Ethics of "bonus payback" when quitting a job

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Topic Author
coalcracker
Posts: 485
Joined: Sat Feb 04, 2012 12:25 pm

Ethics of "bonus payback" when quitting a job

Post by coalcracker » Tue Jul 30, 2019 12:14 pm

My father gave notice that he will be quitting his job in November 2019. Per the language of his contract, he is required to payback the entirety of a bonus (low-mid 5 figures) which was distributed end of 2018, if he leaves the position anytime in 2019. He inquired about paying back a portion of the bonus given he is working most of 2019, but this request was denied.

He works for a subsidiary of a large regional corporation (20,000+ employees), and he would be required to pay the bonus back to "the corporation." When speaking with the HR representative at his offices, he was told something to the effect that the rep would be very surprised if the corporation would pursue repayment if he decided to not pay it back *winkwinknudgenudge*. He was surprised and a bit taken aback.

Would you consider delaying the payback until if/when corporate comes a-knocking at some point in the future? Legally, if they call his bluff, he will need to pay back per his contract. But the amount of money is nothing to sneeze at, and he will have "earned" at least some of the bonus by working most of 2019.

p.s. I can give more details in necessary, but would like to keep it vague to protect anonymity.

Edit: Staying until 1/1/2020 is not an option. His future employer needs him before that time, and is unwilling to let him stay the year.
Last edited by coalcracker on Tue Jul 30, 2019 12:24 pm, edited 2 times in total.

anonenigma
Posts: 736
Joined: Thu Apr 21, 2011 11:58 pm

Re: Ethics of "bonus payback" when quitting a job

Post by anonenigma » Tue Jul 30, 2019 12:19 pm

Delay departure to 1/1/20?

Topic Author
coalcracker
Posts: 485
Joined: Sat Feb 04, 2012 12:25 pm

Re: Ethics of "bonus payback" when quitting a job

Post by coalcracker » Tue Jul 30, 2019 12:21 pm

anonenigma wrote:
Tue Jul 30, 2019 12:19 pm
Delay departure to 1/1/20?
Unfortunately (or fortunately) he took a position elsewhere and they need him ASAP. November was the earliest his current employer would let him leave.

renue74
Posts: 1775
Joined: Tue Apr 07, 2015 7:24 pm

Re: Ethics of "bonus payback" when quitting a job

Post by renue74 » Tue Jul 30, 2019 12:21 pm

anonenigma wrote:
Tue Jul 30, 2019 12:19 pm
Delay departure to 1/1/20?
+1 . I would hang on for the last couple months for that $.

Tell the new employer the situation...that a large bonus is at stake.

JBTX
Posts: 5536
Joined: Wed Jul 26, 2017 12:46 pm

Re: Ethics of "bonus payback" when quitting a job

Post by JBTX » Tue Jul 30, 2019 12:22 pm

I could speculate but I'd probably consult an employment lawyer.

Personally I wouldn't pay for it back if they never ask for it.

User avatar
greg24
Posts: 3702
Joined: Tue Feb 20, 2007 10:34 am

Re: Ethics of "bonus payback" when quitting a job

Post by greg24 » Tue Jul 30, 2019 12:22 pm

If his contract stipulates repayment if he leaves, it would be unethical to attempt to avoid repayment.

dcabler
Posts: 1138
Joined: Wed Feb 19, 2014 11:30 am

Re: Ethics of "bonus payback" when quitting a job

Post by dcabler » Tue Jul 30, 2019 12:25 pm

If it were me, I would be to do nothing till they ask. They may never ask. Downside is if they do at some later date, and you comply, you'll probably end up having to file an amended return.

User avatar
HomerJ
Posts: 13401
Joined: Fri Jun 06, 2008 12:50 pm

Re: Ethics of "bonus payback" when quitting a job

Post by HomerJ » Tue Jul 30, 2019 12:26 pm

greg24 wrote:
Tue Jul 30, 2019 12:22 pm
If his contract stipulates repayment if he leaves, it would be unethical to attempt to avoid repayment.
Yep. He needs to pay it. He took the other job. He should have asked the other job to make him whole.

If he made the decision that the new job was worth it to lose the bonus, then he should live with that decision.
The J stands for Jay

Trader Joe
Posts: 1269
Joined: Fri Apr 25, 2014 6:38 pm

Re: Ethics of "bonus payback" when quitting a job

Post by Trader Joe » Tue Jul 30, 2019 12:27 pm

coalcracker wrote:
Tue Jul 30, 2019 12:21 pm
anonenigma wrote:
Tue Jul 30, 2019 12:19 pm
Delay departure to 1/1/20?
Unfortunately (or fortunately) he took a position elsewhere and they need him ASAP. November was the earliest his current employer would let him leave.
The expected loss of a bonus should have been negotiated with the new employer, typically as a sign-on bonus. In all scenarios I would pay the bonus back. Best of luck.

