest day’s work.”

– Steve Martin

ACTUAL “CASE HISTORIES: Jana contacted our office with an almost whimsical question: “I was just offered a bonus to stay in my job. What’s next . . . offer to pay me to keep breathing?” She honestly did not understand why her employer would pay her to stay in her job for six months, and was quizzical – and even a bit paranoid – at the same time.

In her consultation with us, we explained to Jana the two reasons why employers offer Retention Bonuses: to encourage employees to stay in their jobs either (1) during a period of heightened job insecurity, such as an upcoming merger, which makes people concerned about losing their jobs, or (2) to ensure that an important event or transaction goes smoothly, such as the closing of a large business deal or a major corporate celebration, when the employee is critical to company success. In both circumstances, the employer sees it as worth paying the employees an extra sum.

We also explained to Jana that, by its very nature, an offer of a Retention Bonus means that the employees receiving the offer are viewed as particularly valuable, and in our world that means that they might have leverage to negotiate better “rewards,” that is, higher payment, or lower “risk,” that is, less chance of not getting paid the bonus. With a little coaching, and a dose of induced courage, Jana did request both better “reward” and lower “risk” and to her surprise was successful in both requests.

Though Jana did get the Retention Bonus, her job was eventually eliminated after her employer merged with another company.

Sure was handy that Jana requested enhanced severance in exchange for agreeing to the Retention Bonus. She was the only one in her department who received extra severance. And for only one reason: she was the only one to ask for it.

LESSON TO LEARN: A Retention Bonus is exactly what its name implies: a bonus to stay in your job. For example, “We offer you (a) $25,000 (b) if you stay in your job until June 1st of this year.” By its very name and nature, such an offer says, “You are valuable to us, at least for a certain period of time.” If your employer offers you a Retention Bonus, chances are your continued presence is perceived by your employer as being significant valuable to it

Why do employers offer Retention Bonuses?: (a) to keep you on board after a merger until they decide which of the two Directors of Logistics will be kept on after the merger; (b) to keep you on board until they decide if they need you for the longer term, (c) to gain from you the critical knowledge or insight that only you have, (d) to ensure that there is a smooth transition of client relationships if and when there is a change in corporate structure or personnel, among many other possible reasons.

“Being perceived as valuable” is, in our minds, the precise definition of “having leverage” to negotiation for better terms. And for this reason, we almost always suggest that (a) Retention Bonus offers be read very well to locate hidden “trap doors” in the legal language, and (b) Retention Bonus offers be negotiated with an aim to both (i) increase what you are being offered, and (ii) decrease the chances that you will miss out on the bonus due to possibly “tricky,” unclear or evasive language.

WHAT YOU CAN DO: Here are ten steps you would be “work-wise” to take if you are offered a Retention Bonus: Read the rest of this blog post »

“How should I ask for a retention bonus?”

Published on June 5th, 2013 by Alan L Sklover

Question: The company I work for is going through a major transformation programme. I was facing potential redundancy but after an interview I have secured a role in the new structure. The new position is of a senior level and higher salary. 

I’ve been waiting for five months for the company to confirm my start date and today I was told I will be able to start the new role in January, 2014 [eight months from today]. 

Is it appropriate to ask for a retention bonus? How do I go about that?

London, United Kingdom

Answer: Dear Magdalene: If you are being asked to stay on board in your present position for eight months, during a rather “risky” company transformation, based only on a spoken (that is, not written) promise of a new position, that may or may not come to fruition, it is entirely proper and appropriate to propose a retention bonus or agreement. 

That said, retention bonuses are a bit “tricky” to navigate. They represent (a) delicate assessments of risk, and (b) sophisticated evaluations of perceived value. Nonetheless, as “the world belongs to the bold,” there is no good reason to refrain from attempting to reduce employment and career risk.   

As an initial matter, employees should always bear in mind that no one can, and no one will, take care of them at work, or protect them and their workplace rights, better than they can, or will, themselves. However, when things are “delicate,” “sophisticated” and “risky,” careful adherence and continued mindfulness to analysis are especially important. Here is my analysis:         

1. First, let’s define what we mean by “retention bonus.” It is a (a) business transaction, (b) between employer and employee, (c) in which the employee is promised a payment or something of value, (d) in return for the employee accepting an identified risk. Consider the classic scenario in which retention bonuses are offered: when two companies are negotiating to possibly merge, and as a result of the proposed merger there would be (a) two General Counsels, (b) two Chief Marketing Officers, and (c) two Directors of Sales, just as examples. After any such merger, only one of each title will be needed, and the ones not chosen to remain will then be asked to leave.

 In this situation, it is in the employer’s interests to have the time and unfettered option to decide who to retain, and who to lay off. But, is it in the employees’ interests to stay put, and not seek other employment elsewhere? Of course not. 

The idea of a “retention bonus” is “If the employee accepts a risk, and does not look for other jobs while the employer decides whether to keep the employee, the employee will be paid something for accepting that risk.” 

