If you are taking a new job in a different state, you may be offered a relocation package or stipend to cover the costs of your move. While many new employees are more than happy to make use of this gesture, it usually comes with strings attached: A contractual obligation to repay the fee if you leave the company within a certain amount of time.
Most Relocation Compensation Packages Have Clawback Provisions
Lots of companies use relocation compensation packages to attract talent from out-of-state. They are especially common in executive contracts as a part of the executive compensation agreement. As the costs of moving across the country skyrockets and the inconvenience continues to be overwhelming, the perk can seem like both a nice gesture by the company and a significant cost saver.
Like many other things, though, if it seems too good to be true, it probably is.
Most of these relocation compensation packages have a key requirement hidden in the fine print. They generally require that you stay with the company for a period of time – usually one year, but sometimes two – or else you have to repay the relocation fee.
Is This Clawback Provision Enforceable?
If you agreed to the employment contract and the relocation clawback provision was a part of it, then it is a part of a binding agreement. If you leave the company before the time period has elapsed, you are breaching the contract and will be obligated to repay the company your relocation fee.
For employees who are leaving the company precisely because they could not make their new environs livable, this can be particularly hard to take.
What are My Options?
However, like most contract disputes involving businesses, the next steps are not set in stone. Generally, employees facing a clawback provision will want to wait and see if their ex-employer chooses to demand the money. If they never do, then there is nothing to worry about.
Most employers, however, will invoke their clawback rights.
Typically, you have three options:
- Refuse to repay the fee,
- Pay the fee, or
There are pros and cons to each option, and the context of the situation as well as your interests will matter. If you ended your relationship with the employer on a bad note, they are likely to demand all of the relocation money and will be unwilling to negotiate. On the other hand, if they were largely to blame for your exodus – like if they hired you to manage a team for a project that never got off the ground – they may be more willing to eat the expense if you raise an objection. Your risk aversion and financial state can also impact how you react – if you are concerned about your credit rating or you left the company early to take a far more lucrative position somewhere else, repaying the fee can just be a cost associated with ending that chapter and starting a new one.
Massachusetts Employment Lawyers at the Katz Law Group
The employment attorneys at the Katz Law Group help executives and others negotiate the clawback of relocation packages in Middlesex and Norfolk Counties, as well as in the cities of Worcester, Framingham, and Marlborough. Call them at (508) 480-8202 or contact them online for help.