JBTX
Posts: 5536
Joined: Wed Jul 26, 2017 12:46 pm

Re: Ethics of "bonus payback" when quitting a job

Post by JBTX » Tue Jul 30, 2019 12:29 pm

I would think a claw back provision of an already paid performance bonus, for a prior period, on an employee would be legally problematic. But I'm not a lawyer. I would definitely talk to one.

Topic Author
coalcracker
Posts: 485
Joined: Sat Feb 04, 2012 12:25 pm

Re: Ethics of "bonus payback" when quitting a job

Post by coalcracker » Tue Jul 30, 2019 12:32 pm

Trader Joe wrote:
Tue Jul 30, 2019 12:27 pm
coalcracker wrote:
Tue Jul 30, 2019 12:21 pm
anonenigma wrote:
Tue Jul 30, 2019 12:19 pm
Delay departure to 1/1/20?
Unfortunately (or fortunately) he took a position elsewhere and they need him ASAP. November was the earliest his current employer would let him leave.
The expected loss of a bonus should have been negotiated with the new employer, typically as a sign-on bonus. In all scenarios I would pay the bonus back. Best of luck.
Yes this was an error on his part to not negotiate with the new employer.

milo minderbinder
Posts: 40
Joined: Fri Apr 20, 2018 12:57 pm

Re: Ethics of "bonus payback" when quitting a job

Post by milo minderbinder » Tue Jul 30, 2019 12:32 pm

He can still try to ask the new employer for the make up sign on bonus though he would have had more leverage before accepting. I would also make the old employer forcefully ask for payback before complying.

barnaclebob
Posts: 3964
Joined: Thu Aug 09, 2012 10:54 am

Re: Ethics of "bonus payback" when quitting a job

Post by barnaclebob » Tue Jul 30, 2019 12:35 pm

I'd have no problems keeping the bonus if they don't ask for it back.

setancre
Posts: 44
Joined: Fri Dec 10, 2010 10:55 pm

Re: Ethics of "bonus payback" when quitting a job

Post by setancre » Tue Jul 30, 2019 12:36 pm

Employers regularly include language in employment agreements that is not legally enforceable (overly stringent non-competes, commission/bonus clawbacks, etc).

Each state varies dramatically with respect to employment/labor laws, and many HR agreements are boilerplate. He should consult an employment attorney to discuss the language in his contract and his state law; it will be a small price to pay relative to the bonus.

User avatar
TomatoTomahto
Posts: 9544
Joined: Mon Apr 11, 2011 1:48 pm

Re: Ethics of "bonus payback" when quitting a job

Post by TomatoTomahto » Tue Jul 30, 2019 12:36 pm

Trader Joe wrote:
Tue Jul 30, 2019 12:27 pm
coalcracker wrote:
Tue Jul 30, 2019 12:21 pm
anonenigma wrote:
Tue Jul 30, 2019 12:19 pm
Delay departure to 1/1/20?
Unfortunately (or fortunately) he took a position elsewhere and they need him ASAP. November was the earliest his current employer would let him leave.
The expected loss of a bonus should have been negotiated with the new employer, typically as a sign-on bonus. In all scenarios I would pay the bonus back. Best of luck.
IME, you negotiate with the new employer to make you whole, and the old employer gives you a confirming letter that you have had a bonus clawed back. Too late now. Expensive tuition.
Okay, I get it; I won't be political or controversial. The Earth is flat.

HEDGEFUNDIE
Posts: 3649
Joined: Sun Oct 22, 2017 2:06 pm

Re: Ethics of "bonus payback" when quitting a job

Post by HEDGEFUNDIE » Tue Jul 30, 2019 12:38 pm

You and your father are overthinking this.

If they ask for the money back, pay it. If they don’t, don’t.

Sounds like HR already told him which situation he’s in.

wilked
Posts: 1624
Joined: Thu Mar 24, 2011 1:50 pm

Re: Ethics of "bonus payback" when quitting a job

Post by wilked » Tue Jul 30, 2019 12:39 pm

If I signed a contract I would live up to it. I am surprised at the folks above who say otherwise.

I work in Engineering, and in my industry it's a small world. I wouldn't want the reputation of someone who tries to wriggle out of an obligation

JuniorBH
Posts: 130
Joined: Fri Jun 09, 2017 12:54 pm

Re: Ethics of "bonus payback" when quitting a job

Post by JuniorBH » Tue Jul 30, 2019 12:43 pm

TomatoTomahto wrote:
Tue Jul 30, 2019 12:36 pm
Trader Joe wrote:
Tue Jul 30, 2019 12:27 pm
The expected loss of a bonus should have been negotiated with the new employer, typically as a sign-on bonus. In all scenarios I would pay the bonus back. Best of luck.
IME, you negotiate with the new employer to make you whole, and the old employer gives you a confirming letter that you have had a bonus clawed back. Too late now. Expensive tuition.
Concur with the above. I just went through this; paid back a signing bonus at previous employer (stayed 9 months of the 2 year period require to "earn it") but was more than made whole by signing bonus at new employer. New employer was aware of the situation.

