You Can't Fine Me Because I Quit! Or Can You?
March 11, 2015 2:41 PM   Subscribe

Can my employer really make me pay back my signing bonus if I quit?

I recently started a new job that included a very generous $10,000 signing bonus. However, there are some strings attached, and I'm thinking about how this will work if I decide to move on, and I am thinking about moving on, so this isn't purely theoretical.

The signing bonus is paid up front as taxable wages, so what I actually received was a check for about $5.8k, with federal and state taxes withheld. That's the first catch. The second catch is that the bonus vests 25% every six months, so that if I "voluntarily terminate my employment" within the first six months, I am to reimburse my employer the entire $10,000. After six months, it's $7,500, and so forth. The agreement I signed to receive this bonus uses the word "reimburse" and doesn't specify a due date for repayment. There's no payment coupon attached or anything like that.

So, in theory, right now if I were to quit I'd have to pay my employer $10,000. Can they really do that? Also, what would be the tax implications? I.e., the $10,000 counts as income for me in the 2015 tax year. If I paid it back would that lower my taxable income by $10,000? What if I pay back $7,500 in the 2016 tax year?

I get that it's unfair for me to take a job, cash out the signing bonus, and then quit, but paying over $4,000 above the amount I received just to quit my job also wouldn't be fair. On the other hand, I left a job I actually liked to come here. Maybe the signing bonus should compensate me for taking that risk.

You are not my lawyer, this is not legal advice, and you're not my tax preparer either.
posted by anonymous to Work & Money (19 answers total)
 
previously, AskMe said that your W2 will be adjusted so you don't owe tax on it and you get back the taxes already paid.
posted by the agents of KAOS at 2:45 PM on March 11, 2015 [1 favorite]


So, in theory, right now if I were to quit I'd have to pay my employer $10,000. Can they really do that?

Maybe. You probably signed something agreeing to pay it back if you quit. If your employer is smart, they had a lawyer review the document you signed to make sure it's legally binding (aka an enforceable contract). If it is a legal/enforceable contract, they might be able to sue you & win if you quit and don't pay it back.
posted by insectosaurus at 2:46 PM on March 11, 2015 [2 favorites]


Lawyer lawyer lawyer.

Only a lawyer can completely and competently answer this question for you.

Lawyer.
posted by bilabial at 2:47 PM on March 11, 2015 [12 favorites]


Yes, you agreed to it. I suppose you could have declined the signing bonus and still have taken the job, but you want both the money and the freedom to move without the financial hit. That's not cool. They were clear what the conditions of the money were, you agreed to the terms. You're on the hook for the consequences should you decide to move on.

Maybe the signing bonus should compensate me for taking that risk.

You're trying to rationalize a bad faith move. Don't do that. Pay the money back if you jump and accept that's what you agreed to.
posted by inturnaround at 2:48 PM on March 11, 2015 [17 favorites]


Maybe the signing bonus should compensate me for taking that risk.

The signing bonus is a payment to you; the employer does not care what you do or don't do with it.

right now if I were to quit I'd have to pay my employer $10,000. Can they really do that?

This is a true statement.

If I paid it back would that lower my taxable income by $10,000?

This is a true statement.

What if I pay back $7,500 in the 2016 tax year?

Your taxable income in 2015 would be adjusted down by $7,500 and you would not pay as much taxes (retroactively) in 2015.

paying over $4,000 above the amount I received just to quit my job also wouldn't be fair.

This is an irrelevant statement.

Speaking as someone who has been on the employer side in these sorts of equations, it's been my experience that the cost to the employer of someone quitting in the first six months to year is always significantly in excess of the signing bonus paid the employee.
posted by saeculorum at 2:49 PM on March 11, 2015 [4 favorites]


I've done this. You likely signed something that says you agree to the vesting schedule of the bonus.

The kicker, you pay back the full, pre-tax, unvested amount.

The double kicker, if a tax period has closed since you received the bonus, you will need to amend the bonus year's taxes to be refunded the taxed portion because the income took place in that year...
posted by milqman at 2:55 PM on March 11, 2015 [1 favorite]


For what it's worth, I have definitely heard of people being taken to court to recoup signing bonuses and other similar money. The dollar amounts involved were much higher, but all it really takes is a big enough company (big enough to have ready access to lawyers) and someone in the executive hierarchy who decides to take it personally. I'd run out the clock as much as possible on the vesting and be prepared to pay it back.

Some companies take this very seriously. I've even seen people be hounded to pay back relocation expenses after they were laid off before they "vested." I take a really dim view of this sort of behavior and wouldn't do it myself, but it definitely happens. Others, it may get lost in the shuffle and end up forgotten about. Inaction is probably a more likely outcome if you can leave in such a way that no one is left feeling screwed over and sufficiently motivated to track it down.

I'm sympathetic to the idea of keeping the money because who wouldn't want to but I don't think it's very likely. If you want to quit because you think the job was misrepresented somehow, you may have more of a leg to stand on but that's definitely lawyer territory.
posted by feloniousmonk at 2:55 PM on March 11, 2015


This is pretty shady on your part and I wouldn't do it. That said, legally, you could be sued for breach of contract. Depending on the language of the agreement and your jurisdiction, you may also owe their attorney fees for suing you to collect.
posted by resurrexit at 2:59 PM on March 11, 2015 [3 favorites]


IANYL but joining the chorus of yes, if this is your contractual agreement, you are bound by it and can be sued if you breach it. And yes, damages would be repaying them per the terms of the contract (not per your tax consequences.) Beware if there is also an attorneys fees clause in the contract. In our state, that means whoever loses also pays the other side's attorney's fees in addition to their own. Also, judgments carry an interest rate, which in our state is 12%.
posted by bearwife at 3:06 PM on March 11, 2015


Maybe the signing bonus should compensate me for taking that risk.

