“Guaranteed” Comp?. . . Likely an Illusion

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“The large print giveth and the small print taketh away.”
– Tom Waits

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Be Skeptical of the word “Guaranteed” − After recruitment discussions, clients often call and report that they have been offered “guaranteed” bonus, “guaranteed” severance, perhaps “guaranteed” profit share, equity vesting or commission payout. I’m always a bit skeptical, and often respond with “Well . . . let’s see what the ‘fine print’ says.”


─ “Guaranteed” bonus . . . even if the “At Will” employee is terminated the month, the week or even the day before bonus payments are distributed to others? Not likely.

─ “Guaranteed” commission rate . . . even if Management elects to exercise its “sole discretion” given it by the Commission Plan to lower commission rates? Improbable.

─ “Guaranteed” annual “all in” comp for a calendar year. . . even if your team’s annual revenue production has cratered below expectations? Chances are slim.

─ “Guaranteed” severance even if your employer’s lawyers claim that you violated some arcane Company policy, and are thus being discharged for “Cause?” Do not bet on it.

─ “Guaranteed” profit share when the words “profit” and “share” are not defined. Dubious at best.

Need I say more? I expect not.

The word “Guaranteed” is comforting, assuring, calming, composing. Like the comedian Bob Hope used to say, “I don’t even like money . . . it just calms my nerves.” Employers’ lawyers almost always incorporate hidden or disguised “trap doors” and “wiggle room” into Compensation Agreements, Offer Letters, Compensation or Equity Plans and other workplace documents . . . even Employee Handbooks.

1. When you read “Guaranteed,” think “Guaranteed Unless.” − In employment and compensation agreements, contracts and offer letters, the word “Guaranteed” needs to be read as “Guaranteed Unless . . .” and the “unless-es” need to be identified, narrowed and perhaps removed or overridden. That’s because trap doors, loopholes and “wiggle room” are often viewed as the “art” of lawyering, most especially when compensation is involved. And that is not a criticism of lawyers; I think it is their job to do what they can to promote their clients’ interests.

2. Then try to Minimize the Number and Effect of the “Unless-es” − Once risks are identified, they can be minimized, or even eliminated, in several different ways, limited only by your perception of value to employers and your (or your lawyer’s) creativity. Among those ways are (i) outright elimination of the “trap door” clauses, (ii) replacement of the word “may” with the word “shall,” (iii) suggesting alternative rewards that are to be provided if the so-called “guaranteed” comp does not materialize, (iv) requesting “no less favorable treatment” to that provided to higher-ups, even (v) penalty provisions to “de-motivate” those who may be inclined to view the word “Guaranteed” unfairly.

3. Remember the “Three R’s” of making any Request – Remember that “Request” starts with “R,” and thus needs to be made with (a) Respect, (b) Reasonable “Ask,” and (c) presented with a Rationale that makes simple sense.

4. What’s the Wisdom? – The insight is this: Remember to (i) read “Guaranteed Unless” when the singular word “Guaranteed” is found, and then to (ii) devote your attention to the “unless-es” of the agreement or document, and finally, to reduce or eliminate the risk.

Our Insight is Your Advantage. That we can comfortably guarantee you.

In Summary . . .

Be prudent. Avoid disappointment. Trust, but verify. Look before you leap. When you are told that any of your employment compensation is “guaranteed,” take a breath, take a break, and when you can, look for the “trap doors,” conditions, limitations, exceptions, definitions, employer’s “sole discretions,” and similar ways “guaranteed” can become “disappointed.”

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SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work. Negotiation and navigation of work and career issues requires that you think “out of the box,” and build value and avoid risks at every point in your career. We strive to help you understand what is commonly before you – traps and pitfalls, included – and to avoid the likely bumps in the road. Recognizing that, in reality, little is “Guaranteed” in employment and compensation agreements, even if that word is used, can only then free you up to do what you can to get as close to “Guaranteed” as possible.    

Always be proactive.  Always be creative.  Always be persistent.  Always be vigilant. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment “rewards” and eliminate or reduce employment “risks.” That’s what SkloverWorkingWisdom™ is all about.

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Please Note: This Email Newsletter is not legal advice, but only an effort to provide generalized information about important topics related to employment and the law. Legal advice can only be rendered after formal retention of counsel and must take into account the facts and circumstances of a particular case. Those in need of legal advice, counsel or representation should retain competent legal counsel licensed to practice law in their locale.

Sklover Working Wisdom™ is a trademarked newsletter publication of Alan L. Sklover, of Sklover & Company, LLC, a law firm dedicated to the counsel and representation of employees in matters of their employment, compensation and severance. Nothing expressed in this material constitutes legal advice. Please note that Mr. Sklover is admitted to practice in the State of New York, only. When assisting clients in other jurisdictions, he retains the assistance of local counsel and/or obtains permission of local Courts to appear. Results obtained by some clients have no bearing on results obtained by other clients. Copying, use and/or reproduction of this material in any form or media without prior written permission is strictly prohibited. All rights reserved. For further information, contact Sklover & Company, LLC, 45 Rockefeller Plaza, Suite 2000, New York, New York 10111 (212) 757-5000.

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