HEDGEFUNDIE
Posts: 3649
Joined: Sun Oct 22, 2017 2:06 pm

Re: Ethics of "bonus payback" when quitting a job

Post by HEDGEFUNDIE » Tue Jul 30, 2019 12:44 pm

wilked wrote:
Tue Jul 30, 2019 12:39 pm
If I signed a contract I would live up to it. I am surprised at the folks above who say otherwise.

I work in Engineering, and in my industry it's a small world. I wouldn't want the reputation of someone who tries to wriggle out of an obligation
At megacorps it is not the hiring manager’s job to enforce corporate policy like bonus clawbacks. Even if the bonus is clawed back it sure doesn’t go back into the hiring manager’s budget. Likely the hiring manager won’t even know whether the bonus is repaid or not.

Why should the OP be concerned about the Megacorp’s lack of operational procedures?
Last edited by HEDGEFUNDIE on Tue Jul 30, 2019 12:47 pm, edited 1 time in total.

MichCPA
Posts: 828
Joined: Fri Jul 06, 2018 9:06 pm

Re: Ethics of "bonus payback" when quitting a job

Post by MichCPA » Tue Jul 30, 2019 12:44 pm

JBTX wrote:
Tue Jul 30, 2019 12:29 pm
I would think a claw back provision of an already paid performance bonus, for a prior period, on an employee would be legally problematic. But I'm not a lawyer. I would definitely talk to one.
As a concept, its totally legal and becoming more common. Since it was in the written contract, it might be tough to dispute from a legal perspective.

OP should certainly explore this since state laws will probably vary on this, but I wouldn't have high expectations.

Sic Vis Pacem
Posts: 75
Joined: Mon Sep 04, 2017 8:25 pm

Re: Ethics of "bonus payback" when quitting a job

Post by Sic Vis Pacem » Tue Jul 30, 2019 12:44 pm

Any person or corporation can choose to waive a contract provision that benefits them. It's not unethical to accept that waiver. If the corporation does not ask for it, I would assume the corporation believes they obtained fair value for the services and has chosen to waive the claw-back provision. If they do ask for repayment, then not.

niceguy7376
Posts: 2459
Joined: Wed Jul 10, 2013 2:59 pm
Location: Metro ATL

Re: Ethics of "bonus payback" when quitting a job

Post by niceguy7376 » Tue Jul 30, 2019 12:46 pm

There is no ethics related scenario.

If company made the employee sign the contract, then it is the company that will tell how they will take it back or deduct from final payouts and such.
I dont think it is the employee responsibility to decide on the amount (gross or net pay) and the process and do it on their own terms.

NYC_Guy
Posts: 304
Joined: Fri Mar 10, 2017 2:23 pm
Location: New York

Re: Ethics of "bonus payback" when quitting a job

Post by NYC_Guy » Tue Jul 30, 2019 12:52 pm

Commercial contracts don’t create ethical obligations. Corporations breach contracts all the time when it makes economic sense. The law supports it - it’s called efficient breach. In my opinion, one should feel no sense of ethical obligation to a corporation that is, by definition, an amoral animal. If it is in one’s economic interest to breach, one should feel no compulsion to impose an ethical duty to perform. The corporation that is the counterparty certainly won’t. A classic example is a nonrecourse mortgage — I urge people to walk away if it makes sense to do so. Commercial parties do it all the time.

If HR is effectively telling your father they won’t pursue it, then he shouldn’t feel an ethical obligation to repay.

Just my two cents.

Topic Author
coalcracker
Posts: 485
Joined: Sat Feb 04, 2012 12:25 pm

Re: Ethics of "bonus payback" when quitting a job

Post by coalcracker » Tue Jul 30, 2019 12:53 pm

OP here.

To clarify (and perhaps change opinions), he did receive a letter stating terms of departure which included a line like: "corporation will be expecting repayment of $xx,xxx bonus by the last day of your employment." But in an immediate follow up conversation, the HR rep alluded to the fact they may not pursue repayment. :oops:

cherijoh
Posts: 6357
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Ethics of "bonus payback" when quitting a job

Post by cherijoh » Tue Jul 30, 2019 1:03 pm

coalcracker wrote:
Tue Jul 30, 2019 12:14 pm
My father gave notice that he will be quitting his job in November 2019. Per the language of his contract, he is required to payback the entirety of a bonus (low-mid 5 figures) which was distributed end of 2018, if he leaves the position anytime in 2019. He inquired about paying back a portion of the bonus given he is working most of 2019, but this request was denied.

He works for a subsidiary of a large regional corporation (20,000+ employees), and he would be required to pay the bonus back to "the corporation." When speaking with the HR representative at his offices, he was told something to the effect that the rep would be very surprised if the corporation would pursue repayment if he decided to not pay it back *winkwinknudgenudge*. He was surprised and a bit taken aback.

