Enforcement of Bonus Clawback Forum

[Anonymous User]

Hi everyone:

Hoping folks could weigh-in on my predicament. I left my BigLaw firm late last year to go in-house (major market). Given the timing, the in-house employer agreed to pay me my year-end bonus ($90k), contingent upon my signing a short offer letter providing that if I fail to remain employed in good standing through the end of this year, I have to cough up 100% of the year-end bonus.

Long story short, I've been less than satisfied in my current role and, after being hesitant to make the move in-house to begin with, I have been in talks with my old firm about returning. Realizing this is all conjecture, does anyone have any experience/informed view on the likelihood of my current employer actually pursuing me for the money if I were to leave before the end of the year? Seems to me the most likely options are: (i) I leave, and my disgorgement of the bonus payment is never mentioned/forgotten by all, (ii) I leave, my current employer sends me emails/demand letters/formal requests for the money back, but eventually ceases to pursue me for it or, worst of all, (iii) I leave, my current employer sends me demand letter(s) and eventually sues me for it.

It's unfortunate, because I already realized this income during the calendar year 2021, paid income taxes on it, invested it at the beginning of the year, and lost a good portion of it on account of recent market performance.

Would appreciate anyone's views! Thank you!

[Bramwell]

I’d be surprised if disgorgement applies in all circumstances. It doesn’t say “voluntary”?

If true that you’re off the hook at year end, maybe just wait a few months to December, give notice and leave on Jan 1?

[CanadianWolf]

Have you asked your former law firm for your missed bonus so that you can easily repay your obligation to the in-house company ?

Is the in-house company a client of your former law firm ?

Interesting to read of the "remain in good standing" provision as this indicates a responsibility on your part to return the $90,000 bonus even if fired from the company due to no fault on your behalf.

Without any indication from your current employer regarding their position, I think that it is safe to assume that you will be expected to repay the entire $90,000 bonus. If this company is a client of your former law firm, you might jeopardize your position at your old law firm if you fail to repay the bonus upon demand by your current employer.

If your old law firm will take you back without a signing bonus to repay your obligation to your current employer, then you should consider negotiating with your current employer regarding a repayment plan or partial forgiveness if there was a material misunderstanding or misrepresentation with respect to the duties and responsibilities of the in-house counsel position. Human Resources (HR) is almost certain to demand repayment.

[thisismytlsuername]

::goes on a forum full of lawyers::
::asks how to breach a contract::

[Anonymous User]

In-house they will almost definitely enforce it. It's probably best to just wait it out. Different scenario, but I know a few people who left big law firms recently within their signing bonus clawback period. Those who went in-house weren't asked to return the money but those who went to another firm (including returning to their prior firm) had to pay it back.

[Lesion of Doom]

Unless it is an abusive environment, I would hang in for another four months.

In addition to the clawback issue, it will look better on your resume and especially if you want to go in-house again in the future.

[Anonymous User]

::goes on a forum full of lawyers::
::asks how to breach a contract::

Not a breach of contract to quit a job…

[Dr Tobias Funke]

::goes on a forum full of lawyers::
::asks how to breach a contract::

Not a breach of contract to quit a job…

OP isn't asking how to quit, OP is asking how to quit and keep the signing bonus they promised to pay back if they quit.

[Anonymous User]

Thanks, all, for the responses. As it relates to promotional opportunities at my old firm, I think I'm going to try to move ASAP and negotiate as much as I can from my firm to take the sting out of having to repay the $90k.

[Anonymous User]

Unless it is an abusive environment, I would hang in for another four months.

In addition to the clawback issue, it will look better on your resume and especially if you want to go in-house again in the future.

If it is an abusive environment, or you have another good reason to be dissatisfied, you could potentially have a negotiated departure where they let you keep your bonus but you are bound not to make any complaints against them. I'm aware of severance situations where that was case, but it presupposes that you're willing to have a more contentious departure and that you have a leg to stand on in terms of arguing you were mistreated and that motivated your departure.

[Anonymous User]

Unless it is an abusive environment, I would hang in for another four months.

In addition to the clawback issue, it will look better on your resume and especially if you want to go in-house again in the future.

If it is an abusive environment, or you have another good reason to be dissatisfied, you could potentially have a negotiated departure where they let you keep your bonus but you are bound not to make any complaints against them. I'm aware of severance situations where that was case, but it presupposes that you're willing to have a more contentious departure and that you have a leg to stand on in terms of arguing you were mistreated and that motivated your departure.

I’m an employment attorney on the plaintiffs side and I see this issue pop up sometimes. This is not legal advice blah blah blah. Just information.

Based on practical experience, I wouldn’t cough the money up. Make them send you some nasty letters first at least. If you really want to be bold, make them sue you. So what, we are lawyers. We know that you could likely just settle for less than you owe. Or even better you can negotiate paying back a smaller portion after you get the demand letter.

It’s also probable that the company just lets it go.

[attorney589753]

I’m an employment attorney on the plaintiffs side and I see this issue pop up sometimes. This is not legal advice blah blah blah. Just information.

Based on practical experience, I wouldn’t cough the money up. Make them send you some nasty letters first at least. If you really want to be bold, make them sue you. So what, we are lawyers. We know that you could likely just settle for less than you owe. Or even better you can negotiate paying back a smaller portion after you get the demand letter.

It’s also probable that the company just lets it go.

While this advice is practical and probably true, I'll take the opposite side (and TLS will probably flame me for it). If you are intending to practice law for a while, I'd look to leave your employer on cordial terms and not engage in some "efficient breach" of a bonus contract. You made the decision and you signed the contract; also, it's always good to leave on good terms. I don't think you need to offer the money up proactively. If they ask for it back I think you can try to negotiate it down ("I did good work, stock market declined, I'm helping transition the role" etc).

[Anonymous User]

Pay back what you owe or see your rep burned to ashes. Seriously. Pennies in front of a steamroller here. Could you get out of paying it? Yeah probably. And if there's some truly egregious thing happening at this place, perhaps you try. But you think it won't make its way back to your firm? You think that won't come back to bite you down the road?