46

A Virginia employee was terminated within 1 year of hiring because the on-site customer felt he was "too negative". Offer Letter:

Along with this offer, you are receiving a $10,000.00 signing bonus, which includes $3,000.00 to be paid directly to you in your first company paycheck and the remaining $7,000.00 to be paid to you at 30 days of employment with xxxxx. A 1−year commitment required or the bonus will be repaid in full to xxxxx.

Can the employer legally keep the employee's last check and send the employee a bill for the remainder ?

  • 1
    Was there any other language about the 'bonus" in the letter or in any contract of employment? – David Siegel Mar 10 at 18:34
  • 6
    That was the paragraph pertaining to the signing bonus. It appears to be very simple. At-will employee was involuntarily terminated. – jlo-gmail Mar 10 at 19:25
  • 2
    In South Carolina, employers can be liable for triple ("treble") damages for unpaid wages. Virginia might, too (it's worth checking). So there could be more at risk if they think they'll hold back the pay and sort it out later. – donjuedo Mar 11 at 2:16
  • 1
    Also, in some jurisdictions, failing to pay wages caries criminal liability for the manger(s) or responsible person(s), in addition to the civil liability for the company mentioned by @donjuedo. I'm not familiar with Virginia's laws in this regard. For those reading this question, the details of labor laws vary significantly from state to state (and, obviously, country to country). You are best off seeking advise from a lawyer familiar with labor law in your jurisdiction. Depending on the jurisdiction, there may be a government agency which will advocate for you with minimal/no cost/paperwork. – Makyen Mar 11 at 2:24
  • 4
    @donjuedo Virginia labor law has no provision for treble damages; only a civil penalty no greater than $1,000 for each violation, a portion of attorney's fees, and "all wages due, plus interest at an annual rate of eight percent". See Code of Virginia at § 40.1-29 A.2, F, and G (law.lis.virginia.gov/vacode/title40.1/chapter3/section40.1-29). Item E of that statute determines which violations are misdemeanors and which are felonies. – Iñaki Viggers Mar 11 at 12:29
79

Virginia employer terminated employee and wants signing bonus returned

Can the employer legally keep his last check and send the employee a bill for the remainder ?

No, unless (1) the employee resigned and (2) his resignation does not amount to constructive termination. The employer may withhold the remaining $7,000 only if the employee did not meet the condition of "30 days of employment with xxxxx".

Absent any language to the contrary, the requirement of "1-year commitment" is to be construed as the consideration expected from the employee (namely, "not to quit") in exchange for the bonus. Termination by the employer is self-defeating in the sense the employer himself made it impossible for the employee to fulfill the consideration that was expected from the employee. Therefore, the employer forfeits his entitlement to reimbursement.

In the event that the employee met the condition of "30 days of employment with xxxxx", he would be entitled to the remaining $7,000 as well.

Virginia labor law has no provision for treble damages (this is in response to one of the comments, per the OP's suggestion). The statutory provisions are only a civil penalty no greater than $1,000 for each violation, a portion of attorney's fees, and "all wages due, plus interest at an annual rate of eight percent". See Code of Virginia at § 40.1-29 A.2, F, and G. Item E of that statute determines which violations are misdemeanors and which are felonies. This statute would be applicable only if (1) the employer disavows the employee's entitlement to the remaining $7,000, and/or (2) the employer withholds a portion of the employee's earned compensation in an attempt to recover the initial payment of $3,000.

  • It should be ( ( the employee resigned) and (the resignation was not effective termination) or (the employee was fired for cause)) – Acccumulation Mar 11 at 16:37
  • 7
    @Acccumulation Termination for cause is irrelevant to the expectation of employee's 1-year commitment, at least under the terms of this clause. Termination for cause would touch on issues related to breach/frustration/impracticability of contract and depends on the employer's decision, whereas the ordinary meaning of commitment denotes conduct which resides exclusively on the employee's decision not to leave (be it officially or factually) his employment. – Iñaki Viggers Mar 11 at 17:38
  • 1
    @IñakiViggers: I would think the need for repayment would hinge on whether the employee made a bona fide effort to be a useful employee, distinguishing situations where an employer who accurately represented his abilities was unable to meet the employer's needs despite his best efforts, versus those where e.g. an employee simply refused to work. – supercat Mar 11 at 19:54
  • 2
    @supercat That could be the case, but it would have to be pursued on the basis of breach of contract (or breach of the covenant of good faith, as I commented in user1902689's answer) or akin legal theories that permit the contract to be rescinded. An on-site customer's perception that the employee was "too negative" might fall short of proving that breach of good faith. – Iñaki Viggers Mar 11 at 20:08
  • 1
    @supercat I agree, but what you outline pertains to the covenant of good faith, not to the legal interpretation of the clause. The facts of the case would determine whether the contract shall be rescinded (thereby leading to the outcome & reimbursement you depict). Also, I assume that by "within 30 days it became apparent that the hiring had been a mistake" you mean that the employer not only regretted the hiring, but that he timely terminated the employment. Employer's regret alone --without more-- does not negate the $7,000 accrual once the employee reaches the 30-day benchmark. – Iñaki Viggers Mar 11 at 21:55
29