Would you consider delaying the payback until if/when corporate comes a-knocking at some point in the future? Legally, if they call his bluff, he will need to pay back per his contract. But the amount of money is nothing to sneeze at, and he will have "earned" at least some of the bonus by working most of 2019.

p.s. I can give more details in necessary, but would like to keep it vague to protect anonymity.

Edit: Staying until 1/1/2020 is not an option. His future employer needs him before that time, and is unwilling to let him stay the year.
That is the weirdest contract I have ever seen. "Bonuses" are generally for previous performance and are rarely clawed back except in cases where an executive is implicated in shady dealings - e.g., Wells Fargo CEO had to payback performance bonus over the bogus accounts scandal IIRC. It isn't unusual to lose this year's bonus if you aren't employed the entire year and/or until the payout date. Hence the trend for employers to lay people off near the end of the year. :annoyed

I had the opposite experience with one former employer. They relocated our facility out of state and I opted to take a separation package equal to close to a year's salary starting in August of that year. I was still receiving my separation pay biweekly the next spring at bonus payout time and I was amazed to receive a bonus that was about the same size as the previous full year if prorated for the number of months worked.

EDITED to Add: Was this a sign-on bonus? I assumed it was for previous work at that company. If a sign-on bonus and he didn't stay long enough then he should repay.

I have heard of employees expected to payback relocation assistance or educational assistance if they leave within a certain period. But IMO that is reasonable they are giving you something extra in the expectation that you will continue as an employee. The normal bonus US companies pay is just a sneaky way to make sure that a part of your compensation doesn't end up in your base pay.
Last edited by cherijoh on Tue Jul 30, 2019 1:10 pm, edited 1 time in total.

barnaclebob
Posts: 3964
Joined: Thu Aug 09, 2012 10:54 am

Re: Ethics of "bonus payback" when quitting a job

Post by barnaclebob » Tue Jul 30, 2019 1:04 pm

wilked wrote:
Tue Jul 30, 2019 12:39 pm
If I signed a contract I would live up to it. I am surprised at the folks above who say otherwise.

I work in Engineering, and in my industry it's a small world. I wouldn't want the reputation of someone who tries to wriggle out of an obligation
Does the contract stipulate that the employee must engage to start the clawback process or just that they are subject to a clawback? Paying the bonus back if the company asks for it isn't trying to wriggle out of an obligation. Its not much different than having a court judgement against you that is never pursued by the person who is owed the judgement.
coalcracker wrote:
Tue Jul 30, 2019 12:53 pm
OP here.

To clarify (and perhaps change opinions), he did receive a letter stating terms of departure which included a line like: "corporation will be expecting repayment of $xx,xxx bonus by the last day of your employment." But in an immediate follow up conversation, the HR rep alluded to the fact they may not pursue repayment. :oops:
If HR provided no means to make such a payment then your dad has done his part. They can do theirs if they want to. He isn't being paid to chase down holes in corporate policy.

Momus
Posts: 785
Joined: Tue Feb 21, 2012 9:23 pm

Re: Ethics of "bonus payback" when quitting a job

Post by Momus » Tue Jul 30, 2019 1:19 pm

Someone from HR already told you it's ok not to pay it back, yet you keep pursuing the issue lol... :oops:

If they said they didn't care, then it's not your problem. If they ask at a later date, then fork the cash out.

Why are we discussing this again? :confused

Big Dog
Posts: 1546
Joined: Mon Sep 07, 2015 4:12 pm

Re: Ethics of "bonus payback" when quitting a job

Post by Big Dog » Tue Jul 30, 2019 1:22 pm

setancre wrote:
Tue Jul 30, 2019 12:36 pm
Employers regularly include language in employment agreements that is not legally enforceable (overly stringent non-competes, commission/bonus clawbacks, etc).

Each state varies dramatically with respect to employment/labor laws, and many HR agreements are boilerplate. He should consult an employment attorney to discuss the language in his contract and his state law; it will be a small price to pay relative to the bonus.
Exactly. Contact an employment attorney in the state in which he resides. (for example, I would be surprised if such a bonus clawback is legal in California.)

SmallSaver
Posts: 140
Joined: Mon Mar 26, 2012 11:34 am

Re: Ethics of "bonus payback" when quitting a job

Post by SmallSaver » Tue Jul 30, 2019 1:23 pm

Sounds like the repayment provision is in the contract and he has a letter from HR stating that they expect it. I find life is easier if things like this are fully above board and by the letter, but that's a personality trait. Other people may like the thrill of seeing what they can get away with. He's the one on the line here, and a wink and a nudge from HR doesn't mean anything next to written communication if this comes up later.

