Sign on bonus with 12 month retention policy

[dankil13]

Jurisdiction

New Jersey

HI,

I switched jobs late last fall and I received a sign on bonus to recover the portion of my annual bonus from my previous employer. The agreement I signed required I would repay the entire bonus should I leave within 12 months. My new company was acquired 3 months after I joined and management told us on day 1 our office would be closed within 12-15 months. After 6 months, there has been no discussion around being offered a full time role at the new company (which would require relocation), the new company has hired a person with a similar skill set that I have in their corp HQ, and if/when my position is terminated I would only be entitled to 2 weeks severance. I have an opportunity elsewhere and wanted to know if I would still be on the hook for repayment of my sign on bonus because if so I plan to negotiate some recovery of this in my new employment package? Could they sue me if they plan to terminate me in a few months anyway?

 

[adjusterjack]

I have an opportunity elsewhere and wanted to know if I would still be on the hook for repayment of my sign on bonus

Yes.

Could they sue me if they plan to terminate me in a few months anyway?

Anybody can sue anybody for anything but if they terminate you they would not win unless there was something in your agreement about termination for cause.

 

[dankil13]

Thanks. I'm hoping if I leave quietly they won't pursue, given most of the legacy HR and legal folks have already been dismissed. My former boss is still around, but not sure if he cares. I also would fight any lawsuit since I don't feel it was negotiated in good faith. The acquisition was announced a week after I signed my offer letter (so they clearly knew about it while I didn't), and when I attempted to negotiated an addendum which would have made any repayment pro-rated and added some severance protection during the same time frame, I was given some verbal assurances prior to starting and then it changed completely a few weeks into my employment.

 

[adjusterjack]

All that counts is that you signed the agreement knowing what it said and oral "assurances" aren't going to help you because no one will admit to them and you have no evidence of them.

How much was your sign-on bonus?

In other words, how much money do you risk by quitting?

Add that amount to the potential cost of "fighting" a lawsuit that you are more than likely not going to win.

Then you make the choice based on what you are willing to risk.

 

[dankil13]

All that counts is that you signed the agreement knowing what it said and oral "assurances" aren't going to help you because no one will admit to them and you have no evidence of them.

How much was your sign-on bonus?

In other words, how much money do you risk by quitting?

Add that amount to the potential cost of "fighting" a lawsuit that you are more than likely not going to win.

Then you make the choice based on what you are willing to risk.

The bonus was $20k, the net of tax was around $12k which I stashed in a money market fund. Paying back the $8k of taxes would be the pain point, and some of that I wouldn't recoup(FICA taxes). Also, that money was paid for the bonus I was forfeiting for leaving at the end of the year, so giving that up in general would leave a sour taste in my mouth. I will attempt to recoup some of that when negotiating with my potential new employer.

I do have some emails on the verbal promises, but they are from the recruiter not anyone at the company.

 

[adjusterjack]

This may seem trite but: Plan for the worst and hope for the best.

Worst case scenario is the new owners already know about your bonus and, as soon as you quit, they'll be asking for the $20,000 back.

That you stashed $12,000 puts you in a position where you might be able to negotiate a discounted settlement in exchange for a written release for the balance.

Best case scenario is that they don't know about it and you skate.

Just keep in mind that the statute of limitations for breach of contract in NJ is 6 years so if somebody finds the document a few years from now you could still be vulnerable to a claim for the money, so make sure you keep enough of a slush fund set aside for 6 years in case that happens.

 

[txls]

Seems like if they make him pay it back it should be only the $12,000 and his W2 should be adjusted for the taxes.