Ha. No. That is not what it is for. You know that is not what it is for.

paying over $4,000 above the amount I received just to quit my job also wouldn't be fair.

Right, which is why that is not what would happen. See what people say above as far as all the tax fuckery that would happen. While you're welcome to leave your job for any reason, this bonus would be very difficult if not impossible to hang on to. Put another way, if this was a scam that worked, people would be doing it all the time. Try a little Googling, they are not doing this. Or if they are even attempting it, it's in situations that are a lot less clear cut than the one you are in.
posted by jessamyn at 3:11 PM on March 11, 2015 [5 favorites]


If you were a high-profile college football coach or something, and you decided to jump ship, you might be able to get your new employer to pay the buyout, or pay it out of your new signing bonus.

YMMV if you aren't in quite that much demand.
posted by Huffy Puffy at 3:13 PM on March 11, 2015 [1 favorite]


I get that it's unfair for me to take a job, cash out the signing bonus, and then quit

Life isn't fair. We're talking about the law, not some abstract concept of "fair." As above, you need to ask a lawyer. It's never as simple as "they wrote it on paper, you signed it, so it's legal." For example, in California, employment contracts are pretty much unenforceable- regardless of the nice words on the paper, employees can break them whenever the like. It's possible the payback is unenforceable, but you'd have to ask a lawyer who knows local law.
posted by drjimmy11 at 3:19 PM on March 11, 2015 [4 favorites]


If you want to move on, and the company who you're thinking of moving to wants you bad enough, ask them to give you a signing bonus to make up for the one you have to give back.
posted by dfan at 4:38 PM on March 11, 2015 [5 favorites]


What you are trying to talk yourself into is essentially theft. If your friend gave you money to go to the store for him, and half way there you decide you don't really feel like going to the store, would you just pocket your friend's money? Or would you haul yourself to the store anyway? Or at least agree you should give your friend his money back?

If you intend to breach a contract and keep your payment anyway, you'd better have a darn good reason that's not "because I wanted to keep the money".
posted by zennie at 7:21 PM on March 11, 2015 [4 favorites]


Contact a lawyer for the real legal answer to this question.

As to the moral angle.. you started working for a company and took an extra chunk of money, with the understanding that you would keep working for that company.

How would you feel if you offered someone a signing bonus, and they up and quit and kept it? Would you find that to be acceptable behaviour?
posted by feckless fecal fear mongering at 9:30 PM on March 11, 2015 [2 favorites]


I've agreed to signing bonuses that specified I'd have to repay if I left within a year. My understanding was, yes, it would need to be repaid and I always assumed they would just pull it directly out of my paychecks once I gave notice.

I toyed with leaving within a year and the solution was to ask the prospective employer to "buy out" my contract and give me a bonus to make up for what I'd have to pay back. If you get someone to give you $10k or $6k or whatever you've gotten already, it will basically be as if you kept the original bonus, and not like you paid anyone back.

"paying over $4,000 above the amount I received just to quit my job also wouldn't be fair."

Huh? You would only need to pay back the funds you already received. You aren't paying back money you haven't gotten yet. That makes no sense. edit: Oh, you're talking about taxes? I always assumed they would just reverse/cancel the original transfer so I would simply pay the amount I received back. I haven't done this though so I cannot say for sure, but I do think it will be done automatically in your paycheck.
posted by AppleTurnover at 8:07 AM on March 12, 2015


It all depends on whatever you signed. They may even just be able to take it out of your account if you have direct deposite set up so get this figured out with a professional.
posted by WeekendJen at 9:19 AM on March 12, 2015


Just a note to agree with some others --- just because you signed a contract does NOT mean it is enforceable or legal, but only a lawyer can answer that. (drjimmy11's example is a good one, I've signed unenforceable non-compete agreements at several California companies).
posted by thefoxgod at 1:12 PM on March 12, 2015 [1 favorite]


It's a bummer if their original payment of $10k and your original tax deduction of $4k fell into 2014, and your payback of $10k (and presumable tax refund of $4k) would fall into 2015, meaning that from a cash flow perspective, you'd still have fallout from this a year from now in April 2016 when you're getting your 2015 tax refund. It's complicated to track every dollar of it, but they really did give you $10k, and you really do have to give them $10k back. It's possible that the US government could make money on the exchange. It's possible that when you file your 2014 taxes, you'll get some of that $4k tax deduction back as a refund (i.e. that $10k only cost you $3k extra in taxes, so here's an extra $1k for you in April 2015) And then you pay them $10k in 2015, and file your 2015 taxes, and your net earnings are $10k less than your 2015 employer filed, so you've over-allocated tax money, and get maybe $3k refunded. There are scenarios in which changing tax brackets could mean that you wouldn't get it all back, but it wouldn't make a crazy amount of difference, it will still add up to almost $10k in the end.
posted by aimedwander at 2:22 PM on March 12, 2015


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