Topic Author
coalcracker
Posts: 485
Joined: Sat Feb 04, 2012 12:25 pm

Re: Ethics of "bonus payback" when quitting a job

Post by coalcracker » Tue Jul 30, 2019 1:24 pm

cherijoh wrote:
Tue Jul 30, 2019 1:03 pm
coalcracker wrote:
Tue Jul 30, 2019 12:14 pm
My father gave notice that he will be quitting his job in November 2019. Per the language of his contract, he is required to payback the entirety of a bonus (low-mid 5 figures) which was distributed end of 2018, if he leaves the position anytime in 2019. He inquired about paying back a portion of the bonus given he is working most of 2019, but this request was denied.

He works for a subsidiary of a large regional corporation (20,000+ employees), and he would be required to pay the bonus back to "the corporation." When speaking with the HR representative at his offices, he was told something to the effect that the rep would be very surprised if the corporation would pursue repayment if he decided to not pay it back *winkwinknudgenudge*. He was surprised and a bit taken aback.

Would you consider delaying the payback until if/when corporate comes a-knocking at some point in the future? Legally, if they call his bluff, he will need to pay back per his contract. But the amount of money is nothing to sneeze at, and he will have "earned" at least some of the bonus by working most of 2019.

p.s. I can give more details in necessary, but would like to keep it vague to protect anonymity.

Edit: Staying until 1/1/2020 is not an option. His future employer needs him before that time, and is unwilling to let him stay the year.
That is the weirdest contract I have ever seen. "Bonuses" are generally for previous performance and are rarely clawed back except in cases where an executive is implicated in shady dealings - e.g., Wells Fargo CEO had to payback performance bonus over the bogus accounts scandal IIRC. It isn't unusual to lose this year's bonus if you aren't employed the entire year and/or until the payout date. Hence the trend for employers to lay people off near the end of the year. :annoyed

I had the opposite experience with one former employer. They relocated our facility out of state and I opted to take a separation package equal to close to a year's salary starting in August of that year. I was still receiving my separation pay biweekly the next spring at bonus payout time and I was amazed to receive a bonus that was about the same size as the previous full year if prorated for the number of months worked.

EDITED to Add: Was this a sign-on bonus? I assumed it was for previous work at that company. If a sign-on bonus and he didn't stay long enough then he should repay.

I have heard of employees expected to payback relocation assistance or educational assistance if they leave within a certain period. But IMO that is reasonable they are giving you something extra in the expectation that you will continue as an employee. The normal bonus US companies pay is just a sneaky way to make sure that a part of your compensation doesn't end up in your base pay.
He works in the medical field.

It was not a sign on bonus. They call it a "retention bonus"

User avatar
TomatoTomahto
Posts: 9544
Joined: Mon Apr 11, 2011 1:48 pm

Re: Ethics of "bonus payback" when quitting a job

Post by TomatoTomahto » Tue Jul 30, 2019 1:25 pm

It was not a sign on bonus. They call it a "retention bonus"
Oops. Didn’t work.
Okay, I get it; I won't be political or controversial. The Earth is flat.

adamthesmythe
Posts: 3027
Joined: Mon Sep 22, 2014 4:47 pm

Re: Ethics of "bonus payback" when quitting a job

Post by adamthesmythe » Tue Jul 30, 2019 1:28 pm

I see no problem with waiting for a bill.

MichCPA
Posts: 828
Joined: Fri Jul 06, 2018 9:06 pm

Re: Ethics of "bonus payback" when quitting a job

Post by MichCPA » Tue Jul 30, 2019 1:39 pm

adamthesmythe wrote:
Tue Jul 30, 2019 1:28 pm
I see no problem with waiting for a bill.
+1, I would wait it out then email the same person who said you wouldn't have to pay. If they still say you don't have to pay, then don't pay.

H-Town
Posts: 2101
Joined: Sun Feb 26, 2017 2:08 pm

Re: Ethics of "bonus payback" when quitting a job

Post by H-Town » Tue Jul 30, 2019 1:40 pm

coalcracker wrote:
Tue Jul 30, 2019 12:14 pm
My father gave notice that he will be quitting his job in November 2019. Per the language of his contract, he is required to payback the entirety of a bonus (low-mid 5 figures) which was distributed end of 2018, if he leaves the position anytime in 2019. He inquired about paying back a portion of the bonus given he is working most of 2019, but this request was denied.

He works for a subsidiary of a large regional corporation (20,000+ employees), and he would be required to pay the bonus back to "the corporation." When speaking with the HR representative at his offices, he was told something to the effect that the rep would be very surprised if the corporation would pursue repayment if he decided to not pay it back *winkwinknudgenudge*. He was surprised and a bit taken aback.

Would you consider delaying the payback until if/when corporate comes a-knocking at some point in the future? Legally, if they call his bluff, he will need to pay back per his contract. But the amount of money is nothing to sneeze at, and he will have "earned" at least some of the bonus by working most of 2019.

p.s. I can give more details in necessary, but would like to keep it vague to protect anonymity.

Edit: Staying until 1/1/2020 is not an option. His future employer needs him before that time, and is unwilling to let him stay the year.
Words travel fast. As a professional, you don't want to be on the wrong side of any ethical question. This merits a conversation with decision makers at the current employer to clarify what needs to be done.