Since the employee made a 1-year commitment, and did not quit within the year, I see no justification for the claw-back of the signing bonus. If the letter had said "you must remain employed for one year or the bonus will be repaid" that would be different.

However, before seriously considering a suit, you will want to consult an emplyment lawyer. You may want to do so before sending a communication insisting that your final payceck be paid in full.

  • 8
    Would something like "you must remain employed for one year or the bonus will be repaid" actually be legal? Wouldn't this just set up a situation where the company could let people go at 49 weeks and claw back all the bonuses of people they didn't find 100% necessary? – JMac Mar 11 at 11:09
  • 6
    @JMac that would seem like a Good Faith and Fair Dealing violation. – Robert Columbia Mar 11 at 13:25
  • 5
    Even with that wording I think that the employee could make a compelling argument that they had not done anything to violate their portion of the employment agreement and were thus still entitled to the signing bonus. A more bulletproof wording might be "you must remain employed without causing, for any reason, the client to ask for your removal from the contract or having your employment ended for any other reason by any party," but at that point the contract is so obviously bad for the employee nobody would sign it (and maybe they'd even be able to get it thrown out as unconscionable). – IllusiveBrian Mar 11 at 15:27
  • 4
    @JMac: I think my current employment contract had a clause that if my employment ended for any reason less than two years after I started, I'll have to repay my relocation costs. I started more than six years ago, so I guess either my company found me 100% necessary (ha), or else they're not operating in the bad faith you seem to assume such a clause implies. (Besides, recruitment and onboarding are very expensive; even a cynical company would balk at firing a good employee after a year just to claw back a one-time bonus.) – ruakh Mar 12 at 0:06
4
  1. In my opinion, the sentence is a bit ambiguous. I'd lean toward agreeing that the employee kept their commitment, so termination might not apply. But, the problem with that is an employee could intentionally act in ways causing themselves to be terminated to keep the bonus. (Not saying that's what happened here.) If the judge felt it was ambiguous, like many legal issues, all that matters is which judge you get and how they rule, and no definitive answer can truly be given. You could argue the offer letter was a contract of adhesion, which means it was a standard contract and you were in a take it or leave it position. If that flies, ambiguities are generally resolved against the writer of the contract. The employer would likely counter-argue their employment offer was up for negotiation, differentiating it from terms and conditions you have no negotiation power over, like between (non-extremely-rich) people and banks.

  2. Some states have restrictions on last checks. I have no idea what, if any, Virginia laws apply to them. If you got lucky, maybe Virginia's law requires the last paycheck to be paid in full. (I have no reason to believe this is the case; all I am saying is that it should be researched.) If the judge feels the sentence applied to the situation requires the bonus be paid back, they might need to pay the last paycheck and separately attempt to collect from (including suing) the employee. Virginia may or may not have penalties for failing to give a proper last paycheck. If such penalties exist, whether they go to the state or the employee is a separate issue, again resolved through research.

  3. As David Siegel said, definitely consult an employment lawyer, before doing anything. In my opinion, actually consult with 2-3.

  • 1
    Some clarifications: (1) "termination might not apply" It applies indeed because employment was at-will, regardless of any clauses on bonus. (2) A contract need not be of adhesion for contra proferentem (interpreting against the draftsman of the contract any ambiguities) to apply. What matters is whose bargaining power is greater, even if contract falls short of adhesion. (3) The issue of whether an employee acted in bad faith has to do with breach of contract (specifically, a breach of the covenant of good faith and fair dealing) rather than with interpretation of that contract. – Iñaki Viggers Mar 11 at 11:30
  • " ambiguities are generally resolved in favor against the writer of the contract. " I think you've either got an extra or several missing words here. – Dan Neely Mar 11 at 15:01

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.