If the employees are not offered a retention bonus (or other arrangement), then (a) BOTH Chief Marketing Officers might find new jobs, (b) BOTH General Counsels might find new jobs, and (c) BOTH Directors of Sales might find new jobs, to the very substantial detriment of the merged company. 

Another workplace circumstance in which a retention bonus or arrangement might be suggested is when the employer has a major campaign, deal or undertaking scheduled, and wants to ensure that the employees who may be critical to the campaign’s, the deal’s or the undertaking’s success remain with the company until the matter has been completed in all respects. Because this might conflict with the employees’ plans to take a new position, relocate to a different city, or even retire, it may well be worth it for the employer to offer an inducement to those people to remain. 

2. Second, since a “retention bonus” is a kind of business transaction, we propose it as we would propose any business transaction: by laying out what would be good about the transaction for both “sides.” So many of my clients come to me and say, in one way or another: “How can I get what I want, need or deserve?” My answer is always this: “By offering to someone else, who could give you those things, what they want, need or deserve.” That is to say, negotiation is a give-and-take, and in “give and take” “give” comes first.  

Let me try to illustrate by use of an analogy: If I was to say to you, “May I have $1,000,” is it likely you would give it to me? No, of course not. But if I was to say to you, “I hear you are shopping for a 20-foot boat. I will give you my 20-foot boat, which is in great shape, if you give me $1,000,” it is much more likely I will get the $1,000 I “want, need and deserve.” You might say this is nothing more than “Sales 101,” and I would say, “Yes, and keep that in mind.” 

The lesson is this: In proposing a retention bonus or agreement to your employer, you should first emphasize (a) why it would be in the interests of the employer, and, then (b) what benefit will come about to the employer if it offers the retention bonus.  Remember that saying to your employer, right off the bat, “I want, I need or I deserve” is usually demotivating to the employer, self-defeating for the employee, and a non-starter for the proposed transaction.   

3. Third, since a “retention bonus” is a transaction in the context of the employment relation, the way you propose a “retention bonus” must take into account the various “customs, expectations and usual limits” of that relation. If the usual employee said to the usual manager “Give me a 10% bonus to stay, or I will leave tomorrow,” there is a good chance he or she would be told “Good-bye.” However, if the usual large corporate customer of a small company said, “Give us a 10% reduction in price, or we will have no choice but to buy our things from a different supplier,” the answer would probably not be a simple “Good-bye.” That is because different “customs, expectations and usual limits” – and leverage – exist in each relation. 

So, let’s look at some common aspects of the usual employment relation: 

(a) Most employees are “at will” employees, which means that either the employee or the employer may end the employment relation at any time;

(b) Most employees need the income and benefits of employment, and do not feel comfortable simply leaving one job without having another job lined up;

(c) Most employers feel like they can do without a certain employee than most employees feel they can do without a job;  

(d) Most employees are not comfortable with negotiating for themselves with their bosses; and

(e) It is undeniable that some employees do, in fact, have an extraordinary degree of leverage in that they represent extraordinary value to their employer, either in a general way, or for a specific reason or time period. 

These aspects of the employment relation suggest that each employee must (a) be prudent, (b) be proactive, and (c) in going forward with a proposed transaction at work – including a retention bonus or arrangements – carefully evaluate his or her own “special value,” what others commonly refer to as “leverage.”    

The lesson is this: In proposing a retention bonus or agreement to your employer, you should consider, observe and honor your particular need for job security and what that means to you, and, at the same time, the degree of leverage you may have in your particular situation. 

4. Understand that the usual retention arrangement provides two things for an employee: (i) a certain payment to take the risk of retention, and (ii) specified severance if the risk ends up costing him or her the job. A few years back, I represented two executives who worked for a New Jersey-based insurance company that was being purchased by a Texas-based insurance company. They were in the same position as were the General Counsels, Chief Marketing Officers, and Directors of Sales described in Section 1, above.  

They were each offered (a) a payment of $100,000 to remain with the company for up to two years, payable $50,000 when they signed the agreement, and $50,000 after two years, and, in addition, (b) if they were let go at any time within two years of the merger of the two companies, they would each be paid a full year of compensation (including salary and bonus) and benefits as severance.  

After I assisted them in their negotiations, they were additionally offered (a) accelerated vesting of all stock and stock options, (b) an assurance that their severance would be no less favorable in all respects to anyone else in their positions who was laid off within two years of the merger, (c) guarantee of all payments even if they became disabled, or died, or resigned for “good reasons” (which were defined), and (d) reimbursement of their legal expense of negotiation.  

5. I always counsel that any request or proposal made in the employment relation should be presented with “The Three R’s,” namely:  

(a) Respectfully Presented: No matter what you are suggesting, proposing or offering, in employment relations respect in communications is paramount, as it reflects the employee’s understanding and acceptance of the relative positions of strength, the employee’s duty of loyalty, and the respect to be expected to be displayed to one’s managers. I never heard of an employee being terminated, or otherwise harmed, for being respectful. By the way, I would suggest that the word “arrangement” is often viewed as more respectful than is “bonus” by many managers.  