User avatar
TomatoTomahto
Posts: 9544
Joined: Mon Apr 11, 2011 1:48 pm

Re: Ethics of "bonus payback" when quitting a job

Post by TomatoTomahto » Tue Jul 30, 2019 1:48 pm

MichCPA wrote:
Tue Jul 30, 2019 1:39 pm
adamthesmythe wrote:
Tue Jul 30, 2019 1:28 pm
I see no problem with waiting for a bill.
+1, I would wait it out then email the same person who said you wouldn't have to pay. If they still say you don't have to pay, then don't pay.
HR knows the saying “say it, forget it; write it, regret it.” I am sure, to a moral certainty, that the HR person would not put that in writing. At best, it was a wink and a nod.
Okay, I get it; I won't be political or controversial. The Earth is flat.

HomeStretch
Posts: 2900
Joined: Thu Dec 27, 2018 3:06 pm

Re: Ethics of "bonus payback" when quitting a job

Post by HomeStretch » Tue Jul 30, 2019 1:49 pm

MichCPA wrote:
Tue Jul 30, 2019 1:39 pm
adamthesmythe wrote:
Tue Jul 30, 2019 1:28 pm
I see no problem with waiting for a bill.
+1, I would wait it out then email the same person who said you wouldn't have to pay. If they still say you don't have to pay, then don't pay.
+2 on waiting for company to request repayment.

With the added info that this was a retention bonus, the repayment requirement if your dad leaves before the end of the retention period makes sense.
Last edited by HomeStretch on Tue Jul 30, 2019 2:24 pm, edited 1 time in total.

MichCPA
Posts: 828
Joined: Fri Jul 06, 2018 9:06 pm

Re: Ethics of "bonus payback" when quitting a job

Post by MichCPA » Tue Jul 30, 2019 1:56 pm

TomatoTomahto wrote:
Tue Jul 30, 2019 1:48 pm
MichCPA wrote:
Tue Jul 30, 2019 1:39 pm
adamthesmythe wrote:
Tue Jul 30, 2019 1:28 pm
I see no problem with waiting for a bill.
+1, I would wait it out then email the same person who said you wouldn't have to pay. If they still say you don't have to pay, then don't pay.
HR knows the saying “say it, forget it; write it, regret it.” I am sure, to a moral certainty, that the HR person would not put that in writing. At best, it was a wink and a nod.
It depends on what the actual intention of the company is. If they actually don't intend to pursue the issue there isn't any reason to not say so. It's not like an email from a lower level HR person could invalidate an employment contract.

dcabler
Posts: 1138
Joined: Wed Feb 19, 2014 11:30 am

Re: Ethics of "bonus payback" when quitting a job

Post by dcabler » Tue Jul 30, 2019 2:05 pm

HEDGEFUNDIE wrote:
Tue Jul 30, 2019 12:44 pm
wilked wrote:
Tue Jul 30, 2019 12:39 pm
If I signed a contract I would live up to it. I am surprised at the folks above who say otherwise.

I work in Engineering, and in my industry it's a small world. I wouldn't want the reputation of someone who tries to wriggle out of an obligation
At megacorps it is not the hiring manager’s job to enforce corporate policy like bonus clawbacks. Even if the bonus is clawed back it sure doesn’t go back into the hiring manager’s budget. Likely the hiring manager won’t even know whether the bonus is repaid or not.

Why should the OP be concerned about the Megacorp’s lack of operational procedures?
Hired a guy into my team at engineering megacorp with a sign-on bonus. He left after 6 months to pursue greener pastures and the employment agreement stipulated that he would owe a portion of his sign-on bonus back (A pro-rated amount). He tried to negotiate not having to pay any of it back with HR and they brought it to me, the hiring manager, and asked my opinion. While it wasn't my job to enforce it, the signing bonus did come out of my budget and I requested that the employment agreement be enforced. It was. Funny thing is that several years later, his resume' appeared on my desk again. You can probably guess what became of it. :D As noted above, the engineering world is smaller than people realize. And memories are a lot longer than people may realized.

HEDGEFUNDIE
Posts: 3649
Joined: Sun Oct 22, 2017 2:06 pm

Re: Ethics of "bonus payback" when quitting a job

Post by HEDGEFUNDIE » Tue Jul 30, 2019 2:19 pm

dcabler wrote:
Tue Jul 30, 2019 2:05 pm
HEDGEFUNDIE wrote:
Tue Jul 30, 2019 12:44 pm
wilked wrote:
Tue Jul 30, 2019 12:39 pm
If I signed a contract I would live up to it. I am surprised at the folks above who say otherwise.

I work in Engineering, and in my industry it's a small world. I wouldn't want the reputation of someone who tries to wriggle out of an obligation
At megacorps it is not the hiring manager’s job to enforce corporate policy like bonus clawbacks. Even if the bonus is clawed back it sure doesn’t go back into the hiring manager’s budget. Likely the hiring manager won’t even know whether the bonus is repaid or not.

Why should the OP be concerned about the Megacorp’s lack of operational procedures?
Hired a guy into my team at engineering megacorp with a sign-on bonus. He left after 6 months to pursue greener pastures and the employment agreement stipulated that he would owe a portion of his sign-on bonus back (A pro-rated amount). He tried to negotiate not having to pay any of it back with HR and they brought it to me, the hiring manager, and asked my opinion. While it wasn't my job to enforce it, the signing bonus did come out of my budget and I requested that the employment agreement be enforced. It was. Funny thing is that several years later, his resume' appeared on my desk again. You can probably guess what became of it. :D As noted above, the engineering world is smaller than people realize. And memories are a lot longer than people may realized.
I did not suggest the OP not pay back what he contractually owes, if the company chooses to enforce that contract. But why pay back a company that (1) doesn't ask for it, and (2) gives you no way to pay it back?

Grt2bOutdoors
Posts: 21479
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Ethics of "bonus payback" when quitting a job

Post by Grt2bOutdoors » Tue Jul 30, 2019 2:30 pm

coalcracker wrote:
Tue Jul 30, 2019 12:21 pm
anonenigma wrote:
Tue Jul 30, 2019 12:19 pm
Delay departure to 1/1/20?
Unfortunately (or fortunately) he took a position elsewhere and they need him ASAP. November was the earliest his current employer would let him leave.
It's common for "future employers" to buyout the employees obligations as a condition of being hired by them. Tell the new employer the situation, and see if you can come to an agreement. Try, what is the worse that can happen? Sorry bud, can't help you or let's see what we can do?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

PluckyDucky
Posts: 156
Joined: Tue Jan 15, 2019 8:29 pm

Re: Ethics of "bonus payback" when quitting a job

Post by PluckyDucky » Tue Jul 30, 2019 2:34 pm

JBTX wrote:
Tue Jul 30, 2019 12:22 pm
I could speculate but I'd probably consult an employment lawyer.

Personally I wouldn't pay for it back if they never ask for it.
This. Such a contract provision may be unenforceable depending on the state.

dcabler
Posts: 1138
Joined: Wed Feb 19, 2014 11:30 am

Re: Ethics of "bonus payback" when quitting a job

Post by dcabler » Tue Jul 30, 2019 2:45 pm

HEDGEFUNDIE wrote:
Tue Jul 30, 2019 2:19 pm
dcabler wrote:
Tue Jul 30, 2019 2:05 pm
HEDGEFUNDIE wrote:
Tue Jul 30, 2019 12:44 pm
wilked wrote:
Tue Jul 30, 2019 12:39 pm
If I signed a contract I would live up to it. I am surprised at the folks above who say otherwise.

I work in Engineering, and in my industry it's a small world. I wouldn't want the reputation of someone who tries to wriggle out of an obligation
At megacorps it is not the hiring manager’s job to enforce corporate policy like bonus clawbacks. Even if the bonus is clawed back it sure doesn’t go back into the hiring manager’s budget. Likely the hiring manager won’t even know whether the bonus is repaid or not.

Why should the OP be concerned about the Megacorp’s lack of operational procedures?
Hired a guy into my team at engineering megacorp with a sign-on bonus. He left after 6 months to pursue greener pastures and the employment agreement stipulated that he would owe a portion of his sign-on bonus back (A pro-rated amount). He tried to negotiate not having to pay any of it back with HR and they brought it to me, the hiring manager, and asked my opinion. While it wasn't my job to enforce it, the signing bonus did come out of my budget and I requested that the employment agreement be enforced. It was. Funny thing is that several years later, his resume' appeared on my desk again. You can probably guess what became of it. :D As noted above, the engineering world is smaller than people realize. And memories are a lot longer than people may realized.
I did not suggest the OP not pay back what he contractually owes, if the company chooses to enforce that contract. But why pay back a company that (1) doesn't ask for it, and (2) gives you no way to pay it back?
I said the same thing as you (in red) upstream and agree with you. And it's not what I was addressing in the above post. You mentioned that it doesn't go into the hiring managers budget - it can and it did for me, as I indicated. You also said that is was likely the hiring manager wouldn't know if it was repaid - it can and did in my case. Or were you addressing your comments to wilked?
Last edited by dcabler on Tue Jul 30, 2019 2:53 pm, edited 1 time in total.

Jeff P
Posts: 157
Joined: Tue Aug 11, 2015 10:07 am

Re: Ethics of "bonus payback" when quitting a job

Post by Jeff P » Tue Jul 30, 2019 2:49 pm

HEDGEFUNDIE wrote:
Tue Jul 30, 2019 12:38 pm
You and your father are overthinking this.

If they ask for the money back, pay it. If they don’t, don’t.

Sounds like HR already told him which situation he’s in.
Ditto.