Might I suggest that using the word “bonus” in the phrase “retention bonus” is not the best way to characterize it. Instead, might I suggest that you propose a “retention arrangement,” a “retention agreement, or a “stay arrangement.” “Bonus” can, right from the beginning, put a chill on discussions. 

(b) Reasonable in Amount: In order to be taken seriously from the beginning, you need to assess what might be viewed as “reasonable” in amount for your request. If you earn $45,000 a year, may I suggest that a request for $400,000 will make your manager simply shake her or his head in disbelief, and simply not take you seriously.  

What, then, is reasonable to propose? It is an amount (or a valued item) that makes sense in light of your own circumstances. (i) If you believe your remaining on board, and then losing your job, could result in your having to seek work for 6 months, then perhaps the value of six months of salary and benefits would be “reasonable.” (ii) If you have available to you a particular job, which promises a particular salary and sign-on bonus, and perhaps even a step-up for your career, then perhaps a proposal of one year of compensation is more suitable. (iii) Consider, too, non-monetary items such as (a) accelerated vesting of equity, (b) tuition for a career change, (c) a “bridge to retirement-eligible status,” or even (d) a very healthy severance package, inclusive of tuition for an executive MBA program, if that is of value to you. 

Note well: As noted above, the usual “retention” arrangement provides for (i) a payment for taking a risk, and (ii) specified severance if the job is later lost.   

(c) Presented with a Compelling Rationale: A rationale is the reason that supports your  request or proposal. The rationale for a retention bonus or agreement is usually simple: (i) The company has asked me to stay on, and I want to do so, but (ii) my family and other financial obligations require that I not participate in risky activities. So, (iii) if the company eliminates the risk involved, (iv) I would be happy to ensure the company of my continued presence, efforts and loyalty. 

Remember that there is nothing whatsoever wrong with being prudent, careful and planning. That’s all a proposal for a retention bonus is. And, remember, too, that “I want, I need, and I deserve” is not compelling, but just the opposite; it is demotivating to employers.   

6. When it comes to presenting a retention bonus or arrangement, this is what I recommend: It is always my preference that important communications be put into writing, so that precisely what was said, and how it was said, and to whom it was said, is crystal clear. 

Regarding retention agreements, putting your ideas into writing helps guard against the possible perception – or even mischaracterization – by others that this is an attempt at “highway robbery,” so to speak. By that I mean it is important not to give the impression of “Pay me, or I will leave you when you need me most.” 

Rather, by putting your thoughts into writing can better ensure that you include (a) acknowledgement of the validity of the  mutual concerns, (b) suggested resolution of those concerns by means of the “business transaction” commonly called a “retention arrangement,” and (c) your steadfast desire to serve your employer’s needs, (d) your openness and flexibility as to how those needs are achieved, and (e) your availability to meet to discuss the matter.  

If you are not comfortable with writing, or do not feel confident that you understand “What to Say, and How to Say It,”™ we offer a Model Letter to Propose a Retention Bonus or Arrangement. You can obtain a copy of this Model Letter, to adapt to include your own facts, events, circumstances, and goals, by simply clicking [here.]  

7. From what you have written, you do seem to be a candidate for requesting a retention bonus or arrangement. Magdalene, while I don’t know all of the facts and circumstances of your position, your industry, or your employer, from what you have written it seems to me that you may well be in a position to propose a retention bonus or arrangement:  

First, your employer is going through a transformation programme, which by itself suggests that you and your position might be eliminated, no matter what anyone has told you. In fact, it is even possible that you are being “held on the shelf” that is, lulled, until final decisions are made. Second, your employer has requested that you remain on board during this transformation, but is not willing to either discuss your new employment or its new terms, or put them into effect. Third, while the improved position and compensation do sound attractive, they are not guaranteed in any way. In fact, your continued employment is not guaranteed either. Fourth, you have been identified – and it has been communicated to you – as a person who the company wants to assume a senior role. Fifth, just as your employer must make plans for its future, so too must you.   

My suggestion is that you do, in fact, consider requesting a retention bonus or arrangement, but that you first “fold your parachute” – meaning first look into other possible positions in your industry –  just in case your request is turned down, or your “new position” does, in fact, fall through. 

Magdalene, I hope this is helpful. It is always important to both be aware of risk, but also take advantage of potential leverage. There is nothing whatsoever wrong with proposing a business transaction between employee and employer, just so long as it takes into account the employer’s perspective and needs, the delicate nature of the relation, and the realities of leverage available to you. 

Thanks for writing in from London, and say “Hi” to all of my friends and blog readers in that wonderful city by The Thames.€  

 My Best,
Al Sklover

P.S.: One of our most popular “Ultimate Packages” of forms, letters and checklists is entitled “Ultimate Non-Compete Package” consisting of six Model Letters/Memos for non-compete navigation and negotiation, as well as our 185-Point Non-Compete Guide and Checklist.” To obtain a complete set, just [click here.] “What to Say, and How to Say It.™” Delivered to Your Printer by Email – Instantly!

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© 2013 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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