CheCha54
Posts: 25
Joined: Sat Nov 11, 2017 11:21 am

Re: Ethics of "bonus payback" when quitting a job

Post by CheCha54 » Tue Jul 30, 2019 2:57 pm

I would follow the agreement to repay the bonus. It seems a strange agreement to me that a company would prepay for employment. In my world we would put money in a "bank" that would vest and pay out over time.

simas
Posts: 464
Joined: Wed Apr 04, 2007 5:50 pm

Re: Ethics of "bonus payback" when quitting a job

Post by simas » Tue Jul 30, 2019 3:02 pm

another vote for overthinking - this is not his call, company would tell him what to do as/when he terminates the employment. salary earned, PTO, etc. everything else would be reconciled by payroll based on rules entered.

and generally, taking retention bonus, and then leaving before retention period while still keeping the bonus 'smells bad'. do not want to be tied up ->don't enter specific program. if you entered a program ->live up to the conditions (given this is a bonus to begin with). if you just must jump because can not wait 6 weeks, then own the responsibilities. if I learned person did this, it is unlikely I would hire her/him or recommend anyone to do the same. integrity is everything in this VERY small world.

and yes, anywhere I went, these were always full disclosure and next employee had a choice of waiting a tiny bit or making me whole if they desire to change the timeline. every time, they 'made me whole' and I owned up to any responsibilities I had at any place I came to or left. your word is everything..

wrongfunds
Posts: 2018
Joined: Tue Dec 21, 2010 3:55 pm

Re: Ethics of "bonus payback" when quitting a job

Post by wrongfunds » Tue Jul 30, 2019 3:31 pm

How are the taxes and deduction handled on a "negative paycheck" ?

Assuming the bonus check received in 2018 was for $10K. OP had paid taxes (and other deduction). OP would have been lucky to see $5K in his bank account.

Does he now write $10K check to the employer? And does he then files amended tax returns? How does he get the FICA back? Or only federal and state taxes are deducted from the bonus check? What about 401K deducted from the original bonus check?

Do you see how complicated this becomes? Only if bonus and claw-back happens in same FY year, it could be handled by the payroll.

User avatar
unclescrooge
Posts: 3966
Joined: Thu Jun 07, 2012 7:00 pm

Re: Ethics of "bonus payback" when quitting a job

Post by unclescrooge » Tue Jul 30, 2019 3:32 pm

NYC_Guy wrote:
Tue Jul 30, 2019 12:52 pm
Commercial contracts don’t create ethical obligations. Corporations breach contracts all the time when it makes economic sense. The law supports it - it’s called efficient breach. In my opinion, one should feel no sense of ethical obligation to a corporation that is, by definition, an amoral animal. If it is in one’s economic interest to breach, one should feel no compulsion to impose an ethical duty to perform. The corporation that is the counterparty certainly won’t. A classic example is a nonrecourse mortgage — I urge people to walk away if it makes sense to do so. Commercial parties do it all the time.

If HR is effectively telling your father they won’t pursue it, then he shouldn’t feel an ethical obligation to repay.

Just my two cents.
Yes, I remember back in the day when Euro Disney strategically defaulted on its loans.

It's a business decision.

fru-gal
Posts: 1184
Joined: Wed Jan 02, 2019 9:48 pm
Location: New England

Re: Ethics of "bonus payback" when quitting a job

Post by fru-gal » Tue Jul 30, 2019 3:42 pm

I would wait for them to ask for the return of the bonus. Your Dad is not refusing to pay it, he's waiting for the bill to show up. Hopefully it never does.

I stuck with a terrible job, though, to complete the year needed to keep the payment for moving costs. I don't know what your Dad was thinking.

I would actually not ask the new company for reimbursement, it makes him look like a poor planner starting off on the wrong foot.

User avatar
greg24
Posts: 3702
Joined: Tue Feb 20, 2007 10:34 am

Re: Ethics of "bonus payback" when quitting a job

Post by greg24 » Tue Jul 30, 2019 3:44 pm

coalcracker wrote:
Tue Jul 30, 2019 12:53 pm
To clarify (and perhaps change opinions), he did receive a letter stating terms of departure which included a line like: "corporation will be expecting repayment of $xx,xxx bonus by the last day of your employment."
For those who are saying the company needs to ask him to pay it....

User avatar
8foot7
Posts: 1664
Joined: Mon Jan 05, 2015 7:29 pm

Re: Ethics of "bonus payback" when quitting a job

Post by 8foot7 » Tue Jul 30, 2019 3:51 pm

Normally I'd make an argument for hanging on to this or at least a portion of it if this were a performance or sign-on bonus.

But this is a retention bonus and he's leaving, so that's real hard for me not to pay back.

I would absolutely ensure that you are made whole for taxes withheld and such and only repay to the extent you received a net benefit. There is no reason for you to make Uncle Sam whole on behalf of your employer. And I would not repay until I received direction on how to do so, not just a random note that says they expect it.

Post Reply